A N N U A L R E P O R T - Bouygues

Estimated useful lives and depreciation
methods
Buildings 40 years straight-line
Fixtures and fittings 10 years straight-line
Computer hardware 3 years straight-line
Office furniture 10 years straight-line
2.3. Long-term investments
2.3.1. Holdings in subsidiaries
and affiliates and other long-term
investment securities
Holdings in subsidiaries and affiliates and other
long-term investment securities are recognised
at acquisition cost. Transaction costs that do not
form part of the market value of the acquired
asset are expensed as incurred.
2.3.2. Value in use of holdings in
subsidiaries and affiliates
Holdings in subsidiaries and affiliates and other
long-term investment securities are also measured
at value in use, determined using objective
criteria (stock market price for quoted companies,
shareholders’ equity, profitability), forecast
data (economic outlook, earnings prospects), or
any other information indicative of the actual
value of the asset.
If value in use is less than cost, a provision for
impairment is recorded to cover the difference.
2.3.3. Long-term receivables
Long-term receivables are shown in the balance
sheet at face value. If the realisable value (taking
into account the probability of recovery) is less
than the carrying amount, a provision for impairment
is recorded to cover the difference.
2.4. Receivables and payables
expressed in foreign currencies
Receivables and payables expressed in foreign
currencies are translated at the exchange rate
prevailing on the balance sheet date, or at the
hedged rate if the item is covered by a currency
hedge.
Unrealised foreign exchange gains and losses are
taken to suspense accounts in the balance sheet;
unrealised losses are recognised in the income
statement by means of a provision.
2.5. Short-term investments
The short-term investment portfolio is measured
in accordance with French accounting standards.
The value of equity securities, negotiable debt
instruments and money-market mutual funds
was determined by reference to the last known
price on 31 December 2005. In the case of quoted
securities, the average quoted stock market
price over the last month of the financial year
was used.
2.6. Other assets
Deferred charges mainly comprise the portion
of bond issue costs not covered by the issue
premium. In the case of convertible bonds, any
unamortised issue costs relating to bonds converted
into shares are offset against the share
premium on the newly-issued shares.
Bond redemption premium relates to the bond
issues of July 1999, November 2003, October
2004 and July 2005, which were priced respectively
at 99.854%, 99.348%, 99.05% and 99.804%
of the nominal value.
2.7. Provisions
These mainly comprise:
• provisions for income taxes, in particular taxes
due in respect of rolled-over capital gains and
split taxes;
• provisions for additional risks relating to lossmaking
subsidiaries, established where the
negative net assets of a subsidiary are not
wholly covered by provisions for impairment of
Bouygues SA’s investment in and loans and / or
advances to that subsidiary;
• provisions for charges, including retirement
benefit obligations. With effect from 1 January
2005, Bouygues SA has adopted the CNC recommendation
that these obligations be recognised
as an expense. The effect of this change
of accounting method was €5.2 million, and was
offset against retained earnings.
2.8. Hedging instruments
Bouygues SA uses hedging instruments to limit
the impact on the income statement of fluctuations
in exchange rates and interest rates.
These instruments share the following characteristics:
- they are limited to the following products: forward
currency purchases and sales, currency
swaps and purchases of currency options for
currency risk hedging purposes; and interest
rate swaps, future rate agreements, and purchases
of caps and tunnels for interest rate risk
hedging purposes;
- they are used solely for hedging purposes;
- they are contracted solely with high-quality
French and foreign banks;
- they carry no liquidity risk in the event of a
downturn.
Gains and losses on financial instruments used
for hedging purposes are recognised in the
income statement symmetrically with gains and
losses arising on the hedged item.
2.9. Retirement benefit
obligations
Methods and assumptions used in calculating the
obligation:
• projected unit credit method based on final
salary;
• benefits as defined in agreements or established
by custom within the company, taking
into account the new collective agreement
for managerial grade staff applicable from
1 January 2005;
• obligation adjusted to comply with CNC recommendations
of July 2000, April 2003 and March
2004;
• vested rights as of 31 December 2005;
• employees classified in groups with similar
characteristics in terms of grade, age and
length of service;
• average monthly salary for each employee
group, uplifted by a percentage to reflect the
applicable rate of employer’s social security
charges;
• salary inflation rate: 4.30%;
• discount rate: 3.57%;
• average employee turnover rate calculated on
the basis of average number of leavers in the
years 1999 to 2004;
• life expectancy by reference to 1993 mortality
tables.
2.10. Consolidation
Bouygues SA is the ultimate parent company in
the consolidation.
PARENT COMPANY FINANCIAL STATEMENTS
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