Carrefour - 2017 Registration Document

5 CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2017 Notes to the Consolidated Financial Statements CARREFOUR | 2017 REGISTRATION DOCUMENT 247 Main financial assumptions used to estimate value in use 6.3.1.4 The perpetual growth rates and discount rates (corresponding to the weighted average cost of capital – WACC) applied for impairment testing purposes in 2017 and 2016 are presented below by CGU: Country 2017 2016 After-tax discount rate Perpetual growth rate After-tax discount rate Perpetual growth rate France 6.3% 1.8% 6.3% 1.8% Spain 6.8% 2.1% 6.8% 1.9% Italy 6.7% 1.7% 6.6% 1.7% Belgium 6.2% 1.8% 6.3% 1.8% Poland 8.4% 3.0% 8.5% 2.8% Romania 9.0% 2.6% 8.5% 2.5% Brazil 12.3% 4.4% 13.0% 4.8% Argentina 16.2% 7.4% 16.6% 7.3% China 9.7% 2.4% 8.9% 2.6% Taiwan 7.2% 1.9% 7.4% 1.9% Investment property 6.4 Accounting principles IAS 40 – Investment Property defines investment property as property (land or a building or both) held to earn rentals or for capital appreciation or both. Based on this definition, investment property held by the Group consists of shopping malls (retail and service units located behind the stores’ check-out area) that are exclusively or jointly owned or subject to a finance lease and represent a surface area of at least 2,500 square metres. These assets generate cash flows that are largely independent of the cash flows generated by the Group’s other retail assets. Investment property is recognised at cost and is depreciated over the same period as owner-occupied property (Note 6.2). Rental revenue generated by investment property is reported in the income statement under “Other revenue” on a straight-line basis over the lease term. The rewards granted by the Group under its leases are an integral part of the net rental revenue and are recognised over the lease term (Note 6.2). The fair value of investment property is measured twice a year: by applying a multiple that is a function of (i) each shopping ● mall’s profitability and (ii) a country-specific capitalisation rate, to the gross annualised rental revenue generated by each property; or by obtaining independent valuations prepared using two ● methods: the discounted cash flows method and the yield method. Valuers generally also compare the results of applying these methods to market values per square metre and to recent transaction values. In view of the limited external data available, particularly concerning capitalisation rates, the complexity of the property valuation process and the use of passing rents to value the Group’s own properties, the fair value of investment property is determined on the basis of level 3 inputs. (in millions of euros) December 31, 2017 December 31, 2016 Investment property at cost 593 475 Depreciation and impairment (183) (161) TOTAL INVESTMENT PROPERTY, NET 410 314