Danone // 2020 Universal Registration Document

DANONE UNIVERSAL REGISTRATION DOCUMENT 2020 122 4.2 Financial statements of Danone SA, the parent company Note 1. Accounting principles DANONE treasury shares DANONE shares repurchased by the Company are recognized under the heading: • Other financial assets, when they are repurchased in connection with corporate acquisitions or to be canceled; • Marketable securities, when they are repurchased to hedge Group performance share plans under which shares are allocated to certain Danone employees and corporate officers. They are recognized at acquisition cost, excluding acquisition-related costs. In the event of a disposal, the cost of the DANONE shares sold is calculated by allocation category in accordance with the weighted average cost method, which is calculated individually for each plan for the shares allocated to hedge Group performance share plans. DANONE shares recognized as Other financial assets In the case of DANONE shares recognized as Other financial assets that are not to be canceled, an impairment provision is recognized when their recoverable amount (assessed at the average price for the last month of the fiscal year) falls below their carrying amount. DANONE shares recognized as Marketable securities Hedging of Group performance shares for which it is probable that performance conditions will not be met In the case of treasury shares allocated to hedge plans that cannot be exercised (it is probable that the performance conditions will not be met), a provision for impairment is recognized when the market value of the shares (assessed at the average price for the last month of the fiscal year) is less than their carrying amount. Hedging of Group performance shares for which it is probable that performance conditions will be met In the case of treasury shares allocated to hedge plans that can be exercised (it is probable that the performance conditions will bemet), a provision for impairment is not recognized. However, a provision for risks and charges is, where necessary, recognized in respect of these plans, equal to the carrying amount of the shares allocated to said plans. The provision is booked prorata to the rights vesting period and recognized in Personnel costs in the income statement. Loans and receivables Loans and receivables are stated at their nominal value. An impairment provision is recognized when the recoverable amount is less than the carrying amount. Recognition of transactions in foreign currencies Expense and income in foreign currencies are recorded at their exchange value in euros at the date of the transaction. Liabilities, receivables and cash denominated in foreign currencies are recorded in the balance sheet at their exchange value in eu- ros calculated at the closing rate. The differences resulting from translation at this rate are recorded in the balance sheet in the line items Deferrals and prepaid expense and Deferrals and accrued expense in the case of receivables and liabilities. A provision for risks is recognized for non-hedged unrealized exchange losses. Marketable securities Marketable securities comprise a portion of the treasury shares and other investments made by the Company. Their gross value corresponds to their acquisition cost excluding acquisition-related costs. When the market value of each category of securities of the same nature is lower than the acquisition cost, a provision for impairment is recognized equal to the difference. For further information about treasury shares reclassified asMarketable securities, see the above section DANONE shares recognized as Marketable securities . Bonds Bonds consist in borrowings raised by Danone, on capital markets, notably under its EMTN (Euro MediumTermNote) program, through public issues or private placements, denominated in euros or fo- reign currencies. Bonds denominated in foreign currencies may be maintained in those currencies or swapped into euros; bonds are recognized at their nominal value, translated at the closing exchange rate. Derivatives Danone hedges part of its bonds denominated in foreign currencies by cross-currency swaps. Since January 1, 2017, the Company has applied ANC Regulation no. 2015-05 on financial instruments to its material hedging transactions. In addition, Danone Corporate Finance Services, a wholly-owned subsidiary, also carries out interest rate hedging transactions on behalf of the Company in respect of certain borrowings and com- mercial paper ( Billets de trésorerie ) issued by the Company. Provisions for risks and charges Provisions are recognized for identified risks and charges of un- certain timing or amount when the Company has an obligation to a third party and it is certain or probable that this obligation will result in a net outflow of resources for the Company. For further information about provisions against Group performance share plans, see the above section DANONE shares recognized as Marketable securities .