Ubisoft 2016 Annual Report Download - page 120

Financial statements
5Consolidated fi nancial statements asatMarch31, 2016
Cash flow hedging
The Group applies hedge accounting (Cash Flow Hedge model) for
transactions in US dollars, Canadian dollars and Pound sterling.
Management believes this method better refl ects its hedging policy
in the fi nancial statements.
Hedge accounting applies if:
♦ the hedging relationship is clearly defi ned and documented on
the date it is established;
♦ the effectiveness of the hedging relationship is proven from the
outset and for as long as it lasts.
Application of cash fl ow hedge accounting has the following
consequences:
♦ the effective hedging portion of the change in the fair value of
the hedging instrument is recognized in other comprehensive
income, as the hedged item does not appear on the balance sheet;
♦ the ineffective portion of the change in fair value is recognized
in fi nancial income.
When the hedging instrument no longer meets the criteria for hedge
accounting, reaches maturity, is sold, canceled or exercised, hedge
accounting is no longer applied. The profi t or loss accumulated is held
in others items of comprehensive income until the completion of the
planned transaction. When the hedged item is a non-fi nancial asset,
the profi t or loss accumulated is removed from other comprehensive
income and included in the initial cost. In other cases, related profi ts
and losses that have been recognized directly in other comprehensive
income are reclassifi ed under profi t or loss for the period in which
the hedged item impacts the result.
Other derivatives
Derivatives for which documentation on the hedging relationship
does not meet the requirements of IAS 39 are not referred to as
accounting hedges. Changes in the fair value of these instruments
are recognized on the income statement in accordance with IAS 39.
The same goes for certain types of derivatives (options) that are not
eligible for hedge accounting.
The fair value of assets, liabilities and derivatives is determined on
the basis of market prices at the closing date.
Hierarchy and levels of fair value
In accordance with IFRS 7 (revised), fi nancial assets and liabilities
measured at fair value have been classifi ed according to the fair
value levels specifi ed by the standard:
• Level 1: the fair value corresponds to the market value of
instruments listed on a deep market;
•Level 2: the fair value is measured on the basis of observable
inputs;
• Level 3: the fair value is measured on the basis of non-
observable inputs.
Note 15 specifi es the fair value level for each category of assets and
liabilities measured at fair value.
The Group did not carry out any transfers between levels 1 and 2
during the fi nancial year.
The Group does not hold any assets or liabilities measured at fair
value under level 3.
Employee benefi ts
Post-employment obligations
Ubisoft contributes to pension, medical and termination benefi t
plans in accordance with the laws and practices of each country.
These benefi ts can vary depending on a range of factors, including
seniority, salary and payments to compulsory general plans.
These plans may be either defi ned contribution plans or defi ned
benefi t plans:
♦
with regard to defi ned contribution plans, the pension
supplement is determined by the total capital that the employee
and the Company have paid into external funds. The expenses
correspond to contributions paid during the period. The Group
has no subsequent obligations to its employees. For Ubisoft, this
generally involves public retirement plans and specifi c defi ned-
contribution plans;
♦
with regard to defi ned benefi t plans, the employee receives a
fi xed pension benefi t from the Group, determined on the basis of
several factors, including age, length of service and compensation
level. Such plans are used by the Group in France, Italy, Japan
and India.
The employer’s future obligations are measured on the basis of
an actuarial calculation called the “projected unit credit method”,
in accordance with each plan’s operating procedures and the
information provided by each country. This method involves
determining the value of likely discounted future benefi ts of each
employee at the time of his/her retirement. In accordance with the
revised IAS 19 standard, actuarial gains and losses are recognized
in other comprehensive income.
The discount rate is determined on the basis of market rates for
high-quality corporate bonds (IBBOX AA10+ rate, the average of the
last 12 months of AA rated corporate bonds over 10 years or more).
Payments based on equity instruments
Stock option plans provide an additional incentive for employees
to improve the Group’s performance by allowing them to purchase
a stake in the Company (stock options, free shares, Group savings
scheme).
In accordance with IFRS 2, stock-based compensation of equity
instruments are recognized as personnel expenses in return:
♦
for consolidated reserves when they are settled by transfer of
shares to the benefi ciaries, and the fair value of the instrument
assessed at the date of grant;
♦
for a liability when they are settled in cash, whose liability is
remeasured at fair value at each statement of fi nancial position
date.
This expense is spread over the vesting period, assuming presence
on the vesting date and possibly performance conditions attached.
- Registration Document 2016
118