Groupe Renault - 2020 Universal Registration Document

356 GROUPE RENAULT I UNIVERSAL REGISTRATION DOCUMENT 2020 Find out more at group.renault.com 04 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS The consolidated financial statements for 2020 include restatements of some assets and liabilities undertaken in the context of this pandemic, and the update of the “Renaulution” medium-term business plan (2021-2025). The principal impacts are €762 million of impairment in respect of certain tangible and intangible assets (see note 6), €248 million resulting from discontinuation of recognition of deferred tax assets (see note 8-A), and a €216 million increase in impairment for expected credit losses on sales financing receivables (see note 15). Estimation of the impacts of the COVID-19 pandemic described in this chapter on the financial statements is particularly complex and involves the use of judgments that are explained in the notes, where relevant. On April 14, 2020 the Groupe Renault announced its new business strategy in China, and the signature of a preliminary agreement with Dongfeng Motor Corporation under which Renault transferred its shares in the joint-venture Dongfeng Renault Automotive Company Ltd. (DRAC) to Dongfeng. DRAC ceased operations concerning the Renault brand on April 1, 2020 (see notes 3 and 6-B). The Groupe Renault is refocusing its business activities in China on light commercial vehicles (through Renault Brilliance Jinbei Automotive Co. Ltd. (RBJAC) – see note 13) and on electric vehicles (through New Energy Automotive Co. Ltd. (eGT) and Jiangxi Jiangling Group Electric Vehicle Co. Ltd. (JMEV) – see note 3). On November 20, 2020 the Groupe Renault signed an agreement in France with its social partners to transform technical and service skills in preparation for future developments in the automotive world. This agreement lays down the conditions for a new outplacement policy, and includes a voluntary work-exemption plan for relevant personnel in 2021, and a Collective Contractual Separation plan for a maximum 1,900 employee departures. In the foreign subsidiaries, the Group is rolling out restructuring actions in line with the 2022 cost reduction plan. Restructuring and workforce adjustments have been recognized for these plans (notes 6-A and 20). In the context of the COVID-19 pandemic, the new strategy in China, new workforce reduction plans and the new medium-term business plan Renaulution (2021-2025), the main items in the Group’s consolidated financial statements that are dependent on estimates and judgments and have been paid particular attention are the following: potential impairment of fixed assets, particularly impairment on P specific assets linked to vehicles (see note 6-C), the goodwill of AVTOVAZ and the LADA brand (see note 11); the recoverable value of leased vehicles classified as property, P plant and equipment or inventories (notes 2-G, 11 and 14); investments in associates, notably Nissan and RBJAC (see P notes 12 and 13); impairment for expected credit losses concerning Sales Financing P receivables (notes 2-G and 15); determination of expenses to be paid under sales incentive P programs recorded in other liabilities, in a context of sales price pressure (notes 2-G and 21); determination of restructuring provisions (see note 6-A and 20); P determination of risks associated with distressed suppliers; P the potential impact of the European CAFE (Corporate Average P Fuel Economy) regulation from 2020: under this regulation, carmakers will be fined if the average CO 2 emissions target for all vehicles registered in Europe each calendar year is exceeded (see note 28-A2). This list is not exhaustive due to the constantly evolving COVID-19 situation and its effects on the financial health of the world’s economies, and it remains very difficult to predict the magnitude and duration of the pandemic’s economic impacts on our business. Other important estimates and judgments Renault often has to make estimates and assumptions that affect the book value of certain assets and liabilities, income and expenses, and disclosures made in certain notes to the financial statements. In preparing its financial statements, Renault regularly revises its estimates and assessments to take account of past experience and other factors deemed relevant in view of the economic circumstances. If changes in these assumptions or circumstances are not as anticipated, the figures reported in Renault’s future consolidated financial statements could differ from the estimates established at the time these financial statements were finalized. The main items in the Group’s consolidated financial statements at December 31, 2020 that are dependent on estimates and judgments are the following: capitalization of research and development expenses and their P amortization period (notes 2-K and 10-A); the depreciation and amortization periods for fixed assets other P than capitalized development expenses (notes 2-K, 2-L and 10); recognition of deferred tax assets on tax loss carryforwards P (notes 2-I and 8); provisions, particularly warranty provisions on vehicles and P batteries sold (note 2-G), provisions for pensions and other long-term employee benefit obligations (notes 2-S and 19), provisions for workforce adjustment measures (notes 2-T and 6-A), provisions for legal risks and tax risks (other than income tax risks) (note 20) and provisions for uncertain tax liabilities (note 21); valuation of lease liabilities, particularly the incremental P borrowing rates and the value of renewal options that are reasonably certain to be exercised (note 23). Consolidation principles 2 - C - The consolidated financial statements include the financial statements of all companies controlled exclusively by the Group either directly or indirectly (subsidiaries). Jointly controlled companies are accounted for under the equity method when they are classified as joint ventures and consolidated on the basis of the percentage share specific to each balance sheet and income statement item when they are classified as joint operations. Companies in which the Group exercises significant influence (associates) are included in the financial statements on an equity basis.