2001 Annual Report - Unibail-Rodamco

CONSOLIDATED FINANCIAL STATEMENTS
APPENDICES TO THE CONSOLIDATED FINANCIAL STATEMENTS
48
1- Principles and methods
of consolidation
1-1 Terms of reference
The consolidated financial statements are prepared in accordance
with C.R.C. (Accounting Regulation Committee) Rule 99-07 dated
November 24, 1999 relating to entities accountable to the Comité
de la Réglementation Bancaire et Financière (Banking Regulation
Committee).
Under this rule, companies must recognize the deferred taxes on
any amounts arising from the difference, allocated to properties,
between purchase price and book value of acquired companies.
Unibail decided not to apply this change retroactively when this
regulation initially became effective on January 1, 2000.
However, in 2001, following a review of its accounting rules,
the Group decided to recognize the deferred tax on consolidation
differences recorded in previous years. As a result, all its past
transactions have been adjusted based on the effective tax rate as
at January 1, 2001.
The effect of this restatement is the deferred tax liabilities to
increase the carrying value of acquired assets by offsetting the
deferred tax liabilities.
The presentation of the balance sheets and income statements has
been adapted to the Group’s specific circumstances to enhance
shareholder information and make it easier to interpret the key
performance indicators for each business segment.
These documents are also presented in Appendix 8 in the standard
format set out by Regulation CRC 99-07.
1-2 Methods of consolidation
The scope of consolidation includes all companies controlled
exclusively by Unibail and all companies in which the Group
exercises significant influence, as reflected in direct or indirect
ownership of at least 20% of the capital.
• Companies in which Unibail directly or indirectly holds an
interest of over 50% are fully consolidated.
• Companies in which Unibail directly or indirectly holds an
interest of over 20% are either consolidated by the equity
method, or proportional method if they are jointly controlled.
• The consolidation structure does not include companies the
Group does not plan to keep for strategic purposes and
companies not considered significant relative to the overall
structure.
1-3 Financial year-end
All consolidated companies close their books at December 31.
1-4 Consolidation adjustments
Financial statements restated for homogeneity
The financial statements for Unibail and Omnifinance have been
prepared in accordance with the rules established by the Banking
Commission (Commission Bancaire), while financial statements of
other Group companies are prepared in compliance with the Plan
Comptable, the Generally Accepted Accounting Principles applicable
in France. To ensure the homogeneity of the different financial
statements, they are restated by applying the principles set out in
§1-1.
Inter-company transactions
Inter-company balances and transactions between Group member
companies have been eliminated.
However, to ensure that the consolidated income statements
provide a meaningful picture of each segment of business, intercompany
transactions between the property investment and
property services sectors have not been eliminated.
Consolidation differences
For companies acquired, the difference between the purchase price
and adjusted net assets on the date of acquisition is allocated to
identifiable assets and liabilities of the consolidated company and
evaluated in accordance with the valuation rules normally applied
to such line items.The part of the consolidation difference allocated
to the real estate properties is allocated to the land and construction,
depending on the nature and location of the property.
As regards shopping centers and Convention-Exhibition spaces,
their value is tied in with the location of the land on which they
have been erected and with their allocation for commercial
purposes, which is a result of administrative authorizations.
Consequently, the excess purchase price is, in this case, totally
allocated to land assets.
When the building is erected on leasehold land, the excess purchase
price is amortized over the remaining life of the leasehold.
Any residual difference after allocation is amortized or written off
over a period appropriate to the activity of the company acquired.
Consolidation differences resulting from the acquisition of minority
interests are allocated in the same way.
Net profit from finance leasing
The net profit from finance leasing is calculated for each contract,
after principal repayment.
Principal repayment is deducted directly from banking income so as
to show only the interest income on these activities. Lease
payments are restated as installments on loans, including a partial
repayment of principal as well as the interest on the investment
and services provided by the lessor.
2- Valuation methods
2-1 Customer loans
Customer transactions are shown on the consolidated balance sheets
as credit outstanding.
Non-performing loans are recorded under doubtful accounts
whenever they appear likely or certain to remain unpaid. Such loans
are automatically transferred to doubtful accounts when not paid for
more than six months.
Provisions are assessed on a lease-by-lease basis, based on market
conditions, progress in proceedings undertaken and the nature of the
guarantees received.