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.
When an acquisition takes place in a single transaction, goodwill is equal to the fair value of the consideration paid (including any earn-out commitments which are recorded at fair value at the acquisition 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, minus the fair value of assets, liabilities and contingent liabilities identified at the acquisition date.
Goodwill recorded in the balance sheet is subject to impairment tests on at least an annual basis and whenever there is an indication of impairment. 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 Groupe of cash-generating units. The Groupe considers that the cash-generating unit or the Groupe of cash-generating units are mainly the ten key markets in which the Groupe operates: United States, Canada, United Kingdom, France, DACH (Germany, Austria and Switzerland), Asia-Pacific, the Middle East and Africa, Central and Eastern Europe, Western Europe, Latin America.
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 or using the market multiples approach. 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 current market assessments of the time 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 recognized in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit(s) and then of the other assets. Impairment on goodwill are not reversed.
Studies, research and development costs
The Groupe 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 modelling to optimize media buying for the Groupe’s clients.
Development costs incurred on an individual project are capitalized in accordance with the IAS 38 criteria and in particular when probable future economic benefits can reasonably be considered to be certain. Any capitalized expense is amortized over the future period during which the project is expected to generate income.
Other intangible assets
Separately acquired intangible assets are recognized at acquisition cost minus accumulated amortization and impairment loss.
Intangible assets acquired in a business combination are recognized at their fair value at 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. Capitalized software includes both software for internal use and software for commercial use. It is valued at either the acquisition cost (if purchased externally) or the production cost (if developed internally).
Amortization
Intangible assets are amortized on a straight-line basis over their estimated useful life.
The estimated useful lives for the current period and the comparative period are as follows:
Amortization methods, useful lives and residual values are reviewed at each closing date and adjusted if necessary.
