APC 2014 Annual Report Download - page 198

5CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER31,2014
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Interest rate swaps
Provisions for the discounts offered to distributors are set aside
when the products are sold to the distributor and recognized as a
Interest rate swaps allow the Group to manage its exposure to deduction from revenue.
interest rate risk. The derivative instruments used are financially Certain Group subsidiaries also offer cash discounts to distributors.
adjusted to the schedules, rates and currencies of the borrowings These discounts and rebates are deducted from sales.
they cover. They involve the exchange of fixed and floating-rate
interest payments. The differential to be paid (or received) is Consolidated revenue is presented net of these discounts
accrued (or deferred) as an adjustment to interest income or andrebates.
expense over the life of the agreement. The Group applies hedge
Service contracts
accounting as described in IAS39 for interest rate swaps. Gains
and losses on re-measurement of interest rate swaps at fair value Revenue from service contracts is recorded over the contractual
are recognized in equity (for cash flow hedges) or in profit or loss period of service. It is recognized when the result of the transaction
(for fair value hedges). can be reliably determined, by the percentage of completion
Commodity contracts
method.
Long-term contracts
The Group also purchases commodity derivatives including
forward purchase contracts, swaps and options to hedge price Income from long-term contracts is recognized using the
risks on all or part of its forecast future purchases. Under IAS39, percentage-of-completion method, based either on the percentage
these qualify as cash flow hedges. These instruments are of costs incurred in relation to total estimated costs of the entire
recognized in the balance sheet and are measured at fair value at contract, or on the contract’s technical milestones, notably proof of
the period-end. The effective portion of the hedge is recognized installation or delivery of equipment. When a contract includes
separately in equity (under«Other reserves») and then recognized performance clauses in the Group’s favor, the related revenue is
in income (gross margin) when the hedged item affects recognized at each project milestone and a provision is set aside if
consolidated income. The effect of this hedging is then targets are not met.
incorporated in the cost price of the products sold. The ineffective
portion of the gain or loss on the hedging instrument is recognized Losses at completion for a given contract are provided for in full as
in«Net financial income/(loss)». soon as they become probable. The cost of work-in-process
includes direct and indirect costs relating to the contracts.
Cash flows from financial instruments are recognized in the
consolidated statement of cash flows in a manner consistent with
1.25– Earnings per share
the underlying transactions.
Put options granted to minority shareholders
Earnings per share are calculated in accordance with IAS33 –
Earnings Per Share.
In line with the AMF’s recommendation of November2009 and in
the absence of a specific IFRSrule, the Group elected to retain the Diluted earnings per share are calculated by adjusting profit
accounting treatment for minority put options applied up to attributable to equity holders of the parent and the weighted
December31, 2009, involving puts granted to minority average number of shares outstanding for the dilutive effect of the
shareholders prior to this date. In this case, the Group elected to exercise of stock options outstanding at the balance sheet date.
recognize the difference between the purchase price of the The dilutive effect of stock options is determined by applying
minority interests and the share of the net assets acquired as the«treasury stock»method, which consists of taking into
goodwill, without re-measuring the assets and liabilities acquired. account the number of shares that could be purchased, based on
Subsequent changes in the fair value of the liability are recognized the average share price for the year, using the proceeds from the
by adjusting goodwill. exercise of the rights attached to the options.
The Group opted for accounting subsequent fair value changes of
1.26– Statement of cash flows
put options granted to minority shareholders with counterpart in
equity.
The consolidated statement of cash flows has been prepared
1.24– Revenue recognition
using the indirect method, which consists of reconciling net profit
to net cash provided by operations. The opening and closing cash
positions include cash and cash equivalents, comprised of
The Group’s revenues primarily include merchandise sales and marketable securities, (note1.20) net of bank overdrafts
revenues from services and contracts. andfacilities.
Merchandise sales
Revenue from sales is recognized when the product is shipped
and risks and benefits are transferred (standard shipping terms are
FOB).
196 2014 REGISTRATION DOCUMENT SCHNEIDER ELECTRIC