Page 45 - CODIC Rapport Annuel 2014/2015

Although, as far as we know the question is not explicitly addressed in the IFRS, an analogy could be drawn with
the treatment in accordance with IAS 16 of revenues arising from a test phase of a fixed asset under construction
which are directly deducted from the asset concerned (IAS 16.17(e)).

9. PROVISIONS
A provision is recognised when the following three conditions are met:

• The Group has a present obligation, whether legal or constructive, at closing;
• It is probable that settling this obligation will result in an outflow of resources; and
• The amount of the obligation can be reliably estimated.

Provisions are measured based on the best estimate of the outflow of resources necessary to settle the obligation.
Where applicable, the amounts are discounted to present value to take account of the passage of time.

The provisions established by the Group relate essentially to its residual obligations in respect of projects sold,
notably as regards rental guarantees granted to buyers. These guarantees are of limited duration (maximum
24 months) and cover only part of the areas sold (at most the non-rented part). This type of provision is used
or reversed depending on the result at the later of (i) the moment when the property is rented out and (ii) the
moment when the Group pays the amount of the rental guarantee to the buyer.

As regards risks for which an actual disbursement is considered improbable, these contingent liabilities are
reported in a note to the financial statements (see note 27*).

10. BORROWING COSTS
Borrowing costs consist of interest and other costs incurred in relation with borrowings. Borrowing costs
attributable to the acquisition, construction or production of a qualifying asset are incorporated into the cost
of the asset.
A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale.
The properties held for sale and recognised in inventories meet this criterion since the relevant studies,
construction and sale can take several years.
Capitalisation of borrowing costs is suspended during long periods when the normal course of a project’s
development is halted.
Borrowing costs not attributable to qualifying assets are recognised in profit and loss.

11. FINANCIAL INSTRUMENTS
Financial assets and liabilities are recognised in the balance sheet when the Group becomes a party to the
contractual provisions of the instrument.

Trade and other receivables
Receivables are measured at amortised cost. When there is an objective indication that the carrying amount of
a receivable exceeds the expected cash flows, a reduction in value is recognised in expenses for the difference.

Trade and other payables
Payables are measured at amortised cost, which equals their nominal value in the vast majority of cases.

Bank borrowings
Bank advances and borrowings are initially measured at their fair value less direct transaction costs and
subsequently carried at amortised cost using the effective interest rate method. The effective interest rate is
the rate that exactly discounts estimated future cash outflows over the expected life of the financial liability or
such shorter period as may be appropriate to the net carrying amount on initial recognition.

Derivative instruments
The Group uses derivative instruments only to hedge the risk of interest rate fluctuations on its variable rate
borrowings. However, the Group does not apply hedge accounting in view of the strict conditions to be met in
accordance with IFRS.
Derivative instruments are recognised in the balance sheet at their fair value. Changes in the fair value of derivative
financial instruments are recognised directly in profit or loss.

* The notes to the consolidated financial statements are available on www.codic.eu or from the head office upon request.

43Codic Annual Report 2014/2015