2005 Annual Report - Touax

Financial information concerning the assets,
financial position and results of the issuer
Impact on the accounts of the Group
Impacts of IAS 38 and IAS 16 Balance sheet Translation Balance sheet
(€ thousands) as at 01/01/2004 2004 income difference as at 31/12/2004
Leasco 2 - Formation expenses (1,715) 249 103 (1,363)
Other items (77) 6 (72)
Shipping containers (1,792) 249 108 (1,435)
TOUAX SA - upgrading of modules (6) (1,374) (1,380)
Other items (458) 103 (355)
Modular buildings (464) (1,271) 0 (1,735)
TOTAL (2,256) (1,022) 108 (3,170)
annual report 2005
7 – Recognition of revenue
Recap of the situation
In the “Shipping containers” business, initial commissions
received by the TOUAX Group on the first
sales of containers to the Trusts TCLRT 98 and TLRT
2001 have been used to create collateral deposits
and liquidity reserves which are only recoverable at
the end of the life of the Trusts. These deposits and
reserves are intended in particular to enable the
Trusts to cover their debt repayments in the event
that the leasing revenues redistributed by the TOUAX
Group to the Trusts prove insufficient.
Principles applied under French GAAP
The initial commissions have been entered in revenues
at the time of the sale of the containers.
IFRS
The substantive analysis of the management and
securitization contracts has been carried out in
order to validate the recognition of revenue and
expenses under IFRS. The general principles of
revenue recognition in IAS 18 “Revenue”, reinforced
by EITF interpretation 99-19 (US GAAP), result in the
TOUAX Group being considered to be the principal in
its relationships on the one hand with investors
(pools, Trusts or GIE) and on the other hand with
customers. The Group is therefore justified under
IFRS, and under French standards, in recording in its
income statement all of the revenue and expenses
flows generated by the contracts.
The revenue recognition rules in IAS 18 “Revenue”
are stricter and more precise than the French rules.
Thus the economic benefits associated with the initial
commissions will only become probable when the
TOUAX Group is able to recover the collateral deposits
and liquidity reserves. Under these circumstances,
and in accordance with IAS 18, the initial
commissions received, up to the level of the collateral
deposits and liquidity reserves, do not constitute
revenue. They must be deferred until the probable
recovery of these deposits and liquidity reserves. The
revenue recognized under French GAAP at the beginning
of the Trusts in respect of “initial commissions”
– up to the level of the deposits and liquidity reserves –
is cancelled in the IFRS financial statements and is
entered in the liabilities of the balance sheet in an
“other non-current liabilities” account.
In the “Modular buildings” business, the same treatment
is applied under IFRS for the revenue collected
on the formation of GIE Modul Finance 1 on sales of
modules, for the formation of collateral deposits and
reimbursable advance accounts allocated to guarantee
repayment of the debts of the GIE. The revenue from
sales of modules recorded under French GAAP at the
start-up of the GIE is reversed under IFRS, up to the
amount of the financial assets created to guarantee
the GIE, and is entered in the liabilities of the balance
sheet in an “other non-current liabilities” account. It
will only be entered in the result when the associated
economic benefits become probable for the Group.
108
Consolidated accounts