Income tax
Net income for the period is taxed based on the tax laws and regulations in force in the respective countries where the income is reported. Deferred taxes are reported using the balance sheet liability method for temporary differences between the
tax value and the carrying amount of assets and liabilities at the reporting date. Deferred tax assets are recognized for deductible temporary differences, tax loss carryforwards and unused tax credits to the extent that it is probable that there
will be taxable income for the period (either from the reversal of the temporary differences or generated by the entity) against which such items can be charged in future years.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced if it is no longer probable that there will be sufficient taxable income for the period to take advantage of all or part of this deferred tax asset. Deferred tax assets that are unrecognized are measured on every reporting date and recognized if it is likely that they will be usable against future taxable income for the period. Deferred tax assets and liabilities are measured on the basis of tax rates expected to be applicable in the year in which the asset is realized or the liability settled. The tax rates used are those that have been enacted, or virtually enacted, at the reporting date. Uncertain income tax liabilities are recognized under income tax payable.
Earnings per share and diluted earnings per share (EPS and diluted EPS)
The basic earnings per share is calculated by dividing the net income for the financial year attributable to ordinary shares by the weighted average number of ordinary shares outstanding during the financial year. Diluted earnings per share are calculated
by dividing net income for the financial year attributable to ordinary shares, after cancellation of interest on bonds redeemable for, or convertible into, ordinary shares, by the weighted average number of ordinary shares outstanding during the financial
year adjusted to reflect the effect of options, free shares granted, outstanding warrants and the conversion of bonds convertible into shares (Océanes).
The calculation of diluted earnings per share reflects only instruments that are dilutive, i.e. that reduce earnings per share. For Publicis Groupe stock options, free shares and warrants, the method applied is set forth below. For the calculation of diluted earnings per share, all dilutive options and warrants are assumed to have been exercised and the free shares actually received. The proceeds from the exercise of these instruments are deemed to have been received with the issue of ordinary shares at the average market price for ordinary shares during the period. That issue, which is presumed to be measured at fair value, is neither dilutive nor accretive and is not included in the calculation of diluted earnings per share.
The difference between the number of ordinary shares issued and the number of ordinary shares that would have been issued at average market price must be treated as an issue of ordinary shares without proceeds and therefore as dilutive. This number is added to the denominator in the diluted earnings per share ratio. Hence, options and warrants are dilutive only when the average price per share of ordinary shares during the period exceeds the options’ or warrants’ strike price (i.e. when they are “in the money”). In addition to these earnings per share (base and diluted), the Group calculates and regularly releases a “current” base and diluted EPS, similar to the one described above, except with respect to the earnings figure used, which excludes:
The Group’s financial position and earnings depend on the accounting methods applied and the assumptions, estimates and judgements made when the consolidated financial statements are prepared. The Group bases its estimates on its past experience and on a series of other assumptions considered reasonable under the circumstances to measure the amounts to be used for the Group’s assets and liabilities. Actual outcomes may, however, vary significantly from these estimates.
The characteristics of the main accounting policies, judgments and other uncertainties affecting the application of these accounting policies, together with the sensitivity of the results to changes in circumstances and assumptions associated with them are factors to be taken into consideration. The Group makes estimates and assumptions regarding the future. The accounting estimates will, by definition, rarely be exactly the same as the related actual outcomes. The main assumptions concerning future events and other sources of uncertainty relate to the use of estimates on the reporting date, when there is a significant risk that the estimates of the net carrying amount of the assets and liabilities will be modified in future years, i.e.:
Detailed disclosures concerning these matters are provided in Notes 5, 20, 21, 28 and 30.
