Danone // 2020 Universal Registration Document

4 67 DANONE UNIVERSAL REGISTRATION DOCUMENT 2020 4.1 Consolidated financial statements and notes to the consolidated financial statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Contents NOTE 1. ACCOUNTING PRINCIPLES 68 Note 1.1. Bases for preparation 68 Note 1.2. Accounting framework applied 68 Note 1.3. Application of IAS 29 68 Note 1.4. Application of the amendment to IFRS 9 69 NOTE 2. HIGHLIGHTS OF THE YEAR 69 NOTE 3. IMPLICATIONS OF COVID-19 FOR DANONE 69 Note 3.1. Impacts of Covid-19 on the Group’s activities and performance in 2020 69 Note 3.2. Other impacts of Covid-19 on the Group’s consolidated financial statements and liquidity situation 69 NOTE 4. FULLY CONSOLIDATED COMPANIES AND NON-CONTROLLING INTERESTS 70 Note 4.1. Accounting principles 70 Note 4.2. Main changes during the period 71 Note 4.3. Fully consolidated companies 71 Note 4.4. Accounting for acquisitions resulting in control being obtained in 2020 71 Note 4.5. Non-controlling interests 71 NOTE 5. ASSOCIATES 72 Note 5.1. Accounting principles 72 Note 5.2. Main associates in terms of net income and consolidated net assets 72 Note 5.3. Main changes during the period 72 Note 5.4. Carrying amount and changes during the period 73 Note 5.5. Share of profit of associates 73 Note 5.6. Disposal of the Group’s residual interest in Yakult (EDP, Japan) 74 Note 5.7. Mengniu (EDP, China) and Yashili (Specialized Nutrition, China) 74 Note 5.8. Impairment review of other Investments in associates 75 NOTE 6. INFORMATION CONCERNING THE GROUP’S OPERATING ACTIVITIES 75 Note 6.1. Accounting principles 75 Note 6.2. Operating segments 75 Note 6.3. Other components of recurring operating income 77 Note 6.4. Working capital 77 Note 6.5. Property, plant and equipment, capital expenditure and leases (right-of-use assets) 80 Note 6.6. O ff-balance sheet commitments relating to operating activities 82 Note 6.7. Financial risks associated with operating activities 82 NOTE 7. EVENTS AND TRANSACTIONS OUTSIDE THE GROUP’S ORDINARY ACTIVITIES 83 Note 7.1. Other operating income (expense) 83 Note 7.2. Transformation of Danone’s organization and operations 84 NOTE 8. NUMBER OF EMPLOYEES, PERSONNEL COSTS AND EMPLOYEE BENEFITS 85 Note 8.1. Number of employees at fully consolidated companies 85 Note 8.2. Personnel costs of fully consolidated companies 85 Note 8.3. Retirement commitments, retirement indemnities and personal protection 85 Note 8.4. Group performance shares 89 Note 8.5. Company Savings Plan 89 NOTE 9. INCOME TAX 90 Note 9.1. Income tax expense 90 Note 9.2. Deferred taxes 91 Note 9.3. Tax loss carryforwards 91 NOTE 10. INTANGIBLE ASSETS 92 Note 10.1. Accounting principles 92 Note 10.2. Carrying amount and changes during the period 93 Note 10.3. Impairment review of goodwill and brands with indefinite useful lives 93 NOTE 11. FINANCING AND FINANCIAL SECURITY, NET DEBT AND COST OF NET DEBT 96 Note 11.1. Accounting principles 96 Note 11.2. Liquidity risk and management policy 97 Note 11.3. Financing structure and changes during the period 98 Note 11.4. Group’s financing and financial security managed at the Company level 99 Note 11.5. Short-term investments 101 Note 11.6. Net debt 101 Note 11.7. Cost of net debt 102 Note 11.8. Financial risks associated with the net debt and the financing activity 102 NOTE 12. OTHER FINANCIAL ASSETS, OTHER FINANCIAL INCOME (EXPENSE) 102 Note 12.1. Accounting principles 102 Note 12.2. Other financial assets 103 Note 12.3. Other financial income and Other financial expense 103 NOTE 13. ORGANIZATION OF FINANCIAL RISKS AND DERIVATIVES MANAGEMENT 103 Note 13.1. Organization of financial risks management 103 Note 13.2. Accounting principles 104 Note 13.3. Derivatives 104 Note 13.4. Counterparty risk 107 Note 13.5. Equity securities risk 107 Note 13.6. Reconciliation of the consolidated balance sheet by class and accounting category 108 NOTE 14. DANONE SHARES, DIVIDEND AND EARNINGS PER SHARE 109 Note 14.1. Accounting principles 109 Note 14.2. Transactions and changes involving DANONE shares 109 Note 14.3 Outstanding DANONE shares 109 Note 14.4. Earnings per share – Group share 109 Note 14.5. Dividend 110 NOTE 15. OTHER NON-CURRENT PROVISIONS AND LIABILITIES AND LEGAL AND ARBITRATION PROCEEDINGS 110 Note 15.1. Accounting principles 110 Note 15.2. Other non-current provisions and liabilities 111 Note 15.3. Changes in Other provisions 111 Note 15.4. Legal and arbitration proceedings 111 NOTE 16. RELATED PARTY TRANSACTIONS 111 Note 16.1. Accounting principles 111 Note 16.2. Transactions with associates 111 Note 16.3. Compensation and benefits granted to members of the Executive Committee and Board of Directors 112 NOTE 17. SUBSEQUENT EVENTS 112 NOTE 18. FEES TO THE STATUTORY AUDITORS AND MEMBERS OF THEIR NETWORKS 112 NOTE 19. EXEMPTION OPTION FROM STATUTORY REQUIREMENTS RELATED TO SOME AFFILIATES 113