2019 Annual financial report

Chapter 6. Consolidated financial statements 2019 year

Provisions
Provisions are funded when:

  • the Group has a present obligation (legal or constructive) resulting from a past event;
  • it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation;
  • the amount of the outflow can be estimated reliably. Where the effect of the time value of money is material, provisions are discounted to present value. Increases in the amount of provisions resulting from the unwinding of the discount are recognized as financial expenses. Contingent liabilities are not recognized but, if material, are disclosed in the notes to the financial statements, except in the case of business combinations where they constitute identifiable items for recognition.

Provisions for litigation and claims
These concern identified risks related to litigation or claims of any kind: commercial, regulatory, tax (other than income taxes) or labor. The Group establishes a provision if it is likely that outflow will be necessary to eliminate this risk and it is possible to reliably estimate the cost related to this risk. In such cases, the amount of the provision (including any related penalties) is determined by the agencies and their experts, under the supervision of the Group’s head office teams, on the basis of their best estimate of the probable costs related to the litigation or the claim.

Restructuring provisions
The total cost of restructuring is recognized in the financial year when these actions have been approved and announced. In the context of an acquisition, restructuring plans that do not constitute liabilities for the acquired company on the date of the acquisition are recognized as expenses. These costs consist primarily of severance and early retirement payments and notice periods that have not been worked, which are recognized in employee benefits expenses, and, in some cases, of write-downs of property, plant and equipment and other assets.

Vacant property provisions
Vacant property provision valuations are made by discounting the rent payable, less income expected from sub-leasing and additionally include lease expenses and any taxes on vacant premises, where the premises are not intended for use as part of its main activities. Since January 1, 2018, in accordance with IFRS 16, only lease expenses and any taxes are included in the vacant property provisions. In the context of business combinations, provisions are also recorded when the acquired company has property rental contracts with less favorable terms than those prevailing on the market as of the acquisition date.

Pensions and other post-employment benefits
The Group recognizes obligations relating to pensions and other post-employment benefits based on the type of plan in question:

  • defined contribution plans: the amount of the Group’s contribution to the plan is recognized as an expense for the year;
  • defined benefit plans: the commitment in respect of defined benefit plans is determined separately for each plan using the projected unit credit method. Actuarial gains and losses relating to post-employment plans and arising during the year are recorded directly in other comprehensive income. The effect of the unwinding of discounts on pensions net of the expected return on plan assets is recorded in “Other financial income and expenses”. Various plan administrative expenses are, when directly invoiced to the Group, recognized under operating income.

Trade payables
This line item includes all operating payables (including notes payable and accrued supplier invoices) related to the purchase of goods and services including those related to media buying where the Company acts as agent. These payables are generally due within less than one year.

Liabilities on contracts
Liabilities on contracts correspond to deferred income. These are considerations received or invoiced to clients for which the Group has an obligation to provide goods or services. Contract liabilities do not include client advances for external costs incurred on behalf of clients and that are directly passed through to the clients when the Group acts as “Agent”. Such advances are recorded under Trade payables.