Registration Document

P ◀ CONTENTS ▶
tested for impairment if there is an indication that
they may be impaired, and an impairment loss is
recognized if the carrying amount of the asset is
greater than its estimated recoverable amount;
• financial assets at fair value through profit or
loss include other financial assets held for trading
and acquired for the purpose of resale in the near
term. Subsequent changes in the fair value of
these assets are recognized in financial income
or expense in the income statement.
2.12.2 derivative financial instruments
Sodexo’s policy is to finance the majority of
acquisition costs insofar as possible in the currency
of the acquired entity, generally at fixed rates of
interest.
Most of the Group’s variable-rate borrowings are
converted to fixed-rate using interest rate swaps. In
most cases where borrowings are made in a currency
other than that of the acquired entity, currency swaps
are contracted.
As required by IAS 39, these derivative financial
instruments are initially recognized in the balance
sheet at fair value, as financial assets or liabilities.
Subsequent changes in the fair value of derivative
instruments are recognized in the income statement,
except in the case of instruments that qualify as Cash
Flow Hedges.
For Cash Flow Hedges, the necessary documentation
is prepared at inception and updated at each
balance sheet date. Gains or losses arising on the
effective portion of the hedge are recognized in other
comprehensive income, and are not recognized in
the income statement until the underlying asset or
liability is realized.
Gains or losses arising on the ineffective portion of
the hedge are recognized in the income statement.
The fair value of these derivative instruments is
determined based on valuations provided by the
bank counter-parties.
2.12.3 Commitments to purchase
non-controlling interests
As required by IAS 32, Sodexo recognizes
commitments to purchase non-controlling interests
Consolidated information 06
Notes to the Consolidated Financial Statements
as a liability within borrowings in the consolidated
balance sheet. In the absence of any IFRS standard
or interpretation regarding the treatment of the
related debit entry, Sodexo has elected to offset
the amount involved against the relevant noncontrolling
interests in shareholders’ equity until
they are eliminated in full, and to treat any surplus
as goodwill.
Firm commitments to purchase non-controlling
interests are therefore accounted for as follows under
IFRS:
• the liability arising from the commitment is
recognized in other borrowings at the present
value of the purchase commitment;
• the expected goodwill is recognized in the balance
sheet;
• the change in value arising from the unwinding
of the discounting of the liability is recognized
in the income statement as a financial expense.
Subsequent price adjustments are recognized
as adjustments to the amount of goodwill for
acquisitions made prior to September 1, 2009.
2.12.4 Bank borrowings and bond issues
All borrowings, including bank credit facilities and
overdrafts, are initially recognized at the fair value
of the amount received less directly attributable
transaction costs.
Subsequent to initial recognition, borrowings are
measured at amortized cost using the effective
interest method. The effective interest rate is the
rate that discounts estimated future cash payments
or receipts through the expected life of a financial
liability to the net carrying amount of that liability.
The calculation includes the effects of transaction
costs, and of differences between the issue proceeds
(net of transaction costs) and reimbursement value.
2.13 Cash and cash equivalents
Cash and cash equivalents comprise cash on hand
and short-term cash investments in money-market
instruments which either have an initial maturity of
less than three months at the moment of purchase or
may be withdrawn at any time at a known cash value
with no material risk of loss in value.
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