2007 - Pinguely Haulotte

2007
annual report # p91-92
Consolidated financial statements of December 31st, 2007
The purchase and sale of financial assets
(including derivative financial
instruments) are recognized on the
settlement date.
Information on derivatives used by
Haulotte Group is provided in a separate
note (note 4).
3.6 Inventory and work in progress
Inventories are stated at the lower of cost
and net realizable value:
- Raw materials and supplies are
recognized at the purchase price. The
cost of finished products and work in
progress includes direct production
costs and production overhead (based
on normal operating capacity). The
inventories are measured using the
weighted-average cost method;
- The net realizable value is the estimated
selling price under normal operating
conditions less costs required to sell or
recondition the good.
3.7 Trade receivables
Receivables are initially recognized at fair
value of the amount paid or receivable.
They are subsequently measured at
amortized cost calculated according to
the effective interest rate method, less
provisions for impairment.
When there are serious and objective
evidence of collection risks, a provision
for impairment of trade receivable is
recorded. This provision represents the
difference between the asset’s carrying
amount and the estimated resale value
of the item representing the receivable.
This resale value is estimated on the basis
of a professional valuation. The provision
is recorded in the income statement as
“selling expenses".
a) Sales with guarantees
In line with industry practice, Haulotte
Group S.A. grants guarantees to financial
institutions proposing financing to Group
customers. Under such arrangements,
Haulotte Group transfers equipment to
the financial institution that in turn
proposes the end user customer one of
two options:
- The credit sale of the equipment
through a loan,
- Conclusion of a finance lease.
In both cases, Haulotte Group SA grants
guarantees to this financial institution.
The guarantees granted by Haulotte
Group are of the following nature:
1) Commitments to assure lease
payments: Haulotte Group S.A.
guarantees the financial institution
payment if the debtor defaults and
pays said institution upon the first event
of default the entire outstanding capital
balance owed by the defaulting client.
In such cases, the Group will repossess
the equipment for resale on the market
for used equipment; and/or;
2) Risk pool commitments: for each lease
contract signed, the Group contributes
to a guarantee pool to cover future
risks of customer default;
3) Commitments to purchase the residual
value at the end of the lease: Haulotte
Group grants a guarantee to
repurchase of the residual value of the
equipment to certain financial
institutions at the end of the lease
agreement concluded between the
entity and the Group customer.
The first and second transactions
described above are analyzed in
substance:
- For credit sales of equipment by the
financial institution to the end customer
as a loan granted to the end customer
by Haulotte Group, with the contract
transferred to the financial institution
to obtain financing for the sale;
- For finance lease agreements between
the financial institution and the end
customer as a finance lease between
Haulotte Group and the end customer,
with the contract transferred to the
financial institution to obtain financing
for the sale.
Analysis conducted according to the
provisions of IAS 39 has indicated that
because of the guarantees granted by
the Group, most of the risks and rewards
associated with the receivable payable
by the end client have not been
transferred to financial institutions. In
consequence, in accordance with IAS 17
(or IAS 18) and IAS 39, for the two types
of commitments mentioned above the
Group has recognized receivables from
financing arrangements and financial
debts for the balance payable by the end
client to the financial institution. These
receivables and payables will be
eliminated as the client makes the lease
payments to the financial institution.
In contrast, for the third type of guarantee
(repurchase commitments at the residual
value) the credit risk and the risk of a
delayed payment by the customer are
fully incurred by the financial institution.
In addition, Haulotte Group systematically
offers customers the option of purchasing
the equipment concerned at a price
corresponding to this residual value.
Available market data indicates that this
constitutes an attractive method always
used by customers. The preferential nature
of the residual value guaranteed by
Haulotte Group in relation to the value
of used equipment is verified for every
transaction.
The risk associated with the residual value
theoretically retained by Haulotte Group
is in this context very low. In consequence,
virtually all the risks and rewards
associated with the receivable are
transferred to the financial institution.
The residual value granted by Haulotte
Group is thus recorded under off-balance
sheet commitments.
b) Back-to-back arrangements
In the past, a significant volume of
Haulotte Group sales originated from
back-to-back lease arrangements.
These arrangements involve selling
equipment to a financial institution
accompanied by a leaseback agreement
to be then subleased to the end user