Groupe Renault - 2020 Universal Registration Document

374 GROUPE RENAULT I UNIVERSAL REGISTRATION DOCUMENT 2020 Find out more at group.renault.com 04 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS IMPAIRMENT TESTS ON FIXED ASSETS NOTE 11 The Group carried out impairment tests on its fixed assets under the approach described in the section on accounting policies (note 2-M). Impairment tests on vehicle-specific assets 11 - A - (including components) and the assets of certain entities Following impairment tests of specific assets dedicated to vehicles (including components) and assets belonging to certain entities, impairment of €762 million was booked during 2020, comprising €565 million for intangible assets and €197 million for property, plant and equipment (impairment in 2019 amounted to €239 million, comprising €206 million for intangible assets and €33 million for property, plant and equipment). This impairment was allocated in priority to capitalized development expenses. It mainly concerns petrol and diesel engine vehicles (including components) given the lower sales volumes in 2020, the downward revision of business prospects in view of the COVID-19 pandemic, and the assumptions used in the medium-term plan for the period 2021-2025 presented in January 2021. In 2019, impairment principally concerned vehicles made for the Chinese market, following a decline in sales volumes and the downward revision of Renault’s prospects for those assets. Impairment tests of country-specific assets 11 - B - or cash-generating units of the Automotive (excluding AVTOVAZ) segment Automotive (excluding AVTOVAZ) segment The recoverable value used for the purpose of impairment tests for the Automotive (excluding AVTOVAZ) segment is the value in use, determined under the discounted future cash flow method on the basis of the following assumptions: December 31, 2020 December 31, 2019 Growth rate to infinity 1.2% 1.7% After-tax discount rate 9.2% 8.5% The assumptions used for impairment testing at December 31, 2020 are derived from the medium-term plan for the period 2021-2025 presented in January 2021. They include volume assumptions based on unfavourable market trends, mostly caused by the COVID-19 pandemic, with the return to pre-pandemic volume levels expected in 2024-2025 for the European market, and 2021 for the other Regions of the world where the Group has operations. The growth rate to infinity used in the tests at December 31, 2020 includes the impacts of commitments made by the States that are signatories to the Paris Agreement on climate change. In 2019, no impairment was recognized on assets of the Automotive (excluding AVTOVAZ) segment as a result of the impairment test, and it was considered that a reasonably possible change in the main assumptions used should not result in a recoverable value lower than the book value of the assets tested. At December 31, 2020, no reasonably possible change in the main assumptions used should result in a recoverable value lower than the book value of the assets tested. The recoverable value of the assets tested would remain higher than the book value in the event of the following changes in those assumptions: a growth rate to infinity of 0%; P an after-tax discount rate of 10%. P Impairment tests on the AVTOVAZ 11 - C - cash-generating unit and the Lada brand Impairment tests of the AVTOVAZ cash-generating unit AVTOVAZ was delisted from the Moscow Stock exchange in May 2019, and consequently reference is no longer made to its market capitalization to assess the recoverable value of its net assets, including goodwill which amounts to €678 million (62,000 million roubles) at December 31, 2020 In application of the approach presented in the note on accounting policies (note 2-M to the consolidated financial statements for 2019), an impairment test was conducted at June 30, 2020 but no impairment was recognized at that date as a result. A further test was conducted at December 31, 2020 due to the decline of the Russian market. The annual impairment test will now be conducted at December 31 every year. For the impairment test of the AVTOVAZ cash-generating unit, the value in use was calculated using an after-tax discount rate of 14.7%, an assumption that volumes would return to their pre-pandemic levels in 2022, and a growth rate to infinity (including the effect of inflation) of 3.2%. The test results did not lead to recognition of any impairment at December 31, 2020. A decrease of more than 32.3% in the profitability assumptions underlying the terminal value would lead to recognition of impairment on goodwill, which has a book value of €678 million at December 31, 2020. Impairment tests of the Lada brand For the purpose of allocation of the purchase price of AVTOVAZ, the Lada brand was recognized at its fair value at the date control was acquired (in late 2016), i.e. 9,248 million Russian roubles (€101 million at the exchange rate of December 31, 2020). Since this brand is an intangible asset with an indefinite useful life, an impairment test was carried out at December 31, 2020 based on a discount rate of 14.7% and a growth rate to infinity of 3.2%. No impairment was booked in 2020, as the recoverable value was higher than the book value. A reasonably possible change in the key assumptions used should not result in a recoverable value that is below the book value. The annual impairment test will now be conducted at December 31 every year.