FINANCIAL STATEMENTS 3Corporate financial statements as of December 31, 2017 Principles of asset impairment 2.3 Mergers and similar transactions At each balance sheet and interim reporting date, the Company CNC recommendation 2004-01 of March 25, 2004, as approved on carries out an appraisal to determine any indication that an asset May 4, 2004, by the Comité de réglementation comptable (CRC), relating could have suffered a significant loss in value (Article 214-16 of the to the treatment of mergers and similar transactions states the rule French General Accounting Code). regarding positive or negative variances in respect of canceled shares. An asset is impaired when its actual value falls below its net book The accounting treatment for technical merger losses was changed by value. The actual value is the market value (appraised value excluding Regulation 2015-06 (approved by order of December 4, 2015). taxes on the balance sheet date) or the value in use (Article 214-1 of the French General Accounting Code), whichever is the higher. Negative variance The market value of the asset is determined by independent appraisers, A negative variance arising from these transactions must be treated with the exception of those assets acquired less than six months earlier, in the same way as a negative merger goodwill: whose market value is estimated as the cost of acquisition. > recognition of technical losses on the basis of the nature of the However, given the fact that these appraisals are, by their nature, underlying asset in a special account: intangible asset, property, estimates, it is possible that the amount realized on the disposal of some plant and equipment, financial asset, current asset; real estate assets will differ from the appraised value of those assets, even > recognition of the balance of the negative variance in financial where such disposal occurs within a few months of the balance sheet date. expenses. Assets covered by a contract of sale (mandat de vente) are appraised at their selling price net of exit expenses. Positive variance 2.2.4 Long-term financial investments The positive variance from these transactions must be treated in the same way as a positive merger variance. Any positive variance in the Equity investments are recognized at their cost of acquisition. percentage of earnings accumulated by the merged entity (since At year end, provisions for impairment of investments are booked the acquisition of the acquired company’s equity by the acquiring when inventory value is less than their carrying net value. The company) remaining undistributed must be shown in the financial inventory value of equities is equivalent to their value of utility, as income of the acquiring company. Any residual balance is recognized calculated to take into account the net asset value and the future as shareholders’ equity. cash flows. The net asset value of real estate companies is estimated on the 2.4 Receivables, debts and cash basis of external appraisals conducted by independent real estate and cash equivalents appraisers except for the assets under promise. Receivables, debts and cash and cash equivalents have been Management Company shares are valued at each fiscal year end by measured at par value. an independent appraiser. Trade receivables are estimated individually at each balance sheet Treasury shares acquired for the purpose of transfer to a vendor as date and interim reporting date, and a provision entered wherever part of an external growth transaction are depreciated if the average there is a perceived risk of non-recovery. stock market price for the last month of the fiscal year is lower than the acquisition value. 2.5 Marketable securities 2.2.5 Acquisition cost of fixed assets Marketable securities are recognized at their cost of acquisition net Transfer duties, fees, commissions and legal expenses are included in of provisions. the capitalized cost of the intangible and tangible assets (Articles 213-8 Provisions for impairment of treasury shares are taken when their and 213-22 of the French General Accounting Code). inventory value based on the average stock market price for the last The Company has exercised the option of recognizing the acquisition month of the fiscal year is lower than their existing book value. cost of long-term financial investments as expenses. Provisions are made under liabilities for stocks granted to employees as soon as it becomes probable that the stock options will be exercised 2.2.6 Eviction costs (continued service and performance conditions met and stocks likely to be exercised). The provision is recognized if the average purchase When a lessor terminates a lease prior to the expiration date, he must price exceeds the purchase price offered to employees. pay eviction compensation to the lessee. Where eviction compensation is paid as a result of major renovation 2.6 Deferred expenses: loan issue costs or reconstruction work on a property requiring the prior removal of tenants, the cost is included in total renovation costs. Expenditure that does not meet the combined criteria applying to Expenditure that does not meet the combined criteria applying to the the definition and recognition of assets must be recognized as an definition and recognition of assets and which cannot be allocated to expense. It is no longer possible to amortize these costs over several acquisition or production costs is recognized as an expense: eviction periods. costs paid to tenants during commercial restructuring is recognized CNC recommendation 2004-15 on assets dated June 23, 2004 does as an expense for the fiscal year. not apply to financial instruments and related expenditure, such as loan issue costs, insurance premiums and loan repayment premiums. 2.2.7 Marketing expenses Bond insurance costs and the commissions and fees relating to bank Marketing, re-marketing and renewal fees are recognized as expenses loans are spread over the full loan period. for the fiscal year. 138 KLÉPIERRE 2017 REGISTRATION DOCUMENT