Vetoquinol - Universal Registration Document - 2021

CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated financial statements 70 Vetoquinol Universal Registration Document 2020 Financial report 6 6.5.3.5 Foreign currency translation 6.5.3.5.1 Functional currency and reporting currency The items included in the financial statements of each Group entity are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in euros, the Com- pany’s reporting currency. 6.5.3.5.2 Transactions, assets and liabilities Among the Group companies, transactions in foreign currency are translated into the functional currency at the prevailing exchange rate at the transaction date. Monetary assets and liabilities denominated in foreign currencies are translated at the closing rate. Non-monetary items measured at historical cost are translated using the prevailing exchange rate as of the date of the transaction, whilst those measured at fair value are translated using the prevailing rate on the date when the fair value is determined. Exchange gains and losses resulting from these tran- sactions are recognized in income, except for: • those related to gains or losses recognized directly in other comprehensive income, which are recorded in equity, and • those arising from the translation of net investments in subsidiaries, which are recorded in other com- prehensive income, then taken to income when the investment is sold. 6.5.3.5.3 Translation of Group company financial statements Group company financial statements denominated in functional currencies (excluding hyperinflationary eco- nomies) other than the reporting currency are translated into the reporting currency as follows: • assets and liabilities are translated at the closing rate as of the relevant balance sheet date; • income statement items are translated at the annual average exchange rate or, in the case of material tran- sactions, at the exchange rate applicable as of the date of the transaction; • all resulting exchange differences are recorded as a separate item in other comprehensive income. 6.5.3.6 Impairment of assets In accordance with the requirements set forth in IAS 36, the Group assesses whether there is any indication that an asset may have suffered an impairment loss. If any such indication exists, the Group estimates the recove- rable value of the asset. In addition, the Group performs annual impairment tests on intangible assets with an indefinite useful life and intangible assets not yet ready to be put into service, by comparing the carrying amount to the recoverable amount. An impairment loss equal to the excess of the carrying amount over the asset’s recoverable value is recognized. The recoverable amount of an asset represents the higher of its fair value less costs to sell and its value in use. For the purposes of assessing impairment, assets are grouped together in cash-generating units (CGU), which represent the lowest level that generates independent cash flows. The CGUs defined for Vetoquinol Group are the following companies: Vetoquinol USA, Vetoquinol Canada, Vetoquinol France, Vetoquinol UK, Vetoquinol Belgium, Vetoquinol Switzerland, Vetoquinol Czech Republic, Vetoquinol Austria, Vetoquinol Poland, Veto- quinol Ireland, Vetoquinol Germany, Vetoquinol Italy, Vetoquinol Scandinavia, Vetoquinol India, Vetoquinol Asia, Vetoquinol Australia, Vetoquinol Brazil and Farmvet Systems. Non-financial assets (excluding goodwill) that have incurred impairment losses are reviewed for possible reversal of those losses at each annual or interim closing. Impairment losses are first charged against goodwill. The balance is allocated to the assets of the CGU.