A non-current asset (or a disposal group) is classified as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use.
For this to be the case, the asset (or disposal group) must be available for immediate sale in its present condition and its sale must be highly probable.
The relevant assets and liabilities are shown separately on the balance sheet under “Non-current assets held for sale” and “Liabilities associated with non-current assets held for sale”.
A non-current asset (or disposal group) classified as held for sale is measured at the lower of its carrying amount and fair value less costs to sell. A charge for impairment of unrealised gains is recognised in the income statement. Unrealised gains are no longer amortised when they are reclassified.
A discontinued operation is a component of the entity that has either been disposed of, or is classified as held for sale, and:
- represents a separate major line of business or geographical area of operations;
- is part of a single co-coordinated plan to dispose of a separate major line of business or geographical area of operations;
- is a subsidiary acquired exclusively with a view to resale. Are disclosed on a separate line of the income statement:
- the post-tax profit or loss of discontinued operations until the date of disposal;
- the post-tax gain or loss recognised on the disposal or on measurement to fair value less costs to sell of the assets and liabilities constituting the discontinued operations.
1.4 CONSOLIDATION PRINCIPLES AND METHODS (IAS 27, 28 and 31)
Scope of Consolidation
The consolidated financial statements include the accounts of Crédit Agricole S.A. and of all companies over which Crédit Agricole S.A. exercises control, in accordance with IAS 27, IAS 28 and IAS 31. Control is presumed to exist if Crédit Agricole S.A. owns 20% or more of existing and potential voting rights in an entity, whether directly or indirectly.
As an exception, entities that do not have a material impact on the consolidated financial statements of the group are not included in the scope of consolidation.
Materiality is assessed in the light of three main criteria representing a percentage of the consolidated balance sheet, the consolidated retained earnings and the consolidated income statement.
Definitions of control
In accordance with international standards, all entities falling under exclusive control, joint control or significant influence are consolidated, providing that their contribution is deemed to be material and that they are not covered under the exclusions described below.
Exclusive control is presumed to exist if Crédit Agricole S.A. owns over half of the voting rights in an entity, whether directly or indirectly through subsidiaries, except if, in exceptional circumstances, it can be clearly demonstrated that such ownership does not give it control. Exclusive control also exists if Crédit Agricole S.A., as the owner of half or less than half of the voting rights in an entity, holds majority power within management bodies.
Joint control is exercised in joint ventures in which each of the two or more co-owners are bound by a contractual contribution that provides for joint control.
Significant influence is defined as the power to influence but not control a company’s financial and operational policies. Crédit Agricole S.A. is presumed to have significant influence if it owns 20% or more of the voting rights in an entity, whether directly or indirectly through subsidiaries.
Consolidation of Special Purpose Entities
The consolidation of Special Purpose Entities (entities created to manage a given transaction or a set of similar transactions), and more specifically of funds held under exclusive control, is specified by SIC 12. In accordance with SIC 12, Special Purpose Entities are consolidated when the Crédit Agricole Group exercises control in substance over the entity, even if there is no shareholder relationship. This applies primarily to dedicated mutual funds.
Whether or not a Special Purpose Entity is controlled in substance is determined by considering the following criteria:
- the activities of the SPE, in substance, are conducted on behalf of a Crédit Agricole Group company according to its specific business needs, such that this company obtains benefits from the SPE’s activities;
- this company, in substance, has the decision-making powers to obtain a majority of the benefits of the SPE’s activities or has delegated such decision-making powers by establishing an “autopilot” mechanism;
- this company, in substance, has rights to obtain a majority of the benefits of the SPE’s activities and as a result may be exposed to the risks related to the SPE’s activities; or
- this company, in substance, retains the majority of the residual risks or risks arising from ownership relating to the SPE or its assets, in order to obtain benefits from its activities.
Exclusions from the scope of consolidation
In accordance with the provisions of IAS 28 §1 and IAS 31 §1, equity interests (excluding majority interests) held by venture capital entities are also excluded from the scope of consolidation insofar as they are classified under financial assets designated as at fair value through profit or loss (including financial assets designated upon initial recognition as at fair value through profit or loss).
Consolidation methods
The consolidation methods are respectively defined by IAS 27, 28 and 31. They are based on the type of control exercised by Crédit Agricole S.A. over the entities that can be consolidated, regardless of their business or of whether or not they have legal entity status:
- entities under exclusive control are fully consolidated, including entities with different account structures, even if their business are not an extension of that of Crédit Agricole S.A.;
- entities under joint control are proportionally consolidated, including entities with different account structures, even if their business are not an extension of that of Crédit Agricole S.A.;
Full consolidation consists of eliminating the book value of the shares held in the consolidating company’s financial statements and aggregating all assets and liabilities carried by each subsidiary. The value of the minority interests in net assets and earning is separately identified in the consolidated balance sheet and income statement.
Proportional consolidation consists of eliminating the book value of the shares held in the consolidating company’s financial statements and aggregating a proportion of the assets, liabilities and results of the company concerned representing the consolidating company’s interest.
The equity method consists of eliminating the book value of the shares held in the Group’s financial statements and accounting for its interest in the underlying equity and results of the companies concerned.