Plastic Omnium - 2018 Registration Document

4 2018 CONSOLIDATED FINANCIAL STATEMENTS Consolidated financial statements at December 31, 2018 PLASTIC OMNIUM 2018 REGISTRATION DOCUMENT 143 The Group mainly reviews the following elements and criteria in order to assess whether joint control or significant influence is exercised over an entity: governance: representation of the Group on governance Boards and ● committees, majority rules, veto rights; the determination of the substantive or protective rights granted to ● shareholders, particularly related to the relevant businesses of the entity, namely those that have a significant impact on the variable return of the entity; the consequences of a conflict resolution clause; ● the right/exposure of the Group to the variable returns of the entity. ● Non-controlling interests 1.1.2 Non-controlling interests represent the share of interest, which is not held by the Group. They are presented as a separate item in the income statement and under equity in the consolidated balance sheet, separately from the profit and equity attributable to owners of the parent. Non-controlling interests may be either measured at fair value on the acquisition date ( i.e. with a share of goodwill) or for their share in the fair value of identifiable net assets acquired. This choice can be made on a transaction-by-transaction basis. HBPO minority interests are valued on the basis of the fair value of identifiable net assets acquired. Changes in a parent’s ownership interest in a subsidiary that do not change control are recognized as equity transactions. For example, in the event of an increase (or decrease) in the percentage ownership interest of the Group in a controlled entity, without change in control, the difference between the acquisition cost of (or transfer price) and the carrying amount of the share of net assets acquired (or sold) is recognized in equity. The changes that trigger a takeover have the following consequences. a theoretical sale of the historically held equity holding, with an income ● statement at the date of acquisition; accounting for business combinations an application of IFRS 3 ● “Business Combinations”. In the 2018 financial year, the acquisition of additional 33.33% stake from Mahle Behr and the take-over of HBPO had the aforementioned consequences above (see Notes 1.1.4 and 2.3.1). Sector information 1.1.3 Segment information is presented on the basis of the sectors identified in the Group’s internal reporting and notified to the management in order to decide on the allocation of resources and to analyze performance. As a consequence of the takeover of HBPO and the disposal of the Environment business, the Group is managed according to two operating segments: Industries, which combines the body parts business (Intelligent Exterior ● Systems Division) and the fuel storage and supply systems (Clean Energy Systems Division); and Modules, for the HBPO front-end modules business. ● Business combinations 1.1.4 Business combinations are recognized by applying the acquisition method. Identifiable assets, liabilities and contingent liabilities acquired are recognized at their fair value on the purchase date. The surplus of the sum of the price paid to the seller and, where appropriate, the value of the non-controlling interest in the company acquired against the net balance of the acquired assets and the identifiable liabilities acquired is recognized in goodwill. Where the takeover is carried out through successive purchases, the consideration also includes the acquisition-date fair value of the acquirer’s previously held equity interest in the acquired company. The previously held equity interest is measured at fair value through profit or loss (see Note 2.3.1.2). Acquisition costs are recorded as expenses. The fair value adjustments of assets acquired and liabilities assumed are offset against goodwill adjustments on the basis of information obtained during the allocation period, i.e. within twelve months of the acquisition. Changes in value after that date are recognized in profit or loss, including any changes in deferred tax assets and liabilities, if they are related to new items that have occurred since the change of control. If they result from new information relating to facts existing at acquisition date and collected during the 12 months following this date, they are an offset to the acquisition’s goodwill. Translation of the financial statements of foreign 1.1.5 subsidiaries Plastic Omnium Group uses the euro as its presentation currency in its financial statements. The financial statements of foreign companies are prepared in their functional currency, i.e. in the currency of the economic environment in which the entity operates; usually the functional currency corresponds to the local currency, except for some foreign subsidiaries such as the Mexican subsidiaries which carry out the majority of their transactions in another currency. These financial statements are translated into the Group’s presentation currency, as follows: translation of balance sheet items, other than equity, at the closing rate; ● translation of income statement items at the average rate for the ● period; translation differences are recognized in consolidated equity. ● Goodwill arising from business combinations with foreign companies is recognized in the functional currency of the acquired entity. They are subsequently translated into the Group’s presentation currency at the closing rate, with the translation difference recognized in equity. On disposal of the entire interest in a foreign company, the related translation differences are initially recognized in equity, then reclassified in profit and loss. Recognition of transactions in foreign currencies 1.1.6 Transactions in foreign currencies are initially recorded in the functional currency at the rate on the transaction date. On the closing date, monetary assets and liabilities are revalued at the rates prevailing at the closing date. Non-monetary assets and liabilities at cost are valued at the historical rates, prevailing at the transaction date (for example, goodwill, tangible assets, inventories, etc.). Non-monetary assets and liabilities at fair value are valued at the rates prevailing at the date when fair value is determined (for example, assets available for sale). For monetary items exchange rate differences arising from changes in interest rates are recorded in the income statement, as other operating income and expenses, when they are related to operations and as financial income/expense when they are related to financial transactions. Borrowings in foreign currencies contracted by a subsidiary from the Group and whose repayment is neither planned nor likely in the foreseeable future are considered to be part of the net investment of the Plastic Omnium Group in this foreign business. The corresponding translation differences are recorded in equity.