Etex-AR2017-WEBSITE

6.1
Financial report
Consolidated financial statements
Etex Annual Report 2017
Financial report
Consolidated financial statements
Accounting policies
Etex S.A. (the “Company”) is a company
domiciled in Belgium. The consolidated
financial statements comprise the
Company and its subsidiaries, interests
in jointly controlled entities and equity
accounted investees (together referred
to as “the Group”) as at 31 December
each year.
The financial statements have been
authorised for issue by the Board of
Directors on 28 March 2018.
Statement of compliance
The consolidated financial statements
of Etex for the year ended 31 December
2017 have been prepared in accordance
with International Financial Reporting
Standards (IFRS) and its interpretations
as issued by the International Accounting
Standards Board (IASB) as adopted by the
European Union (EU).
The Group applied the same IFRSs as those
adopted in the previous years, except for
the new IFRSs and interpretations the
entity adopted as of 1st January 2017.
The nature and the impact of each of the
following new standards, amendments
and/or interpretations are described below:
• Amendments to IAS 7 Statements of
Cash Flows, effective 1 January 2017
• Amendments to IAS 12 Income
taxes: Recognition of Deferred
Tax Assets for Unrealised Losses,
effective 1 January 2017
• Annual Improvements to IFRSs
2014-2016 Cycle (issued December
2016), effective 1 January 2017
Basis of preparation
A - Functional and presentation currency
The consolidated financial statements are
presented in Euro, which is the Company’s
functional and presentation currency.
All values are rounded to the nearest
thousand except when otherwise indicated.
B – Basis of measurement
The consolidated financial statements are
prepared on the historical cost basis except
that the following assets are stated at their
fair value: derivative financial instruments.
Also, the liabilities for cash-settled
share based payment arrangements are
measured at fair value. The consolidated
financial statements have been prepared
using the accrual basis for accounting,
except for cash flow information.
C – Use of judgement, estimates
and assumptions
The preparation of financial statements in
conformity with IFRS requires management
to make judgements, estimates and
assumptions that affect the reported
amounts of revenue, expenses, assets,
liabilities and related disclosures at the
date of the financial statements. These
judgements, estimates and associated
assumptions are based on management’s
best knowledge at reporting date of current
events and actions that the Group may
undertake in the future. However, actual
results could differ from those estimates,
and could require adjustments to the
carrying amount of the asset or liability
affected in the future. The estimates and
underlying assumptions are reviewed on an
ongoing basis.
The significant estimates made by
management concerning the future and
other key sources of estimation uncertainty
at the balance sheet date that have a
significant risk of causing a material
adjustment to the carrying amount of
assets and liabilities within the next
financial year are discussed below.
Impairment of non-financial assets
The recoverable amount of the cashgenerating
units tested for impairment
is the higher of its fair value less costs to
sell and its value in use. Both calculations
are based on a discounted cash-flow
model. The cash flows are derived from
the budget for the next three to ten
years. The recoverable amount is most
sensitive to the discount rate used for
the discounted cash flow model as well
as the expected future cash inflows and
the growth rate used for extrapolation
purposes. The key assumptions used to
determine the recoverable amount for the
different cash-generating units, including
a sensitivity analysis, are further explained
in note 8.
Provisions The assumptions that have
significant influence on the amount of
the provisions are the estimated costs,
the timing of the cash outflows and the
discount rate. These assumptions are
determined based on the most appropriate
available information at reporting date.
Further details about the assumptions used
are given in note 19.
Employee benefits The measurement
of the employee benefits is based on
actuarial assumptions. Management
believes that the assumptions about
discount rates, expected rates of return on
assets, future salary increases, mortality
rates and future pension increases used for
these actuarial valuations are appropriate
and justified. They are reviewed at each
balance-sheet date. However, given the
long-term nature of these benefits, any
change in certain of these assumptions
could have a significant impact on the
measurement of the related obligations.
Further details about assumptions used are
given in note 21.
Recognition of deferred tax assets on
tax losses carried forward Deferred tax
assets are recognised for all unused tax
losses to the extent that it is probable
that taxable profit will be available
against which the losses can be utilised.
Significant management judgment is
required to determine the amount of the
deferred tax assets that can be recognised,
based upon the likely timing and the level
of future taxable profits together with
future tax planning strategies. The potential
utilisation of tax losses carried forward is
based on budgets and forecasts existing at
reporting date. Actual results could differ
from these budgets with an impact on the
utilisation of tax losses carried forward.
Cash-settled share-based payment
transaction The Group measures the
cost of cash-settled transactions with
employees by reference to the fair value of
the equity instruments at each reporting
date. Estimating fair value for share-based
payment transactions requires determining
the most appropriate valuation model,
which is dependent on the terms and
conditions of the grant. This estimate also
requires determining the most appropriate
inputs to the valuation model including
the expected life of the share option,
volatility and dividend yield and making
assumptions about them. The assumptions
and model used for estimating fair value
for share-based payment transactions are
disclosed in note 22.
Financial instruments To measure
the fair value of financial assets that
cannot be derived from active markets,
management uses a valuation technique
based on discounted future expected
cash flows. The inputs of this model
require determining a certain number
of assumptions, including discount rate,
liquidity risk and volatility, subject to
uncertainty. Changes in these assumptions
could have an impact on the measurement
of the fair value. Further details are given
in note 16.
D – Basis of consolidation
Subsidiaries Subsidiaries are entities that
are controlled, directly or indirectly, by the
Company.
Control is achieved when the Group is
exposed, or has rights, to variable returns
from its involvement with the investee
and has the ability to affect those returns
through its power over the investee.
Specifically, the Group controls an investee
if, and only if, the Group has:
• Power over the investee (i.e.,
existing rights that give it the
current ability to direct the relevant
activities of the investee)
• Exposure, or rights, to variable returns
from its involvement with the investee
• The ability to use its power over
the investee to affect its returns
Generally, there is a presumption that a
majority of voting rights result in control.
To support this presumption and when
the Group has less than a majority of the
voting or similar rights of an investee, the
Group considers all relevant facts and
circumstances in assessing whether it has
power over an investee, including:
• The contractual arrangement with the
other vote holders of the investee
• Rights arising from other
contractual arrangements
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