FINANCIAL REPORT - Française des Jeux

2.3. EQUITY INVESTMENTS
Equity investments are recorded on the balance sheet at their
acquisition cost. Their value is reviewed annually by reference to
their value in use, which takes particular account of the current
and projected profi tability of the subsidiary or the share of equity
held. If the value in use falls below the acquisition cost, a provision
for impairment of the asset is recorded.
2.4. INVENTORIES
Inventories are measured at cost, provided that this amount does
not exceed the net realisable value. Cost is established based on
the "fi rst in, fi rst out" (FIFO) method for games and according to
the weighted average cost method for other products.
Inventories are depreciated according to their technical or
commercial obsolescence.
2.5. RECEIVABLES
Receivables are recognised at their nominal value. They are subject
to a provision for impairment if the debtor’s situation indicates
that the amount may not be recoverable.
2.6. TRANSFERABLE SECURITIES
Transferable securities are recorded on the balance sheet at
historical cost. However, if at the balance sheet date their market
value is less than their initial value, a provision for impairment is
recorded (except for securities with guaranteed capital and
securities with a maturity of less than 6 months). Market value is
determined:
– for listed securities, by reference to the stock market price at
year-end
– for unlisted securities, by reference to the last net asset value
published or the estimated realisable value.
2.7 REGULATED PROVISIONS
The provision for investments is calculated based on employee
profi t-sharing agreements. Accelerated depreciation is determined
based on the difference between fi scal depreciation and economic
depreciation.
2.8. PROVISION FOR EMPLOYEE BENEFITS
The company’s obligations for post-employment benefi ts are
covered by a provision for charges using the corridor method. In
accordance with Recommendation No. 2003-R-01 of the French
National Accounting Council, they are calculated retrospectively
using the projected unit credit method based on salary at
retirement. In addition, employees of la Française des Jeux retain
their health coverage upon retirement (or in the event of disability/
dismissal), which is in keeping with the requirements of the Evin
Law of 31 December 1989 and the interprofessional national
LA FRANÇAISE DES JEUX — 65
agreement of 11 January 2008. The system for former employees
runs at a defi cit and is covered by a provision.
2.9. COUNTERPARTY AND PERMANENT FUNDS
Some draw-based games, sports betting games and scratch-card
games are based on the counterparty principle:
– the face value of prizes is fi xed or derived from a probability
calculation
– the number or value of prizes won is determined by chance.
The total amount effectively paid out to winners cannot be
precisely predetermined, but only estimated: it may be more or
less than the share of player stake set aside for players in
accordance with the Budget Minister's decree. Depending on
whether these differences are positive or negative, they may entail
a fi nancial risk for la Française des Jeux. Such risks are managed
in a counterparty fund specifi c to each game, which allows the
fi nancial risk to be spread across all gaming events.
Furthermore, to limit the overall counterparty risk for la Française
des Jeux, which may be extremely signifi cant, a permanent fund
has been created to manage differences in risk hedging for each
game and thus allows it to be spread across all games of this type.
According to the 1978 Decree, as amended by Decree No. 2066-
174 of 17 February 2006, the permanent fund is capped at 1%
of player stake for the year and the surplus is paid to the state.
2.10. FOREIGN CURRENCY TRANSACTIONS
In respect of currency hedges, income and expenses in a foreign
currency are recorded at their equivalent value in euros at the
hedging rate. Payables and receivables in foreign currency carried
on the balance sheet at year-end are translated at the exchange
rate in force at 31 December. The difference resulting from this
translation is recognised in the balance sheet under "Translation
adjustments".
Excluding currency hedges, income and expenses in foreign
currency are recorded at their equivalent value in euros at the
transaction date. Payables and receivables in foreign currency
carried on the balance sheet at year-end are translated at the
exchange rate in force at 31 December. The difference resulting
from this translation is recognised in the balance sheet under
"Translation adjustments". Any unrealised exchange losses are
covered by a contingency provision.