accordance with the general accounting conventions laid down in the National Accounting Code, arising from ruling 99.03 of the Accounting Regulatory Committee (CRC), and the valuation methods outlined below.
The general accounting conventions have been applied in compliance with the principle of prudence, in accordance with the basic assumptions of:
❚ going concern;
❚ consistency of accounting methods from one fiscal year to the next;
❚ fiscal year independence,
as well as the general rules governing the preparation and presentation of the annual financial statements.
The basic method used to value the items booked in the Company’s accounts is the historical cost method.
2.2. Use of estimates
The preparation of the Group’s financial statements is based on estimates and assumptions which may have an impact on the book value of certain balance‑sheet and income‑statement items, as well as the information in some notes in the appendix. Altran reviews these estimates and assessments on a regular basis to take into account its past experience and other factors considered relevant to the economic environment.
These estimates, assumptions and assessments are compiled on the basis of information available and the actual situation at the time when the financial statements were prepared and could turn out to differ from future reality.
These estimates mainly concern provisions for risks and charges and assumptions underpinning the business plans used to value the investments (or equity holdings) and certain intangible assets (notably goodwill).
2.3. Intangible assets
Intangible fixed assets include trademarks, licenses, software and goodwill. These are booked at acquisition or production cost.
2.3.1. Trademarks
Trademarks are valued at brand‑registration cost (essentially Altran trademarks and logos) and are not amortised.
2.3.2. Software
This includes software that is either bought or created by the Company.
Software created for internal or commercial use is, for the most part, booked as costs. However, these can be booked as assets if the following conditions are met:
❚ the project must be clearly identified and monitored in an individual and reliable way;
❚ the project must have a strong chance of being technically successful;
❚ software products for rental, sale or marketing must offer strong prospects of commercial profitability;
❚ the Company makes known its intention to produce, market or make in‑house use of the software concerned;
❚ costs (internal or external) are directly incurred during the software analysis programming, testing and development stages. In 2013, during the annual amortisation‑duration reviews, estimation tests were carried out on the Company’s software. In consequence of the results of these tests, it was decided to extend the amortisation schedule for “business” software from three to five years.
Software is amortised on a straight‑line basis over its estimated life span of between 12 months and five years.
2.3.3. Goodwill
Goodwill includes:
❚ the historical cost of goodwill acquired by merged companies; ❚ technical merger losses, corresponding to the difference between
the net value of the shares of the acquired companies (which are booked as assets by the parent company) and their book values. These mainly concern technical losses arising from the merger of 26 companies in 2006, and 11 companies in 2013, which are subject to annual impairment testing based on forecast discounted cash flows generated by Company activities.
2.4. Tangible assets
Tangible assets include fixtures and fittings, office and IT equipment and furniture.
These are booked at acquisition cost, which includes all costs directly attributable to the tangible assets in question.
❚ buildings 10‑30 years
❚ fixtures and fittings 9‑10 years
❚ vehicles 5 years
❚ office equipment 2‑5 years
❚ office furniture 9‑10 years
2.5. Financial assets
Financial assets include equity holdings and long‑term loans and receivables.
The gross value of equity holdings and other financial assets are booked in the balance sheet at acquisition cost, which includes all costs that are directly attributable to the fixed assets in question. The inventory value of these assets corresponds to their respective value in use for the Company. This is determined by taking account of the enterprise value, determined by the profitability prospects (revenues, EBIT, cash flow and growth rate) based on the business plans (discounted cash flow method). In the absence of available data on these measures, the value in use corresponds to net worth. Depreciation is recorded when the inventory value thus defined is lower than the acquisition cost.
2.6. Inventories and work in progress
for services provided
Inventories are measured at their weighted average unit cost. The gross value of goods and supplies includes the purchase price plus related costs, other than value added.
Depreciation is recorded when the inventory value is lower than the nominal cost.
2.7. Debts and receivables
Debts and receivables are valued at nominal value.With regard to loans to subsidiaries, the inventory value of these receivables is calculated by using the depreciation method for equity holdings.
Depreciation is recorded when the inventory value is lower than the nominal cost.
2.8. Marketable securities
All marketable securities are held in mutual funds (SICAVs) and measured at acquisition cost. The difference between the amount booked to the balance sheet and the last market price at closing is subject to a fiscal adjustment.
2.9. Provisions for risks and charges
Provisions for risks and charges are booked when, at the close of the fiscal year, Altran has an obligation to a third party which will probably, or certainly, result in a cash outlay for the Company to the third party, without, at least, any equivalent consideration expected from the third party.A provision is written for the estimated amount of costs the Company will probably have to bear in order to meet its commitment.
Altran’s main provisions for risks and charges include:
❚ estimated costs for disputes, lawsuits and claims brought by third parties or former employees;
❚ estimated restructuring costs.
In the event of restructuring, provisions are made as soon as the Company announces, draws up or starts implementing a detailed restructuring plan before the close of the fiscal year.
2.10. Retirement benefit commitments
In accordance with recommendation 2003‑R01 of the CNC (French National Accounting Board), the Company has adopted the preferential method of accounting retirement commitments, which entails booking all such commitments as provisions in the Company accounts.Retirement commitments, based on applicable laws and provisions set forth in the Syntec collective agreement, were assessed by Towers Watson actuaries.
Costs related exclusively to end‑of‑career benefits are valued in accordance with the projected credit‑unit method and are booked under:
❚ operating income, for the portion relative to services costs and the amortisation of actuarial gains/losses;
❚ financial expenses, for the portion relative to discounted interest. Differences between the valuation and the provisioning of end‑ of‑career commitments (depending on forecasts used or new assumptions employed) are booked as actuarial gains and losses. Commitment differences, arising from changes in assumptions are also an integral part of actuarial differences.
Actuarial differences are booked to the income statement using the corridor method, whereby the portion exceeding the higher of 10% of the liabilities or of 10% of the fair value of the plan assets at the closing date is spread over the remaining working life of the beneficiaries.
note 3.2.2.): ❚ mortality table; ❚ staff turnover; ❚ discounting rate; ❚ inflation rate; ❚ salary trends.
2.11. Foreign currency operations
and translation differences
Revenues and costs denominated in foreign currencies are booked in euros on the date of operation. All debt, receivables and available cash denominated in foreign currencies are booked in euros in the balance sheet on the basis of the end‑year exchange rate.
All gains and losses resulting from the conversion of debt and receivables in non‑Eurozone currencies based on the closing exchange rates are booked as translation adjustments in the balance sheet and a provision is written to cover any latent losses.
2.12. Long-term operations and revenue
recognition
Revenues include all income generated by the Company’s services offering.
The accounting treatment of revenues and costs depends on the type of service rendered.