FINANCIAL AND ACCOUNTING INFORMATION Assets held under finance leases are stated at reference to a first-in first-out basis, including freight an amount equal to the fair value of the leased in costs, net of any purchase rebates. Net realizable property or, if this is lower, the present value of the value is the estimated selling price at balance sheet minimum lease payments at inception of the lease, date, less the estimated selling expenses, taking into less accumulated depreciation (see below) and account technical or marketing obsolescence and impairment losses. Minimum lease payments are risks related to slow moving inventory. apportioned between the finance expense and the reduction of the outstanding liability. The finance 3.8 Financial assets expense is allocated to each period during the lease term so as to produce a constant periodic rate of 3.8.1 Long-term investments interest on the remaining balance of the liability. The Long-term investments principal ly include capital gains arising from the sale and leaseback of investments in non-consolidated companies and property, plant and equipment are recognized in full other shareholdings, deposits required for operating upon sale when the lease qualifies as an operating purposes, and loans. lease and the transaction is realized at fair value. Investments in non-consolidated companies and They are spread on a straight-line basis over the other shareholdings are measured at fair value. When lease term in case of a finance lease. fair value is not reliably measurable, investments Assets held under finance leases are depreciated are stated at cost less impairment losses when over their expected useful lives on the same basis necessary. Changes in fair value are recognized in as owned assets or, when shorter, the term of the other comprehensive income and transferred to finance lease. profit or loss when the asset is sold or permanently Payments made under operating leases are impaired. recognized in the income statement on a straight- 3.8.2 Held for trading instruments line basis over the term of the lease. Lease incentives Financial instruments held for trading mainly include received are recognized in the income statement on marketable securities and are stated at fair value, a straight-line basis as an integral part of the total with any resulting gain or loss recognized in profit lease expense. or loss. Depreciation 3.8.3 Trade and other accounts receivable Depreciation is charged to profit or loss on a straight- line basis over the estimated useful lives of each part Trade and other accounts receivable are measured of an item of property, plant and equipment. initial ly at fair value and subsequently measured at amortized cost using the effective interest rate Land is not depreciated. method (see note 3.10) less impairment losses. The estimated useful lives are as follows: Impairment losses from estimated irrecoverable Commercial and office buildings 20 to 35 years; amounts are recognized in the income statement • when there is objective evidence that the asset •Building improvements is impaired. The principal factors considered in and operating equipment 5 to 10 years; recognizing these potential impairments include actual financial difficulties or aging of overdue •Transportation equipment 3 to 8 years; receivables in excess of 30 days. •Computers and hardware 3 to 5 years. 3.8.4 Derivative financial instruments The assets’ residual values, useful lives, and methods Derivative financial instruments are measured at of depreciation are reviewed and adjusted if fair value. The gain or loss on remeasurement to appropriate at each balance sheet date. fair value is recognized immediately in profit or loss. However, when derivatives qualify for hedge 3.7 Inventories accounting, the recognition of any resulting gain or Inventories are mainly composed of goods held loss is dependent on the nature of the item being for resale. Inventories are stated at the lower of hedged (see note 3.8.5). They are classified as assets cost and net realizable value. Cost is calculated by or liabilities depending on their fair value. REXEL 2017 – REGISTRATION DOCUMENT 224