Page 43 - CODIC 2016/2017 - Annual report

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 26*).

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.

12. REVENUE
Revenue is measured at the fair value of the consideration received or to be received.

The Group’s revenue comes from its real estate development activities. Applying the interpretation given in
IFRIC 15 – Agreements for the Construction of Real Estate, the various components of the agreement with the
client are identified and dealt with separately. In this regard the following components are normally identified:
land, construction and sales services.

Thus, the land portion of the sales contract is generally a distinct component, the revenue associated with
which is recognised when the conditions laid down by IAS 18 – Revenue for the sale of goods are met, in particular
as regards the transfer of control and of the significant risks and benefits inherent in ownership of the land.

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

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