registration document France Telecom 2009 - Orange.com

20 CONSOLIDATED
financial information concerning the issuer’s assets and liabilities, financial position and profits and losses
STATEMENTS
Loans and receivables
This category mainly includes trade receivables, cash, some
cash collateral, as well as other loans and receivables. These
instruments are recognized at fair value upon origination and
are subsequently measured at amortized cost by the effective
interest method. Short-term receivables with no stated interest
rate are measured at original invoice amount unless there is any
signifi cant impact resulting fromof the application of an implicit
interest rate.
If there is any objective evidence of impairment of these
assets, the value of the asset is reviewed at the end of each
the reporting period. An impairment is recognized in the income
statement when the fi nancial asset carrying amount is higher
than its recoverable amount.
Impairment of trade receivables is based on two methods:
■ a statistical method: it is based on historical losses and
leads to a separate impairment rate for each ageing balance
category. This analysis is performed over an homogenous
group of receivables, with similar credit characteristics
because they belong to a customer category (mass-market,
small offi ces and home offi ces);
■ a stand-alone method: the assessment of impairment
probability and its amount are based on a set of relevant
factors (ageing of late payment, other balances with the
counterpart, rating from independent agencies, geographical
area). This method is used for carriers and operators (domestic
and international, local, regional and national authorities) and
for large accounts of Enterprise Communication Services.
Impairment losses identifi ed for a group of receivables represent
the step preceding impairment identifi cation for individual
receivable. When information is available (clients in bankruptcy
or subject to equivalent judicial proceedings), these receivables
are then excluded from the statistical database and individually
impaired.
Financial assets at fair value through profit or loss
Financial assets at fair value through profi t or loss are:
■ assets held for trading that the Group acquired principally for
the purpose of selling them in the near term;
■ assets that form a part of a portfolio of identifi ed fi nancial
instruments that are managed together and for which there is
evidence of a recent actual pattern of short-term profi t taking;
■ derivative assets not qualifying for hedge accounting;
■ assets voluntarily classifi ed at inception in this category
because:
■ this classifi cation allows to eliminate or signifi cantly reduce
a measurement or recognition inconsistency regarding
recognition of assets or liabilities linked together, that would
otherwise be assessed differently (for instance, a fi nancial
asset measured at fair value, linked to a fi nancial liability
measured at amortized cost),
■ a group of fi nancial assets, fi nancial liabilities or both is
managed and its performance is valued on a fair value
basis, in accordance with a documented risk management
or investment strategy, and information about this group of
fi nancial instruments is provided internally on that basis to
the Group’s key management personnel,
■ the entity decides not to separate from the host contract a
separable embedded derivative. It should then assess the
entire hybrid instrument at its fair value.
The Group can designate at fair value at inception cash and
cash equivalents with high liquidity and low volatility investments
such as negotiable debt securities, deposits, mutual funds
(OPCVM). These investments can be classifi ed as cash
equivalent in the statement of fi nancial position if they meet the
conditions required by IAS 7 “Statement of cash fl ows” (assets
easily convertible into a determined cash amount and subject to
a remote risk of change in value).
Recognition and measurement of financial
liabilities
Financial liabilities at amortized cost
With the exception of fi nancial liabilities at fair value, borrowings
and other fi nancial liabilities are recognized upon origination
at fair value of the sums paid or received in exchange for the
liability, and subsequently measured at amortized cost using the
effective interest method. Interest-free payables are booked at
their nominal value.
Transaction costs that are directly attributable to the acquisition
or issue of the fi nancial liability are deducted from the liability’s
carrying value. The costs are subsequently amortized over the
life of the debt, by the effective interest method.
Within the Group, some fi nancial liabilities at amortized cost,
including borrowings, are subject to hedge accounting. It
relates mostly to fi x rate borrowings hedged against changes in
interest rate and currency value (fair value hedge) and to foreign
currency borrowings in order to hedge to future cash fl ows
against changes in currency value (cash fl ow hedge).
Compound instruments
Certain fi nancial instruments comprise both a liability component
and an equity component. For the Group, they comprise
perpetual bonds redeemable for shares (TDIRA) and bonds
convertible into or exchangeable for new or existing shares
(OCEANE).
On initial recognition, the fair value of the liability component
is the present value of the contractually determined stream of
future cash fl ows discounted at the rate of interest applied at
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2009 REGISTRATION DOCUMENT / FRANCE TELECOM