This standard took effect on 1 January 2019.
Key changes resulting from the standard are as follows:
The lease term is the non-cancellable period of each lease unless the Group is reasonably certain to exercise the contractual renewal options.
The right of use is depreciated over the term of the lease.
The discount rate used to assess the lease debt corresponds to the effective annual interest rate for each lease. We calculate it using the zero interest rate coupons received per currency and per maturity tranche, plus the Group credit spread.
L’Oréal selected the simplified retrospective approach and has measured the right of use of almost all its leases by determining their book value of the lease start date.
€ millions
| Other intangible assets/ tangible assets | -92 |
|---|---|
| Right-of-use assets | 2,005 |
| Deferred tax assets | 19 |
| Other current assets | 2 |
| TOTAL | 1,934 |
€ millions
| Equity | -82 |
|---|---|
| Deferred tax liabilities | -10 |
| Non-current lease debt | 1,751 |
| Other current liabilities | -129 |
| Current lease debt | 404 |
| TOTAL | 1,934 |
The application since 1 January 2019 of IFRIC 23 “Uncertainty Over Income Tax Treatments” has led the Group to the reclassification of uncertain tax provisions as Non-current tax liabilities.
The preparation of the consolidated financial statements in accordance with international accounting standards requires that the Group makes a certain number of estimates and assumptions that may affect the value of the Group’s assets, liabilities, equity and net profit (loss).
These estimates and assumptions mainly concern the measurement of goodwill and other intangible assets, operating lease terms, provisions, non-current tax liabilities, pension obligations, deferred taxes and share-based payments. The estimates used by the Group in relation to these different areas are made based on information available when the accounts are prepared and are described in detail in each specific associated note.
All companies included in the scope of consolidation have a financial year ending 31 December or close their accounts on that date.
All companies directly or indirectly controlled by the parent company L’Oréal have been fully consolidated.
Group companies that are jointly controlled by a limited number of other shareholders under a contractual agreement are consolidated under the equity method in accordance with IFRS 11.
Associates over which the Group has a significant influence have been accounted for by the equity method.
The assets and liabilities of foreign subsidiaries are translated at closing exchange rates. Income statement items are translated at average exchange rates for the year.
The resulting translation difference attributable to the Group is entered directly under equity under the item Cumulative translation adjustments, while the translation difference attributable to non-controlling interests are recognised under the Non-controlling interests item.
Goodwill generated by foreign companies is considered to form part of the assets and liabilities of the foreign company, and is therefore expressed in the entity’s functional currency and translated using the closing exchange rates in effect at the closing date. Goodwill recorded before1 January 2004 continues to be recorded in euros.
