Danone // 2020 Universal Registration Document

DANONE UNIVERSAL REGISTRATION DOCUMENT 2020 80 4.1 Consolidated financial statements and notes to the consolidated financial statements Note 6. Information concerning the Group’ s operating activities Note 6.5. Property, plant and equipment, capital expenditure and leases (right-of-use assets) Accounting principles Property, plant and equipment acquired Property, plant and equipment acquired by the Group are recognized at cost of acquisition or at construction cost. Depreciation Depreciation of property, plant and equipment is calculated on a straight-line basis over the estimated useful lives as follows: • buildings: 15 to 40 years; • equipment, furniture and fixtures: 5 to 20 years; • other: 3 to 10 years. The depreciation charges in respect of property, plant and equipment are allocated to various headings in the income statement on the basis of the nature and utilization of the assets concerned. Refundable containers Refundable containers (including, in particular, jugs in the Waters Reporting Entity) are recognized at cost. They are depreciated on a straight-line basis, based on available statistics for each Group entity, over the shorter of the following lengths of time: • physical useful life, taking into account the internal and external breakage rates and wear and tear; • commercial useful life, taking into account planned or likely modifications of containers. When the amount of the refund changes, the liability for deposits received is measured based on the new amount. Leased assets IFRS 16 Leases requires lessees to use a unique accounting model for leases, which involves the recognition in the balance sheet of a right-of-use asset with a corresponding lease liability in respect of the present value of the lease payments due over the reasonably certain term of the lease. Deferred tax is also recognized on the basis of the difference between the carrying amount of the right- of-use asset and the lease liability. The depreciation charge in respect of the right-of-use asset is presented in the various headings within consolidated net income and the interest expense relating to the lease liability is presented within Interest expense. The cash flows relating to the lease payments are presented in cash flows provided by (used in): • financing activities, in the case of the portion corresponding to the repayment of the lease liability; • operating activities, in the case of the portion corresponding to the interest on the lease liability. Danone uses the incremental borrowing rate to determine the lease liability unless the interest rate implicit in the lease can be easily determined. It is calculated separately for each currency and ma- turity, on the basis of the internal financing rate, to which is added a credit spread for the Danone SA bond issues, taking into account a linear repayment profile. The lease term used is the non-cancellable period during which Danone has the right to use the underlying asset, together with both periods covered by options to extend or to terminate the lease if their exercise is assessed as reasonably certain. The decision of the IFRS IC of November 26, 2019 concerning lease term and the useful life of leasehold improvements did not have amaterial impact on the Group’s consolidated financial statements. The right-of-use asset is depreciated over the lease term or over the useful life of the underlying asset if the exercise of a purchase option is deemed reasonably certain. Danone uses the simplification measures specified by IFRS 16 and consequently: • does not restate leases of low value assets whose reasonably certain term is less than 12 months. The lease expense is reco- gnized in the income statement as incurred; • it distinguishes between the lease and non-lease components and accounts for them accordingly; • for the purposes of its implementation as of January 1, 2019: • did not apply IFRS 16 to contracts that the Group had not previously identified as containing a lease component, pur- suant to IAS 17 and IFRIC 4: IFRS 16 is not applied on the transition date and will be applied, where relevant, on the renewal of the contract if it is determined that the contract is or contains a lease; the accounting principles in force as of December 31, 2018 for such leases therefore remain applicable; • relied, where relevant, on its assessment of whether leases were onerous leases as of December 31, 2018, to adjust the right-of-use asset recognized as of the date of first-time application.