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148 2014 Registration Document
Consolidated Financial Statements Year ended December 31, 2014
5
Notes to the Consolidated statements
In light of the nature of its business, the Group considers that its property
and equipment have no residual value.
Depreciation methods and periods are reviewed at each period-end
and, where appropriate, adjusted prospectively.
New long-term leases – particularly property leases – are analyzed to
determine whether they represent operating leases or finance leases,
i.e.
leases that transfer substantially all the risks and rewards incidental
to ownership of the asset to the lessee. For property leases, the analysis
is performed separately for the land on the one hand and the building
on the other.
Finance leases are accounted for as follows:
■
the leased assets are recognized in the statement of financial position at
fair value or, if lower, the present value of the minimum lease payments.
They are depreciated over their useful life, in the same way as assets
owned outright, or, if shorter, over the lease term;
■
the liability for the future lease payments is recognized in the statement
of financial position under liabilities;
■
lease payments are apportioned between the finance charge and the
reduction of the outstanding liability.
2.6.4 IMPAIRMENT TESTS
In accordance with IAS 36 –
Impairment of Assets,
intangible assets and
property and equipment are tested for impairment whenever events or
changes in the market environment indicate that the recoverable amount
of an individual asset and/or a cash-generating unit (CGU) may be less
than its carrying amount. For assets with an indefinite useful life – mainly
goodwill in the case of the Carrefour group – the test is performed at
least once a year.
Individual assets or groups of assets are tested for impairment by
comparing their carrying amount to their recoverable amount, defined
as the higher of their fair value less costs of disposal and their value in
use. Value in use is the present value of the future cash flows expected
to be derived from the asset.
If the recoverable amount is less than the carrying amount, an impairment
loss is recognized for the difference. Impairment losses on property and
equipment and intangible assets (other than goodwill) may be reversed
in future periods provided that the asset’s increased carrying amount
attributable to the reversal does not exceed the carrying amount that
would have been determined, net of depreciation or amortization, had no
impairment loss been recognized for the asset in prior years.
◗
2.6.4.1 Impairment of intangible assets
other than goodwill and property
and equipment
Impairment tests on property and equipment are performed at the level
of the individual stores, for all formats.
In accordance with IAS 36, intangible assets (other than goodwill)
and property and equipment are tested for impairment whenever there
is an indication that their recoverable amount may be less than their
carrying amount. All stores that report a recurring operating loss before
depreciation and amortization in two consecutive years (after the start-up
period) are tested. Intangible assets with an indefinite useful life such as
brands are tested at least once a year.
Value in use is considered as being equal to the store’s discounted
future cash flows over a period of up to five years plus a terminal value.
Fair value is estimated based on the prices of recent transactions, industry
practice, independent valuations or the estimated price at which the store
could be sold to a competitor.
The discount rate applied is the same as for impairment tests on goodwill.
◗
2.6.4.2 Impairment of goodwill
IAS 36 –
Impairment of Assets
requires impairment tests to be performed
annually at the level of each CGU or group of CGUs to which the
goodwill is allocated.
According to the standard, goodwill is allocated to the CGU or group
of CGUs that is expected to benefit from the synergies of the business
combination. Each unit or group of units to which the goodwill is so
allocated should represent the lowest level within the entity at which the
goodwill is monitored for internal management purposes and should not be
larger than an operating segment as defined in IFRS 8 before aggregation.
For the purpose of analyzing the recoverable amount of goodwill, each
individual country is considered as representing a separate CGU. The
choice of this level is based on a combination of organizational and
strategic criteria:
■
operations within each country (hypermarkets, supermarkets, etc.) use
shared resources (country-level centralized purchasing organization,
marketing systems, headquarters functions, etc.) that represent an
essential source of synergies between the various operations;
■
decisions to dispose of business portfolios are generally made at
country level and it is rare for just a single store to be sold.
Value in use is considered as corresponding to the sum of discounted
future cash flows for a period generally not exceeding five years, plus a
terminal value calculated by projecting data for the final year to perpetuity
at a perpetual growth rate. A specific discount rate by country is used
for the calculation. Future cash flows are estimated based on the three-
year business plan drawn up by country management and approved by
Group management.
The discount rate for each country corresponds to the weighted average
cost of equity and debt, determined using the median gearing rate for
the sector. Each country’s cost of equity is determined based on local
parameters (risk-free interest rate and market premium). The cost of debt
is determined by applying the same logic.
The main assumptions used for impairment testing purposes are
presented in Note 17.