VINCI - 2005 annual report

These estimates assume the operation is a going concern and are made
on the basis of the information available at the time. Estimates may be
revised if the circumstances on which they were based alter or if new
information becomes available. Actual results may be different from these
estimates.
Revenue
The consolidated revenue of the Energies, Roads and Construction business
lines represents the total of the work, goods and services produced by the
consolidated subsidiaries as their main activity. It includes the Group’s
revenue from concession infrastructure shown in the VINCI balance sheet
as concession intangible fixed assets. The method for recognising revenue
in respect of construction contracts is explained in the note on construction
contracts below.
The Concession and services business line’s consolidated revenue comprises
tolls for the use of road infrastructures operated under concessions,
revenue booked by car parks and airport service concessions, and ancillary
income such as fees for the use of commercial installations, rental of
telecommunication infrastructure and advertising space.
In the property sector, revenue arising on lots sold is recognised as the
property development proceeds, using the incurred cost method (cost of
land, of work, etc.).
Revenue from ancillary activities
Revenue from ancillary activities comprises rental income, sales of equipment,
materials and merchandise, study work and fees other than those
generated by concession operators.
Construction contracts
VINCI recognises construction contract income and expenses using the stage
of completion method defined by IAS 11.
For the Construction business line, the stage of completion is usually determined
on a physical basis. For the other business lines (Roads and Energies),
the stage of completion is determined on the basis of the percentage of total
costs incurred to date.
For construction projects in which VINCI’s share is less than €10 million, it is
considered that the profit or loss recognised on the basis of work completed
is in line with that determined on a stage of completion basis, other than in
exceptional cases.
If the estimate of the final outcome of a contract indicates a loss, a provision
is made for the loss on completion regardless of the stage of completion, based
on the best estimates of income, including any rights to additional revenue or
claims if these are probable and can be reliably estimated. Provisions for losses
on completion are shown under liabilities.
Revenue, including the margin on the construction (profit or loss), realised
in the context of concession contracts shown under concession intangible
fixed assets is recorded in the income statement using the stage of completion
method described above.
Part-payments received under construction contracts before the corresponding
work has been carried out are recognised under liabilities under advances and
payments on account received.
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VINCI 2005 ANNUAL REPORT
Share-based payments
The measurement and recognition methods for share subscription and
purchase plans and the Plans d’Epargne Groupe – Group Savings Scheme
– are defined by IFRS 2 Share-based Payment. The granting of share options
and offers to subscribe to the Group Savings Scheme represent a benefit
granted to their beneficiaries and therefore constitute supplementary
remuneration borne by VINCI. Because such transactions do not give rise
to monetary transactions, the benefits granted in this way are recognised
as expenses in the period in which the rights are acquired, with a corresponding
increase in equity. Benefits are measured on the basis of the fair
value of the equity instruments granted.
Share subscription option plans
Options to subscribe to shares are granted to Group employees and officers.
The fair value of the options granted is determined at the grant date
using a binomial valuation model, of the “Monte Carlo” type, adjusting
for the probability of the vesting conditions of the rights to exercise the
option not being met.
Group Savings Scheme
Under the Group Savings Scheme, the Group issues new shares three times
a year reserved for its employees with a subscription price that includes a
discount against the average stock market price of the VINCI share during
the last 20 business days preceding the authorisation by the Board of
Directors. This discount is considered as a benefit granted to the employees;
its fair value is determined using a binomial valuation model, of the
“Monte Carlo” type, at the date on which the Board of Directors sets the
subscription price. As certain restrictions apply to the shares acquired by
the employees under these plans regarding their sale or transfer, the fair
value of the benefit to the employee takes account of the fact that the shares
acquired cannot be freely disposed of for five years.
Cost of net financial debt
The cost of net financial debt comprises:
– the cost of gross financial debt, which includes the interest expense
calculated at the effective interest rate, gains and losses on interest rate
hedges in respect of gross financial debt, and net changes in the fair
value of interest rate derivatives that are not used for hedging.
– financial income from investments comprises the return on cash investments
(interest income, dividends from UCITS, disposal gains and losses,
etc.), the impact of interest rate hedges related to these investments and
changes in their fair value.
Other financial income and expenses
Other financial income and expenses mainly comprise foreign exchange
gains and losses, the effects of discounting to present value, dividends
received from unconsolidated entities, capitalised borrowing costs and
changes in the value of derivatives not allocated to interest rate risk
management.
Borrowing costs borne during the construction of assets are included in
the cost of the assets. They are determined as follows:
– to the extent that funds are borrowed specifically for the purpose of
constructing an asset, the borrowing costs eligible for capitalisation on
that asset are the actual borrowing costs incurred during the period less
any investment income arising from the temporary investment of those
borrowings;