In April 2014, the company established a new subsidiary in South Korea, Lectra Korea, to accelerate its development in Asia. On May 1, 2014, this subsidiary took over the activities of the agent that previously represented Lectra in this country for many years. The cost of the purchase by Lectra of these activities is shown in the statement of cash ﬂows under “Acquisition cost of activities purchased”. The impact of this subsidiary’s creation and of the purchase of these activities on the Group’s income statement and the statement of ﬁnancial position is immaterial, the bulk of sales in this country having previously been billed by Lectra SA. Lectra Korea has been fully consolidated since May 1, 2014. There was no other change in the scope of consolidation in 2014, and there were none in 2013. In view of the parent company’s percentage of interest in its consolidated subsidiaries, non-controlling interests are immaterial and are therefore not shown in the ﬁnancial statements.
are primarily in Chinese yuan, while those of the Group are in euros. Meanwhile, sales prices in many markets are in U.S. dollars or euros. The exchange rates between these three currencies have, therefore, a competitive impact. Currency Translation Impact On the income statement, as accounts are consolidated in euros, revenues, gross proﬁt, and income from operations of a subsidiary conducting its business in a foreign currency are mechanically affected by exchange rate ﬂuctuations when translated into euros. In the statement of ﬁnancial position, this refers primarily to foreign currency accounts receivable, in particular to those between the parent company Lectra SA and its subsidiaries, and it corresponds to the variation between exchange rates at collection date and those at billing date. This impact is recognized in “Foreign exchange income (loss)” in the income statement. Currency risk is borne by the parent company. The Group seeks to protect all of its foreign currency receivables and debts as well as future cash ﬂows against currency risk on economically reasonable terms. Hedging decisions take into account currency risks and trends where these are likely to signiﬁcantly impact the Group’s ﬁnancial condition and competitive situation. The bulk of foreign currency risks concerns the U.S. dollar. The Group generally seeks to hedge the risk arising in respect of its net operational exposure to the U.S. dollar (revenues less all expenses denominated in U.S. dollars or strongly correlated currencies) by purchasing dollar puts (or euro calls) or by forward currency contracts, when justiﬁed by the cost of the hedge. The Group’s statement of ﬁnancial position exposure is monitored in real time; it utilizes forward currency contracts to hedge all relevant receivables and debts. Consequently, all changes in the value of these instruments offset foreign exchange gains and losses on the remeasurement of these receivables and debts. However, these hedges are not treated as hedge accounting under IAS 39. Derivative ﬁnancial instruments to hedge future ﬂows of funds are initially booked at fair value. Thereafter they are marked to market at the closing date. Resulting proﬁts or losses are recognized in other comprehensive income or in the income statement, depending upon whether
RISK MANAGEMENT POLICY
The Group’s risk management policy contained in these notes to the consolidated ﬁnancial statements is mainly discussed in the Management Discussion of the Board of Directors, in chapter 4, Risk Factors − Management of Risks, in chapter 14, Business Trends and Outlook, and in the Chairman’s Report on Internal Control Procedures and Risk Management, and on Corporate Governance, in chapter 2, Internal Control and Risk Management Procedures Established by the Company, to which readers are referred.
NOTE 3.1 SPECIFIC FOREIGN EXCHANGE RISKS FINANCIAL INSTRUMENTS DERIVATIVE