Sodexo’s policy is to finance the majority of acquisition costs insofar as possible in the currency of the acquired entity, generally at fixed rates of interest.
Derivative financial instruments are initially recognized at fair value in the statement of financial position. Subsequent changes in the fair value of derivative instruments are recognized in the income statement, except in the case of instruments that qualify as cash flow hedges.
For cash flow hedges, the necessary documentation is prepared at inception and updated at each period end. Gains or losses arising on the effective portion of the hedge are recognized in other comprehensive income, and are not recognized in the income statement until the underlying asset or liability is realized. Gains or losses arising from the ineffective portion of the hedge are recognized in the income statement.
Interest-rate derivatives are also used as fair value hedges (fixed-rate bond swapped for a floating rate). In the case of fair value hedge relationships, the portion of financial liabilities hedged by the interest-rate derivatives are remeasured to the extent of risk hedged. Changes in the value of hedged items are recognized in profit and loss for the period and are offset by symmetrical adjustments in interest-rate derivatives.
The fair value of these derivative instruments is generally determined based on valuations provided by the bank counter-parties.
All borrowings, including bank credit facilities and overdrafts, are initially recognized at the fair value of the amount received less directly attributable transaction costs.
Subsequent to initial recognition, borrowings are measured at amortized cost using the effective interest method. The effective interest rate is the rate that discounts estimated future cash payments or receipts through the expected life of a financial liability to the net carrying amount of that liability. The calculation includes the effects of transaction costs, and of differences between the issue proceeds (net of transaction costs) and reimbursement value.
Cash and cash equivalents comprise current bank account balances, cash on hand and short-term cash investments in money-market instruments. Money-market instruments correspond to authorized “short-term” or “standard” money-market funds under the new regulation adopted by the European Union (market funds that are eligible to the presumption as to classification as cash equivalents pursuant to the common AMF and ANC position issued in November 27, 2018) and have an initial maturity of less than three months at the moment of purchase or may be withdrawn at any time at a known cash value with no material risk of loss in value.
| (in million euros) | FISCAL 2022 | FISCAL 2021 |
|---|---|---|
|
Gross borrowing cost(1) |
Gross borrowing cost(1) FISCAL 2022(91) |
Gross borrowing cost(1) FISCAL 2021(89) |
| Interest income from short-term bank deposits and equivalent | Interest income from short-term bank deposits and equivalent FISCAL 202215 |
Interest income from short-term bank deposits and equivalent FISCAL 20216 |
| NET BORROWING COST | NET BORROWING COSTFISCAL 2022(76) | NET BORROWING COSTFISCAL 2021(83) |
|
Interest on financial lease liabilities IFRS 16(2) |
Interest on financial lease liabilities IFRS 16(2) FISCAL 2022(17) |
Interest on financial lease liabilities IFRS 16(2) FISCAL 2021(20) |
| Net foreign exchange gains/(losses) | Net foreign exchange gains/(losses) FISCAL 20223 |
Net foreign exchange gains/(losses) FISCAL 2021(2) |
| Net interest cost on net defined benefit plan obligation | Net interest cost on net defined benefit plan obligation FISCAL 2022(2) |
Net interest cost on net defined benefit plan obligation FISCAL 2021(3) |
| Interest income from loans and receivables at amortized cost | Interest income from loans and receivables at amortized cost FISCAL 20225 |
Interest income from loans and receivables at amortized cost FISCAL 20214 |
| Other financial income | Other financial income FISCAL 202214 |
Other financial income FISCAL 20218 |
| Other financial expense | Other financial expense FISCAL 2022(14) |
Other financial expense FISCAL 2021(9) |
| NET FINANCIAL EXPENSE | NET FINANCIAL EXPENSEFISCAL 2022(87) | NET FINANCIAL EXPENSEFISCAL 2021(106) |
| Of which Financial income | Of which Financial incomeFISCAL 202237 | Of which Financial incomeFISCAL 202118 |
| Of which Financial expense | Of which Financial expenseFISCAL 2022(124) | Of which Financial expenseFISCAL 2021(124) |
(1) Gross borrowing cost represents interest expense on financial liabilities at amortized cost and interest expense on hedging instruments.
(2) Interests on lease liabilities recognized in accordance with IFRS 16.
