registration document France Telecom 2009 - Orange.com

20 NOTES
financial information concerning the issuer’s assets and liabilities, financial position and profits and losses
TO THE ANNUAL FINANCIAL STATEMENTS OF FRANCE TELECOM S.A.
2.2.9 Trade receivables
Due to its broad range of customers (consumers, large
companies and small businesses), France Telecom S.A.
does not consider itself to be exposed to a concentration of
customer risk. Provisions are recognized according to the risk
of non-recovery of the receivables. They are calculated either
on an individual basis or on a statistical assessment of the risk
according to customer segment.
Securitization
“ Consumer” receivables and a part of “ business” receivables
are sold to special purpose entities (SPEs) as part of the
programme of disposal of receivables. The receivables sold are
not recognized in the Statement of Financial Position. Where
they are sold at a discount, being the difference between the
nominal value of the receivable and the disposal price, this is
recognized as a fi nancial cost. Residual interests in securitized
receivables in a variety of forms (subordinated units, deposits,
reserve fund, etc.) are recorded as “ Financial assets” . Any
impairment of these interests, determined according to the risk
of non-recovery of the securitized receivables, is deducted from
“ Financial assets” . Selling costs together with commissions
and fi nancial interest paid to holders of units in the SPEs are
recognized in fi nance costs.
As the initial securitization program for “ Consumer” receivables
reached maturity in 2009 a new securitization program was put
in place. The securitization structure of these trade receivables
and the associated terms for this program were broadly similar
to those of the preceding program.
In 2010, France Telecom S.A.’s securitization programs were
renewed for two years with a maximum amount of 550 million
euros.
2.2.10 Marketable securities
Marketable securities are stated at cost. An impairment loss is
recognized for each line of securities of the same nature equal
to the difference between their carrying amount and the average
stock market price during the previous month or, in the case
of unlisted securities, their probable trading value. However,
in line with CRC Rule no. 2008-15 of December 4, 2008, no
impairment losses are recognized on marketable securities
comprising shares purchased or held in respect of free share
award plans.
2.2.11 Share issuance costs
In line with Opinion 2000-D of the CNC’s Comité d’Urgence,
external costs directly linked to a capital increase are deducted
from the issue premium. Other costs are expensed as incurred.
2.2.12 Other Shareholders’ Equity
When, based on the terms of the contract or the economic
conditions at the time of issuance, an interest bearing-fi nancial
instrument is not redeemable at the lender’s option or it is
redeemable in equity instruments, it is recognized in Other
shareholders’ equity.
The perpetual bonds redeemable for shares (TDIRAs) issued
by France Telecom S.A. on March 3, 2003 are included in this
category.
2.2.13 Government grants
France Telecom S.A. may receive non-repayable government
grants in the form of direct or indirect funding for capital projects,
mainly provided by local and regional authorities. The grants are
recognized as a liability and recycled to the income statement
at the same rate and over the same period as the depreciation
of the assets fi nanced.
2.2.14 Bond issuance costs
Bond issuance costs are expensed as incurred. Redemption
premiums are recognized in fi nance costs over the life of the
bond.
2.2.15 Derivatives
France Telecom S.A. manages the market risks related to
changes in interest and exchange rates using derivatives,
and particularly interest rate swaps, caps and fl oors, futures
contracts on organized markets, forward currency contracts,
currency swaps, and currency options. These instruments are
used for hedging purposes only.
Gain and losses arising on these derivatives are recorded in the
income statement on a symmetrical basis with the losses and
gains on the hedged items:
■ differences in interest receivable or payable on swaps,
caps and fl oors contracted for hedging purposes, and
any premiums or discounts, are recorded in the income
statement over the life of the contract as an adjustment to
interest expense;
■ initial differences between the negotiated forward rate and
the spot rate on forward currency contracts and currency
swaps designated as hedges are recognized in the income
statement over the life of the contract as an adjustment to
interest expense. Subsequent gains and losses generated
on these contracts due to exchange rate fl uctuations are
recognized as adjustments to foreign exchange gains or
losses arising on the hedged item;
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2009 REGISTRATION DOCUMENT / FRANCE TELECOM