In the event of a partial sale of securities in an exclusively controlled entity that does not modify control of this entity, the difference between the fair value of the sale price of the securities and the proportion of consolidated equity capital that these securities represent at the date of sale is recognized as equity attributable to shareholders in the parent company of the Groupe. The consolidated value of the subsidiary’s identifiable assets and liabilities, including goodwill, is thus left unchanged.
In the statement of cash flows, the sale of securities without loss of exclusive control is presented as net cash flow relating to financing activities.
The loss of exclusive control leads to the recognition of a disposal gain or loss calculated on the entire interest held at the transaction date.
Any residual interest is therefore remeasured at fair value through the income statement at the time of the exclusive loss of control.
In application of IFRS 5 “Non-current assets held for sale and discontinued operations,” the assets and liabilities of controlled entities held for sale are presented separately on the balance sheet.
Reclassified non-current assets are no longer depreciated from the date on which they are reclassified.
Publicis recognizes expenditure for studies and research as expenses attributable to the financial year in which they are incurred. This expenditure primarily relates to the following items: studies and tests relating to advertising campaigns, research programs into consumer behavior and clients’ needs in various areas, and studies and modeling to optimize media buying for the Groupe’s clients.
Development expenditure incurred for an individual project are capitalized once they are considered to be reasonably certain of being recovered in the future. Any capitalized expense is amortized over the future period during which the project is expected to generate income.
When a takeover takes place in a single transaction, goodwill is equal to the fair value of the consideration paid to acquire the securities (including any earn-out payments which are recorded at fair value at the takeover date), plus the value of non-controlling interests (these items are valued for each business combination either at fair value or at the proportionate share of the fair value of the net assets of the acquired business and minus the fair value of assets, liabilities and contingent liabilities identified at the acquisition date).
Goodwill recorded in the balance sheet is not amortized but is instead subject to impairment tests on at least an annual basis. Impairment tests are performed for the cash-generating unit(s) to which goodwill has been allocated by comparing the recoverable amount and the carrying amount of the cash-generating unit or group of cash-generating units. The Groupe considers that the cash-generating unit or the group of cash-generating units are mainly the 10 key markets in which the Groupe operates: United States, Canada, United Kingdom, France, DACH (Germany, Austria and Switzerland), Asia-Pacific, Africa-Middle East, Northern and Central Europe, Western Europe, Latin America (excluding Brazil) and Brazil.
The recoverable amount of a cash-generating unit is the greater of its fair value (generally its market value), net of disposal costs, and its value in use. Value in use is determined on the basis of discounted future cash flows. Calculations are based on five-year cash flow forecasts, a terminal growth rate for subsequent cash flows and the application of a discount rate to all future flows. The discount rates used reflect the time current market assessments of value of money and the specific risks to which the cash-generating unit is exposed. In addition, these rates take into account lease liabilities when estimating the debt-to-equity ratio.
If the carrying amount of a cash-generating unit is higher than its recoverable amount, the assets of the cash-generating unit are written down to their recoverable amount. Impairment losses are allocated, firstly, to goodwill and are recognized through the income statement and then against other assets.
Separately acquired intangible assets are recognized at acquisition cost. Intangible assets acquired in the context of a business combination are recognized at their fair value on the acquisition date, separately from goodwill, if they are identifiable. The identifiable nature is demonstrated if they meet one of the following two conditions:
Intangible assets primarily consist of trade names, client relationships, technologies, e-mail address databases and software.
From July 1, 2019, the useful of life of brands, which had been indefinite until then, was reestimated and an amortization term of eight years was retained (see Note 6). They are also subject to impairment tests if there are any indicators that they may have been impaired.
Client relationships with a finite useful life are amortized over such useful lives, which are generally between 10 and 15 years. They are also subject to impairment tests if there are any indicators that they may have been impaired.
