Equity investments and other financial investments are carried on the balance sheet at cost. At each balance sheet date, a provision for impairment is recorded if the value in use of these assets is less than their net carrying amount including any merger deficits allocated to the assets for accounting purposes.
The value in use of investments is determined on the basis of net asset value, profitability and the future prospects of the investee.
When the carrying amount of an investment is higher than the net book value of the share of net assets of the subsidiary, the valuation is also supported by comparing the carrying amount of the investment to its value in use based on discounted future cash flows, using the following parameters:
Based on the estimated value in use, an investment may be maintained at a carrying amount in excess of the share of book net assets held.
Costs incurred to acquire shares in companies recognized at cost are recognized for tax purposes as exceptional amortization over a five-year period.
Receivables related to equity investments are recognized at face value. A provision for impairment is recorded where the recoverable amount is less than the carrying amount.
When an equity investment is sold or liquidated, any provision for impairment previously recognized against that investment is released and recorded as exceptional income.
Accounts receivable are recognized at face value. An allowance for doubtful accounts is recorded where the recoverable amount is less than the carrying amount.
Marketable securities are recognized at acquisition cost, with any unrealized losses at the balance sheet date covered by a provision for impairment.
A provision is recorded when it is probable that restricted share plans will give rise to an outflow of resources. The amount of the provision is based on the cost of the treasury shares acquired (or to be acquired) for allocation to each plan.
Depending on the plan terms, the provision is recognized over the period in which the services are rendered by the beneficiaries, as applicable.
The provision is released upon delivery of the shares and recognition of a capital loss in an amount equal to the average cost of the delivered shares.
When treasury shares are neither allocated to a plan nor held for the purpose of being cancelled, they are valued at the lower of the average purchase price and the average market price for the last month of the fiscal year.
Treasury shares acquired for cancellation purposes are recognized in other financial assets and no provision for impairment is recorded.
Foreign currency revenues and expenses are translated using the exchange rate as of the transaction date. Foreign currency liabilities and receivables are translated in the balance sheet at the exchange rate prevailing as of the balance sheet date. Any difference arising from the retranslation of foreign currency liabilities and receivables at the closing exchange rate is recorded in the balance sheet. Unrealized foreign exchange losses at the balance sheet date are recognized to the extent the underlying balance is not hedged.
In accordance with the ANC regulation no. 2015-05, for foreign currency transactions a distinction is now made between commercial transactions and financial transactions, with the exchange gains and losses on these transactions recognized as follows:
Debt issuance costs are recognized as a deferred charge asset in the balance sheet and amortized straight-line over the term of the debt.
Retirement benefit obligations due to active employees by law or under collective agreements are included in off -balance sheet commitments. Commitments under supplementary retirement plans are estimated using the projected unit credit method based on final salary and are also included in off-balance sheet commitments, net of any plan assets.
Sodexo S.A. is the lead company in the French tax consolidation, and has sole liability for income taxes for the entire French tax group. Each company included in the French tax consolidation recognizes the income tax for which it would have been liable had there been no French tax consolidation. Any income tax gains or losses arising from the French tax consolidation are recognized in the Sodexo S.A. financial statements.
In connection with position statement no. 2005-G issued on October 12, 2005 by the Urgent Issues Committee of the Conseil national de la comptabilité on the conditions under which a provision may be recognized by a Parent company covered by a French tax consolidation, Sodexo S.A. has elected the following accounting treatment: a provision for taxes is recognized in the financial statements of Sodexo S.A. to cover tax losses of subsidiaries which are used to off set income in the French tax consolidation and which will probably be reclaimed by the subsidiary. All tax losses incurred by operating subsidiaries are regarded as probable of being reclaimed by the subsidiary, given that the subsidiary will be able to offset such losses against income once it returns to profitability.
