Atari 2011 Annual Report Download - page 58

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ANNUAL FINANCIAL REPORT – REGISTRATION DOCUMENT
58
2.19. PROVISIONS
A provision is recognized when (i) the Group has a legal or constructive obligation toward a third party as a result of a
past event, (ii) the amount of the obligation can be reliably estimated, and (iii) it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation, without at least an equivalent return expected from
the third party concerned. If the timing or amount of the obligation cannot be measured reliably, it is classified as a
contingent liability and is treated as an off-balance sheet commitment.
In the case of an obligation that is expected to be settled in more than one year, the amount of the provision is
discounted and the effect of such discounting is recorded as a financial expense.
2.20. PROVISIONS FOR PENSIONS AND OTHER POST-EMPLOYMENT BENEFITS
Defined contribution plans
Group subsidiaries are subject to certain obligations under local laws and practices with respect to employee pensions,
life and disability insurance plans and health insurance and other types of employee benefits. Contributions to defined
contribution plans are expensed as the contributions fall due.
The Group records accrued contributions as an expense when they relate to operating costs based on the plan
beneficiaries.
Defined benefit plans
The Group's estimated obligations under defined benefit plans are calculated on a yearly basis using the projected unit
credit method, as prescribed by IAS 19. This method takes into account estimated years of service at retirement, future
salary levels, life expectancy, a discount rate, and staff turnover, based on actuarial assumptions.
After initial recognition, if the accumulated unrecognized actuarial gains and losses exceed 10% of the greater of the
defined benefit obligation or the fair value of the plan assets, a portion of that net gain or loss is recognized as income or
expense (the "corridor" method"). The portion recognized is the excess divided by the expected average remaining
working lives of the participating employees.
2.21. FINANCIAL LIABILITIES AND INSTRUMENTS
Financial liabilities include bonds and other borrowings, as well as finance lease liabilities and trade payables.
Bonds and other borrowings
Bonds and other interest-bearing borrowings are initially recognized at the fair value of the consideration received, which
corresponds to their cost, net of expenses directly attributable to the debt issue. These financial liabilities are
subsequently measured at amortized cost, applying the effective interest method. The effective interest rate corresponds
to the internal rate of return that exactly discounts estimated future cash flows through the expected life of the borrowings
to the net carrying amount of the financial liability.
Some financial instruments – e.g. convertible bonds such as OCEANE bonds and bonds redeemable for new or existing
shares (ORANE bonds) – are treated as hybrid financial instruments with a debt component and an equity component.
The two components must be measured on the issue date and recognized separately in the balance sheet.
The debt component is included in debt based on the present value of future contractual repayments, discounted using
the market rate prevailing on the issue date for standard debt with an identical maturity, plus a margin equal to the credit
spread relevant at the issue date for similar bonds. At each balance sheet date this financial liability is measured at
amortized cost using the effective interest method.
The value of the equity component is calculated as the difference between the bonds' nominal value on the issue date
and their debt component as defined above. Costs are allocated to the two components based on the proportion of the
total nominal amount represented by each component.
The renegotiations of credit facility agreements do not cause the initial debt to be extinguished and a new debt to be
recognized unless there are material differences between the old and the new agreement. Whenever this is the case,
renegotiation costs are included in financial expenses for the period in which the renegotiation took place.
Trade payables
Trade payables are recognized initially at fair value and are subsequently measured at amortized cost.