Fiscal 2022 Universal Registration Document

2.1.2 New accounting standards and interpretations applied

The accounting policies used by the Group to prepare its consolidated financial statements for the fiscal year ended August 31, 2022 are the same as those used for the consolidated financial statements as of August 31, 2021, except for the principles impacted by the decisions of the IFRS Interpretation Committee mentioned below. The other texts effective as of September 1, 2021 had no impact on the consolidated financial statements of the Group.

In April 2021, the IFRS Interpretation Committee issued its final decision clarifying the calculation methods, in application of IAS 19 “Employee benefits”,  for commitments with an obligation to be present in the Group at the time of retirement and of which the rights are capped to a certain number of years of seniority.The application of this decision impacted the consolidated shareholders’ equity as of September 1, 2021 for +10 million euros net of tax. Comparative information relating to Fiscal 2021 has not been restated, the impact having been considered immaterial for the Group.

This same Committee, in March 2021, made final its decision providing details on the accounting for configuration and customization costs of SaaS (Software as a Service) type software. This decision clarifies that configuration and customization costs related to SaaS software are to be recognized as an expense except if the costs meet the definition of an intangible asset in application of IAS 38 “IntangibleAssets”. The application of this decision impacted the consolidated shareholders' equity as of September 1, 2021 for -31 million euros net of tax. Comparative information relating to Fiscal 2021 has not been restated, the impact having been considered immaterial for the Group.

2.2 Use of estimates

The preparation of financial statements requires the Management of Sodexo and its subsidiaries to make estimates and assumptions which affect the amounts reported for assets, liabilities and contingent liabilities as of the date of preparation of the financial statements, and for revenues and expenses for the year.

These estimates and valuations are updated continuously based on past experience and on various other factors considered reasonable in view of current circumstances and are the basis for the assessments of the carrying amount of assets and liabilities. Unpredictability generated by the Covid-19 pandemic made the use of estimates and assumptions a key factor in the establishment of the consolidated financial statements.

Actual amounts may differ from these estimates if assumptions or circumstances change.

2.2.1 Key estimates and assumptions

Significant items subject to such estimates and assumptions include the following:

• impairment of current and non-current assets (notes 4.3 to 6.4);
• provisions for risks, litigation and restructuring (notes 10.1and 10.2);
• recognition of deferred tax assets (note 9);
• liabilities recognized for uncertain tax positions (note 9);
• fair value of financial assets and derivative financial instruments (notes 12.5 and 12.6);
• valuation of post-employment defined benefit plan assets and liabilities (note 5.1);
• share-based payments (note 5.2);
• valuation of intangible assets acquired as part of a business combination, as well as their estimated useful lives (note 3);
• assessment of the lease term in measuring the lease liabilities and related right-of-use assets (note 7.1).

2.2.2 Assessment of the effects of climate change

As part of its Climate Strategy, the Group has set the objective of significantly reducing its environmental impact at every level of its value chain, in particular through the following actions:

• implementing the Waste Watch program, to minimize food waste by facilitating the operational and behavioral changes required to eliminate avoidable product waste, both in the kitchen and by consumers;
• developing the plant-based food offer, to raise consumer awareness of the nutritional and environmental benefits of meals based on vegetable protein, another essential driver in reducing carbon emissions;
• using 100% renewable electricity at its directly operated sites by 2025, and deploying its energy management service to assist its clients with their renewable energy choices;
• progressively transitioning away from coal sector projects, with the aim of exiting the sector by 2025.

The many initiatives undertaken by Sodexo aim, in particular, to achieve the objective of a 34% reduction in the Group’s greenhouse gas emissions by 2025 (as compared to the 2017 reference year), as part of its corporate responsibility roadmap Better Tomorrow 2025 defined in 2017.

The Group took into account the estimated costs of implementing these actions within the business plans drawn up for each operating segment when preparing its impairment tests.

The potential long-term impact of climate-related risks and opportunities on other components of business plans – primarily the effect on the cost of sales and the margin of possible disruptions to the Group’s supply chain due to physical risks after taking into account the anticipated impact of the mitigating measures – is considered via sensitivity analysis of the value in use estimated for the purposes of the impairment tests to the variation in operational assumptions, the results of which are presented in note 6.4.

The commitments made by the Group in relation to climate change had no other impact on the judgments and estimates used by Management in the context of the preparation of its consolidated financial statements as of August 31, 2022, in particular regarding the assessment of the useful life of property, plant and equipment, the estimate of their recoverable value or the recognition of liabilities.