FINANCIAL STATEMENTS 3Corporate financial statements as of December 31, 2017 By application of the prudence principle, unrealized gains are not allocated to the terminated lease and credited to income for the recognized in income (PCG Art. 628-18), regardless of the market on period in which it is recognized. which the instrument is traded. Unrealized losses lead to the establishment of a provision in 2.10 Employee benefits financial income to cover the amount of this unrealized capital loss in accounts 1516 “Provisions for losses on contracts” by debiting There are two types of plans: account 6865 “Allowances to financial provisions”. > defined contribution pension plans; In the context of the first-time application of the new rules at > defined benefit pension plans grouping long-term benefits and January 1, 2017 relating to forward financial instruments on post-employment benefits. transactions in isolated open positions, the Company has therefore reviewed the portfolio of financial instruments with a view to their In accordance with Recommendation No. 2013-02 of November 7, 2013 qualification. the pension commitments have been provisioned in full (preferred The application of these new rules on financial impacts has no impact method) in order to comply with the new disposals of the revised on shareholders’ equity due to a change of method. IAS 19 standard. The over-hedging on foreign exchange swaps covering the Turkish Under this method commitments are valued according to the same centers qualifies as an isolated open position, the foreign exchange disposals as recommended by the revised IAS 19 standard. gain was recognised in profit or loss in account 766. 2.11 The tax credit for competitiveness 2.8 Translation adjustment (assets and liabilities) and employment (CICE) Receivables and debts in foreign currencies are translated and The 3rd Amending Finance Law 2012 set up the CICE starting recognized in local currency based on the Banque de France’s last January 1, 2013, with the following main characteristics: exchange rate. > a 4% (6% for 2014) tax credit calculated per calendar year based When the application of the translation rate on the balance sheet date on compensation less than or equal to 2.5 SMIC paid starting causes the amounts in local currency previously recognized to be January 1, 2013; modified, the translation differences are recorded under translation > unless it is applied to taxes due, the credit will be reimbursable difference – assets, and translation difference – liabilities. within three years. Unrealized gains are not recognized in income but are recorded under The French 2017 Finance Law No. 2016-1917 Art. 72 set the rate at 7% balance sheet liabilities. In contrast, a provision for risks is recognized for fiscal year 2017. for unrealized losses. The CICE is recognized as an employee expense deduction. The regulations related to these receivables and debts are compared with the original historical values and result in the recognition of Klépierre benefits from the competitiveness tax credit stemming from foreign exchange gains and losses without set-off. its tax transparent subsidiary Klépierre management. The new rules on the financial instruments of transactions in isolated 2.12 Tax regime adopted by the Company open positions have led to the presentation of changes in unrealized gains and losses presented to accounts 4786 “Evaluation difference Following its option to apply the regime provided for by Article 11 of on cash instruments – Asset” and 4787 “Evaluation difference on cash the Finance Law of December 30, 2002, Klépierre SA is exempted instruments – Liability” (see note 2.7). from corporate income tax and hence shall follow the three following 2.9 Operating income and expenses distribution requirements: > distribution of 95% of profits from building lease transactions prior Rental income is recognized on a straight-line basis over the full to the end of the financial year following the year in which they duration of the lease agreement, building expenses are re-billed to were made; clients on payment, and interest is entered on receipt or payment. > distribution of 60% of capital gains made on disposals of buildings, At the end of the fiscal year, gains and expenses are adjusted by equity investments in companies covered by the provisions of the addition of accrued amounts not yet due and the subtraction of Article 8 of the French Tax Code (tax transparency) which purpose pre-posted non-accrued amounts. is identical to the one of a SIIC or stocks in subsidiaries subject to Accruals for building expenses are recognized as payables in corporate income tax, where such companies have elected to the “Suppliers – invoices to be received”. SIIC regime prior to the end of the second financial year following the year in which the gains were made; 2.9.1 Leases > distribution of all dividends received from subsidiaries electing to Rental income is recognized on a straight-line basis throughout the the SIIC regime during the fiscal year following the year in which full period of the lease. the dividends were received. Stepped rents and rent-free periods are recognized every fiscal year Taxable and exempted income are determined in accordance with by spreading the resulting increase or decrease in rental income over current and applicable legislation: the reference period. > direct allocation of expenses and income, wherever possible; The reference period adopted is the first firm lease term. > allocation of general expenses pro rata to the income of both sectors; 2.9.2 Early termination indemnities > allocation of financial expenses pro rata to the gross fixed assets Tenants who terminate their leases prior to the contractual expiration of both sectors. date are liable to pay early termination penalties. This revenue is 140 KLÉPIERRE 2017 REGISTRATION DOCUMENT