Financial performance 2024 consolidated financial statements 05 Measurement Loans and receivables are measured at amortized cost using the effective interest rate method. Financial assets at fair value are valued by direct reference to a price quoted in an active market or on the basis of market assumptions (note 17.3). Gains and losses, realized or unrealized, arising from changes in the fair value of financial assets at fair value through profit or loss are recognized immediately in other financial income and expenses. Gains and losses, realized or unrealized, arising from changes in the fair value of financial assets at fair value through comprehensive income are recorded in other comprehensive income and never impact the income statement. Impairment At each reporting date, the Group looks for any objective indication of impairment of financial assets recorded at amortized cost. The model for calculating the expected credit loss is determined on the basis of the counterparty rating and the associated default probability. The impairment loss is calculated over a period of 12 months given the non-deterioration of the credit risk of the counterparties. It is recognized in the income statement. When the credit risk of a financial asset at amortized cost increases significantly, the expected credit loss is calculated over the life of the asset. If there is no longer a reasonable expectation to recover the value of a financial asset at amortized cost, the asset is derecognized from the consolidated statement of financial position and impacts the income statement. 9.1 Cost of net debt and other financial income and expenses Cost of net debt and other financial income and expenses are broken down in the table below: (in € millions) 2024 2023 Interest expense (169) (259) Interest expense on lease liabilities (49) (43) Interest income on cash, cash equivalents and cash management financial assets 141 130 Interest rate derivatives (4) (29) Fees on credit lines (6) (6) Capitalized borrowing costs 11 9 COST OF NET DEBT (77) (198) Net income from financial assets (other than cash and cash equivalents and cash management financial assets) 67 52 Currency remeasurement (including currency derivatives) (37) (87) Other (11) 37 OTHER FINANCIAL INCOME AND EXPENSES 19 2 The cost of net debt includes an expense of €4 million (2023: expense of €29 million) corresponding to negative fair value adjustments to interest rate derivatives recorded during the year due to changes in interest rates. This accounting treatment reflects the fact that these derivatives do not qualify as hedging instruments, as explained in note 17. Most of the Group’s borrowings are denominated in euros. Some of these borrowings are subsequently swapped into foreign currencies to finance foreign subsidiaries and derivatives are purchased to manage the interest-rate risk of these currencies, as illustrated in note 17.2.3. 390 2024 UNIVERSAL REGISTRATION DOCUMENT_MICHELIN
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