Renault S.A. – Annual report – 31 December 2020
2-A. CHANGES IN ACCOUNTING POLICIES (extract)
A3 – Application of the IFRIC agenda decision concerning recognition of the impacts of reverse factoring programs in the statement of financial position and cash flow statement
In December 2020 the IFRIC published an agenda decision concerning reverse factoring programs, concluding that the existing standards are sufficient for appropriate treatment of such programs in the financial position and cash flow statement. This decision notably clarifies that supplier payables covered by reverse factoring programs should be classified in the statement of financial position as trade payables or financial liabilities, or presented in a separate line. The treatment applied by the Group to these programs is consistent with this decision (see note 2-P).
The IFRIC’s decision also clarifies that the presentation in the cash flow statement depends on the analysis of the transaction, particularly because a repayment considered to concern a non-operating finance arrangement must be classified as a cash flow from financing activities. To date the group has presented repayments of liabilities covered by reverse factoring programs as cash flows from operating activities, even when the transaction was considered a financing operation. The amounts concerned in 2020 have been reclassified in accordance with the IFRIC decision (see section 126.96.36.199 – A4). The amounts concerned in previous years have not been reclassified since they are not significant.
2-P. ASSIGNMENT OF RECEIVABLES AND REVERSE FACTORING
Receivables assigned to third parties (through securitization, discounting, or factoring) are removed from Group assets when the associated risks and benefits are also substantially transferred to the third parties in question. Risk analysis principally concerns the credit risk, the risk of late payment and the country risk. The same rule applies in the Automotive (excluding AVTOVAZ) segment and the Sales Financing segment.
The Automotive segments participate in reverse-factoring programs. These programs can be used to support a supplier, or to benefit the Group by extending payment deadlines. In the first case, the liability continues to be considered as part of the operating cycle and the amounts concerned remain in trade payables in the financial position. In the second case, if the reverse factoring contract includes an unconditional commitment by the Group to pay the amount initially due to the supplier to the financial institution that is a party to the contract, the liability is no longer considered as part of the operating cycle and the amounts concerned are reclassified as financial liabilities (this has no impact on the cash flow statement at the reclassification date). If the contract is considered as a financial liability and covers a financing requirement for the group subsidiary involved, the repayments to financial institutions impact cash flows from financing activities in the cash flow statement; otherwise, they are included in cash flows from operating activities.
23-E. FINANCING BY ASSIGNMENT OF RECEIVABLES AND REVERSE FACTORING
Automotive segments financing by assignment of receivables
Some of the Automotive segment’s external financing comes from assignment of commercial receivables to non-Group financial establishments.
Details of financing by assignment of commercial receivables is as follows:
The total amount of tax receivables assigned and derecognized in 2020 is €214 million, comprising €165 million of CIR receivables and €49 million of VAT receivables (€324 million of CIR receivables, €54 million of CICE receivables and €60 million of VAT receivables in 2019).
French tax receivables assigned outside the Group (the “CIR” Research Tax Credit), with transfer of substantially all the risks and benefits associated with ownership of the receivables, are only derecognized if the risk of dilution is deemed to be non-existent. This is notably the case when the assigned receivables have already been subject to a tax inspection or preliminary audit. No assigned tax receivables remained in the balance sheets at December 31, 2020.
The assigned receivables are derecognized when the associated risks and benefits are substantially transferred, as described in note 2-P.
The Automotive segments assigns its dealership receivables to the Sales financing segment. The total dealership receivables transferred to the Sales financing segment principally concerns the Renault group. The amounts are presented in note 15-D.
Automotive segments financing by reverse factoring programs
The accounting treatment for these programs is described in note 2-P, Assignment of receivables and reverse factoring. At December 31, 2020, reverse-factoring programs concerned €26 million of financial liabilities (€44 million at December 31, 2019).