| Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
| Dec. 31, 2018 |
| Text block [abstract] | |
| Statement of compliance | 2.1 Statement of compliance
The Consolidated Financial Statements of Constellium N.V. and its
subsidiaries have been prepared in accordance with International
Financial Reporting Standards (IFRS) as issued by the International
Accounting Standards Board (IASB) and as endorsed by the European
Union (EU). The Group’s application of IFRS results in no
difference between IFRS as issued by the IASB and IFRS as endorsed
by the EU (https://ec.europa.eu/info/law/international-accounting-standards-regulation-ec-no-1606-2002_en).
The Consolidated Financial Statements have been authorized for
issue by the Board of Directors on March 11, 2019. |
| Application of new and revised IFRS | 2.2 Application of new and revised IFRS
The Group has adopted IFRS 15— Revenue from Contracts with
Customers Financial Instruments
Several other amendments and interpretations apply for the first
time in 2018, but do not have any impact on the Consolidated
Financial Statements of the Group. The Group has not early adopted
any other standard, interpretation or amendment that has been
issued but is not yet effective.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 supersedes IAS 11— Construction Contracts Revenue
The Group adopted IFRS 15 using the cumulative effect method of
adoption at the date of initial application for contracts that were
not completed at that date. There was no cumulative effect
adjustment to the opening balance of retained earnings in the
Consolidated Financial Statements of Financial Position as of
January 1, 2018, as a result of the adoption of IFRS 15.
The Group primarily contracts with customers for the sale of rolled
or extruded aluminium products. For the majority of our business,
performance obligations with customers begin when we acknowledge a
purchase order for a specific customer order of product to be
delivered in the near-term. These purchase orders are short-term in
nature, although they may be governed by long-term multi-year frame
agreements.
The Group has concluded that revenue from sale of goods, measured
at the fair value of the consideration received or receivable,
should be recognized at the point in time when control of the asset
is transferred to the customer, generally upon delivery, similar to
the Group revenue recognition model under IAS 18. In certain
limited circumstances, the Group may be required to recognize
revenue over time for products that have no alternative use and for
which the Group has an enforceable right to payment for production
completed to date. This could result in recognizing revenue earlier
than under prior IFRS rules which required recognition at a point
in time for these transactions. However, as of the date of initial
application and for the year ended December 31, 2018, IFRS 15
had no impact on the timing of our revenue recognition.
Revenue is measured at the fair value of the consideration received
or receivable. Revenue from product sales, net of trade discounts,
allowances and volume-based incentives, is recognized for the
amount the Group expects to be entitled to, generally upon
delivery, and provided persuasive evidence that control has
transferred.
Upon adoption of IFRS 15, the Group made the following
reclassifications in its opening financial position:
(in millions of Euros) Carrying amount Contract liabilities Carrying amount
Trade receivables and other 467 18 485
Trade payables and other (984 ) (41 ) (1,025 )
Provisions (153 ) 23 (130 )
Contract liabilities, which have been reclassified, consist of
expected volume discounts, rebates, incentives, refunds and
penalties and price concessions. Contract liabilities were
previously presented as provisions or as a reduction in trade
receivables. Contract liabilities as of December 31, 2018 are
presented in NOTE 20—Trade payables and other.
IFRS 9 Financial Instruments
IFRS 9 replaces the provisions of IAS 39 that relate to the
recognition, classification and measurement of financial assets and
financial liabilities, derecognition of financial instruments,
impairment of financial assets and hedge accounting.
The adoption of IFRS 9— Financial Instruments
i. Classification and measurement
On January 1, 2018 (the date of initial application of IFRS
9), the Group’s management assessed which business models
apply to the financial assets held by the group and classified its
financial instruments into the appropriate IFRS 9 categories. The
main effect results from the reclassification of Trade receivables
from the Loan and receivables category to Fair value through OCI
category (FVOCI), as receivables may be either held until
collection or sold as part of factoring arrangements. There was no
significant difference between the previous carrying amount and the
fair value of the other financial assets as of January 1, 2018
to be recognized in opening retained earnings, as a result of their
liquidity or short maturity.
Consistent with IAS 39, derivatives are required to be held at Fair
Value through Profit and Loss (FVPL) under IFRS 9 as they do not
meet the criteria for amortized cost or FVOCI unless they are
designated for hedge accounting.
• Financial assets
Financial assets are classified either: (a) at amortized cost,
(b) at fair value through other comprehensive income (FVOCI),
or (c) at fair value through profit or loss (FVPL). The
classification depends on the financial asset’s contractual
cash flow characteristics and the Group’s business model for
managing the financial assets. Management determines the
classification of Constellium’s financial assets at initial
recognition.
i.
Assets at amortized cost are comprised of other
receivables, non-current non-current
ii.
Assets at fair value through OCI are comprised of
trade receivables in the Consolidated Statement of Financial
Position. The business model is to maintain liquidity for the
Group, should the need arise, which leads to sales through
factoring agreements that are more than infrequent and significant
in value. Therefore, trade receivables are managed under an
objective that results in both collecting the contractual cash
flows and selling the receivables to the factors. The portfolio of
trade receivables is therefore classified as measured at fair value
through OCI. Foreign exchange revaluation and impairment losses or
reversals are recognized in profit or loss and computed in the same
manner as for financial assets measured at amortized cost. The
remaining fair value changes are recognized in OCI. Upon
derecognition, the cumulative fair value change recognized in OCI
is recycled to profit or loss. These assets are classified as
current or non-current
iii.
Assets at fair value through profit or loss are
comprised of derivatives except when they are designated as hedging
instruments in a hedging relationship that qualifies for hedge
accounting in accordance with IAS 39, ‘Financial
instruments’. Financial assets carried at fair value through
profit or loss are initially recognized at fair value and
transaction costs are expensed in the Consolidated Income
Statement.
• Financial liabilities
Borrowings and other financial liabilities (excluding derivative
liabilities) are recognized initially at fair value, net of
transaction costs incurred and directly attributable to the
issuance of the liability. These financial liabilities are
subsequently measured at amortized cost using the effective
interest rate method. Any difference between the amounts originally
received (net of transaction costs) and the redemption value is
recognized in the Consolidated Income Statement using the effective
interest rate method.
ii. Impairment of financial assets
Financial assets subject to IFRS 9’s new expected credit loss
model includes: cash and cash equivalents, trade receivables and
other and loans to joint ventures.
The impact of the change in impairment methodology on the
Group’s retained earnings and equity is disclosed as
follows:
•
For cash and cash equivalents, the identified
impairment loss was immaterial.
•
For trade receivables and other (including contract
assets and other receivables), the group applies the IFRS 9
simplified approach to measuring expected credit losses which uses
a lifetime expected loss allowance for all trade receivables and
contract assets. The application of the IFRS 9 expected credit loss
model resulted in an immaterial impairment loss.
•
For loans to joint ventures the application of the
amendment to IAS 28 and the IFRS 9 expected credit loss model
resulted in the recognition of a loss allowance of
€2 million in opening retained earnings net of tax
(previous loss allowance was nil).
iii. Hedging
The Group did not adopt the disposition of IFRS 9 on hedging and
will therefore continue to apply the provisions of IAS 39. (Refer
to Note 2.6)
iv. Offsetting financial instruments
Financial assets and liabilities are offset and the net amount
reported in the Consolidated Statement of Financial Position when
there is a legally enforceable right to offset the recognized
amounts and there is an intention to settle on a net basis or
realize the asset and settle the liability simultaneously. |
| New standards and interpretations not yet mandatorily applicable | 2.3 New standards and interpretations not yet mandatorily
applicable
The Group has not applied the following new standards and
interpretations that have been issued but are not yet effective and
which could affect the Group’s future Consolidated Financial
Statements:
IFRS 16— Leases
The standard will replace IAS 17— Leases non-lease
The group expects to recognize right-of-use
IFRIC 23—Uncertainty over Income Tax Treatments
This interpretation provides a framework to consider, recognize and
measure the accounting impact of tax uncertainties. It specifies
how to determine the unit of account and the recognition and
measurement guidance to be applied to that unit. The interpretation
also explains when to reconsider the accounting for a tax
uncertainty, and it states specifically that the absence of comment
from the tax authority is unlikely, in isolation, to trigger a
reassessment. The impact of this interpretation on the
Group’s results and financial situation is being evaluated.
The Company expects no significant impact on its Consolidated
Financial Statements from the effect of applying IFRIC 23.
The interpretation is effective for annual years beginning on or
after January 1, 2019.
The Group plans to adopt the new standards and interpretations on
their required effective dates. |
| Basis of preparation | 2.4 Basis of preparation
In accordance with IAS 1— Presentation of Financial
Statements
The financial position of the Group, its cash flows, liquidity
position and borrowing facilities are described in the Consolidated
Financial Statements respectively in NOTE 13—Cash and Cash
Equivalents, NOTE 21—Borrowings and NOTE 23—Financial
Risk Management.
The Group’s forecasts and projections, taking account of
reasonably possible changes in trading performance, including an
assessment of the current macroeconomic environment, indicate that
the Group should be able to operate within the level of its current
facilities and related covenants.
Accordingly, the Group continues to adopt the going concern basis
in preparing the Consolidated Financial Statements. Management
considers that this assumption is not invalidated by the
Group’s negative equity at December 31, 2018. This
assessment was confirmed by the Board of Directors on
March 11, 2019. |
| Presentation of the operating performance of each operating segment and of the Group | 2.5 Presentation of the operating performance of each operating
segment and of the Group
In accordance with IFRS 8— Operating Segments
Constellium’s CODM measures the profitability and financial
performance of its operating segments based on Adjusted EBITDA as
it illustrates the underlying performance of continuing operations
by excluding certain non-recurring non-operating start-up non-recurring |
| Basis of consolidation | Basis of consolidation
These Consolidated Financial Statements include all the assets,
liabilities, equity, revenues, expenses and cash flows of the
entities and businesses controlled by Constellium. All intercompany
transactions and balances are eliminated.
Subsidiaries are entities over which the Group has control. The
Group controls an entity when the Group has power over the
investee, is exposed to, or has rights to variable returns from its
involvement in the entity and has the ability to affect those
returns through its power over the entity.
Subsidiaries are fully consolidated from the date on which control
is transferred to the Group. They are deconsolidated from the date
that control ceases.
Investments over which the Group has significant influence are
accounted for under the equity method. Investments over which the
Group has joint control are accounted for either as joint ventures
under the equity method or as joint arrangements in relation to
their interest in the joint operation.
Joint venture investments are initially recorded at cost.
Subsequently they are increased or decreased by the Group’s
share in the profit or loss, or by other movements reflected
directly in the equity of the entity. |
| Business combinations | Business combinations
The Group applies the acquisition method to account for business
combinations.
The consideration transferred for the acquisition of a subsidiary
is the fair value of the assets transferred, the liabilities
assumed and the equity interests issued by the Group. The
consideration transferred includes the fair value of any asset or
liability resulting from a contingent consideration arrangement.
Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date. The amount
of non-controlling
Goodwill is initially measured as the excess of the aggregate of
the consideration transferred and the amount of non-controlling
At the acquisition date, the Group recognizes the identifiable
acquired assets, liabilities and contingent liabilities
(identifiable net assets) of the subsidiaries on the basis of fair
value at the acquisition date. Recognized assets and liabilities
may be adjusted during a maximum of 12 months from the acquisition
date, depending on new information obtained about the facts and
circumstances existing at the acquisition date.
Significant assumptions used in determining allocation of fair
value include the following valuation techniques: the cost
approach, the income approach and the market approach which are
determined based on cash flow projections and related discount
rates, industry indices, market prices regarding replacement cost
and comparable market transactions.
Acquisition related costs are expensed as incurred and are included
in Other gains / (losses)—net in the Consolidated Income
Statement. |
| Cash-generating units | Cash-generating units
The reporting units (which generally correspond to industrial
sites), the lowest level of the Group’s internal reporting,
have been identified as cash-generating units. |
| Goodwill | Goodwill
Goodwill arising from a business combination is carried at cost as
established at the date of the business combination less
accumulated impairment losses, if any.
Goodwill is allocated and monitored at the operating segments level
which are the groups of cash-generating units that are expected to
benefit from the synergies of the combination. The operating
segments represent the lowest levels within the Group at which the
goodwill is monitored for internal management purposes.
Gains and losses on the disposal of a cash-generating unit include
the carrying amount of goodwill relating to the cash-generating
unit sold. |
| Impairment of goodwill | Impairment of goodwill
A group of cash-generating units to which goodwill is allocated is
tested for impairment annually, or more frequently when there is an
indication that the group of units may be impaired.
The net carrying value of a group of cash-generating units is
compared to its recoverable amount, which is the higher of the
value in use and the fair value less cost of disposal.
Value in use calculations use cash flow projections based on
financial budgets approved by management and usually covering a
5-year
The value in use is the sum of discounted cash flows over the
projected period and the terminal value. Discount rates are
determined based on the weighted-average cost of capital of each
operating segment.
The fair value is the price that would be received for the group of
cash-generating units, in an orderly transaction, from a market
participant. This value is estimated on the basis of available and
relevant market data or a discounted cash flow model reflecting
market participant assumptions.
An impairment loss is recognized for the amount by which the group
of units carrying amount exceeds its recoverable amount.
Any impairment loss is allocated first to reduce the carrying
amount of any goodwill allocated to the group of cash-generating
units and then, to the other assets of the group of units pro rata
on the basis of the carrying amount of each asset in the group of
units.
Any impairment loss is recognized in the line Impairment in the
Consolidated Income Statement. An impairment loss recognized for
goodwill cannot be reversed in subsequent years. |
| Non-current assets (and disposal groups) classified as held for sale & Discontinued operations | Non-current
IFRS 5— Non-current
Assets and liabilities are classified as held for sale when their
carrying amount will be recovered principally through a sale
transaction rather than through continuing use. This condition is
regarded as met only when the sale is highly probable and the
non-current
Assets and liabilities are stated at the lower of carrying amount
and fair value less costs to sell if their carrying amount is to be
recovered principally through a sale transaction rather than
through continuing use.
Assets and liabilities held for sale are presented in separate line
items in the Consolidated Statement of Financial Position of the
year during which the decision to sell is made.
The results of discontinued operations are shown separately in the
Consolidated Income Statement and Consolidated Statement of Cash
Flows. |
| Foreign currency transactions and foreign operations | Foreign currency transactions and foreign operations
Functional currency
Items included in the Consolidated Financial Statements of each of
the entities and businesses of Constellium are measured using the
currency of the primary economic environment in which each of them
operates (their functional currency).
Foreign currency transactions
Transactions denominated in currencies other than the functional
currency are recorded in the functional currency at the exchange
rate in effect at the date of the transaction. Foreign exchange
gains and losses resulting from the settlement of such transactions
and from the translation at year-end
Foreign exchange gains and losses that relate to borrowings and
cash and cash equivalents are presented within Finance
costs—net.
Realized foreign exchange gains and losses that relate to
commercial transactions are presented in Cost of sales. All other
foreign exchange gains and losses, including those that relate to
foreign currency derivatives hedging commercial transactions, are
presented within Other gains / (losses)—net.
Foreign operations: presentation currency and foreign currency
translation
In the preparation of the Consolidated Financial Statements, the
year-end year-end
The net differences arising from exchange rate translation are
recognized in the Consolidated Statement of Comprehensive Income /
(Loss).
The following table summarizes the main exchange rates used for the
preparation of the Consolidated Financial Statements:
Year ended Year ended Year ended
Foreign exchange rate for 1 Euro Average Closing Average Closing Average Closing
U.S. Dollars USD 1.1798 1.1450 1.1273 1.1993 1.1063 1.0541
Swiss Francs CHF 1.1546 1.1269 1.1103 1.1702 1.0901 1.0739
Czech Koruna CZK 25.6452 25.7240 26.3151 25.5349 27.0342 27.0210 |
| Research and development costs | Research and development costs
Costs incurred on development projects are recognized as intangible
assets when the following criteria are met:
-
It is technically feasible to complete the intangible
asset so that it will be available for use;
-
Management intends to complete and use the intangible
asset;
-
There is an ability to use the intangible asset;
-
It can be demonstrated how the intangible asset will
generate probable future economic benefits;
-
Adequate technical, financial and other resources to
complete the development and use or sell the intangible asset are
available; and
-
The expenditure attributable to the intangible asset
during its development can be reliably measured.
Development expenditures which do not meet these criteria are
expensed as incurred. Development costs previously recognized as
expenses are not recognized as an asset in a subsequent period. |
| Other gains / (losses) - net | Other gains / (losses)—net
Other gains / (losses)—net include: (i) realized and
unrealized gains and losses on derivatives contracted for
commercial purposes and accounted for at fair value through profit
or loss, (ii) unrealized exchange gains and losses from the
remeasurement of monetary assets and liabilities and (iii) the
ineffective portion of changes in fair value of derivatives, which
are designated for hedge accounting.
Other gains / (losses)—net separately identifies other
unusual, infrequent or non-recurring |
| Interest income and expense | Interest income and expense
Interest income is recorded using the effective interest rate
method on loans, receivables and on the interest bearing components
of cash and cash equivalents.
Interest expense on short and long-term financing is recorded at
the relevant rates on the various borrowing agreements.
Borrowing costs (including interests) incurred for the construction
of any qualifying asset are capitalized during the period of time
required to complete and prepare the asset for its intended
use. |
| Share-based payment arrangements | Share-based payment arrangements
Equity-settled share-based payments to employees and Board members
providing similar services are measured at the fair value of the
equity instruments at the grant date.
The fair value determined at the grant date is expensed on a
straight-line basis over the vesting period, based on the
Group’s estimate of equity instruments that will eventually
vest, with a corresponding increase in equity. At the end of each
reporting year, the Group revises its estimate of the number of
equity instruments expected to vest. |
| Property, plant and equipment | Property, plant and equipment
Recognition and measurement
Property, plant and equipment acquired by the Company are recorded
at cost, which comprises the purchase price (including import
duties and non-refundable work-in-progress
Subsequent costs
Enhancements and replacements are capitalized as additions to
Property, plant and equipment only when it is probable that future
economic benefits associated with them will flow to the Company and
the cost of the item can be measured with reliability. Ongoing
regular maintenance costs related to Property, plant and equipment
are expensed as incurred.
Depreciation
Land is not depreciated. Property, plant and equipment are
depreciated over the estimated useful lives of the related assets
using the straight-line method as follows:
-
Buildings 10 – 50 years;
-
Machinery and equipment 3 – 40 years;
-
Vehicles 5 – 8 years. |
| Intangible assets | Intangible assets
Recognition and measurement
Technology and customer relationships acquired in a business
combination are recognized at fair value at the acquisition date.
Following initial recognition, intangible assets are carried at
cost less any accumulated amortization and impairment losses. The
useful lives of the Group intangible assets are assessed to be
finite.
Amortization
Intangible assets are amortized over the estimated useful lives of
the related assets using the straight-line method as follows:
-
Technology 20 years;
-
Customer relationships 25 years;
-
Software 3 – 5 years. |
| Impairment of property, plant and equipment and intangible assets | Impairment of property, plant and equipment and intangible
assets
Property, plant and equipment and intangible assets subject to
amortization are reviewed for impairment if there is any indication
that the carrying amount of the asset (or cash-generating unit to
which it belongs) may not be recoverable. The recoverable amount is
based on the higher of fair value less cost of disposal (market
value) and value in use (determined using estimates of discounted
future net cash flows of the asset or group of assets to which it
belongs).
Any impairment loss is recognized in the line Impairment in the
Consolidated Income Statement. |
| Derivatives financial instruments | Derivatives financial instruments
Derivatives are initially recognized at fair value on the date a
derivative contract is entered into and are subsequently
re-measured
Fair value is the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between
market participants at the measurement date. Where available,
relevant market prices are used to determine fair values. The Group
periodically estimates the impact of credit risk on its derivatives
instruments aggregated by counterparties and takes it into account
when estimating the fair value of its derivatives.
Credit Value Adjustments are calculated for asset derivatives based
on Constellium counterparties credit risk. Debit Value Adjustments
are calculated for credit derivatives based on Constellium own
credit risk. The fair value method used is based on historical
probability of default, provided by leading rating agencies.
For derivative instruments that do not qualify for hedge
accounting, changes in the fair value are recognized immediately in
profit or loss and are included in ‘Other gains /
(losses)—net’.
For derivative instruments that are designated for hedge
accounting, the group documents at the inception of the hedging
transaction the relationship between hedging instruments and hedged
items, as well as its risk management objective and strategy for
undertaking the hedge transaction. The group also documents its
assessment, both at hedge inception and on an ongoing basis, of
whether the derivatives that are used in hedging transactions have
been and will continue to be highly effective in offsetting changes
in cash flows of hedged items.
The effective portion of changes in the fair value of derivatives
that are designated and qualify as cash flow hedges is recognized
in Other Comprehensive Income and accumulated in reserves in
equity. The gain or loss relating to the ineffective portion is
recognized immediately in the Consolidated Income Statement in
‘Other gains / (losses)—net’.
Amounts accumulated in equity are reclassified to the Consolidated
Income Statement when the hedged item affects the Consolidated
Income Statement. The gain or loss relating to the effective
portion of derivative instruments hedging forecasted cash-flows
under customer agreements is recognized in ‘Revenue’.
When the forecasted transaction that is hedged results in the
recognition of a non-financial
When a hedging instrument expires or is sold or terminated, or when
a hedge no longer meets the criteria for hedge accounting, any
cumulative gain or loss existing in equity at that time remains in
equity and is recognized when the forecasted transaction is
ultimately recognized in the Consolidated Income Statement. When a
forecasted transaction is no longer expected to occur, the
cumulative gain or loss that was recognized in equity is
immediately reclassified to the Consolidated Income Statement. |
| Leases | Leases
Constellium as the lessee
Leases in which a significant portion of the risks and rewards of
ownership are retained by the lessor are classified as operating
leases. Various buildings, machinery and equipment are leased from
third parties under operating lease agreements. Under operating
leases, lease payments are recognized as rent expense on a
straight-line basis over the term of the lease agreement, and are
included in Cost of sales or Selling and administrative expenses,
depending on the nature of the leased assets.
Leases of property, plant and equipment under which the Group has
substantially all the risks and rewards of ownership are classified
as finance leases. Various buildings and equipment are leased from
third parties under finance lease agreements. Under such finance
leases, the asset financed is recognized in Property, plant and
equipment and the financing is recognized as a financial liability,
in Borrowings.
Constellium as the lessor
Certain land, buildings, machinery and equipment are leased to
third parties under finance lease agreements. At lease inception,
the net book value of the related assets is removed from Property,
plant and equipment and a Finance lease receivable is recorded at
the lower of the fair value and the aggregate future cash payments
to be received from the lessee computed at an interest rate
implicit in the lease. As the Finance lease receivable from the
lessee is due, interest income is recognized. |
| Inventories | Inventories
Inventories are valued at the lower of cost and net realizable
value, primarily on a weighted-average cost basis.
Weighted-average costs for raw materials, stores, work in progress
and finished goods are calculated using the costs experienced in
the current period based on normal operating capacity (and include
the purchase price of materials, freight, duties and customs, the
costs of production, which includes labor costs, materials and
other expenses, that are directly attributable to the production
process and production overheads). |
| Trade account receivables | Trade account receivables
Recognition and measurement
Trade account receivables are recognized at fair value through OCI
since they are managed under an objective that results in both
collecting the contractual cash flows and selling the receivables
to the factors. Prior to the adoption of IFRS 9, trade account
receivables were recognized initially at fair value and
subsequently measured at amortized cost using the effective
interest method, less impairment. In prior years, the impairment of
trade receivables was assessed based on the incurred loss model.
Individual receivables known to be uncollectible were written off
by reducing the carrying amount directly. The other receivables
were assessed collectively, to determine whether there was an
objective evidence that an impairment had been incurred but not yet
identified.
Factoring arrangements
In non-recourse |
| Cash and cash equivalents | Cash and cash equivalents
Cash and cash equivalents are comprised of cash in bank accounts
and on hand, short-term deposits held on call with banks and other
short-term highly liquid investments with original maturities of
three months or less that are readily convertible into known
amounts of cash and are subject to insignificant risk of changes in
value, less bank overdrafts that are repayable on demand, provided
there is an offset right. |
| Share capital | Share capital
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new ordinary shares or
options are shown in equity as a deduction, net of tax, from the
proceeds. |
| Trade payables | Trade payables
Trade payables are initially recorded at fair value and classified
as current liabilities if payment is due in one year or less. |
| Provisions | Provisions
Provisions are recorded for the best estimate of expenditures
required to settle liabilities of uncertain timing or amount when
management determines that a legal or constructive obligation
exists as a result of past events, it is probable that an outflow
of resources will be required to settle the obligation, and such
amounts can be reasonably estimated. Provisions are measured at the
present value of the expected expenditures to be required to settle
the obligation.
The ultimate cost to settle such liabilities is uncertain, and cost
estimates can vary in response to many factors. The settlement of
these liabilities could materially differ from recorded amounts. In
addition, the expected timing of expenditure can also change. As a
result, there could be significant adjustments to provisions, which
could result in additional charges or recoveries affecting future
financial results.
Types of liabilities for which the Group establishes provisions
include:
Close down and restoration costs
Estimated close down and restoration costs are accounted for in the
year when the legal or constructive obligation arising from the
related disturbance occurs and it is probable that an outflow of
resources will be required to settle the obligation. These costs
are based on the net present value of estimated future costs.
Provisions for close down and restoration costs do not include any
additional obligations which are expected to arise from future
disturbance. The costs are estimated on the basis of a closure plan
including feasibility and engineering studies, are updated annually
during the life of the operation to reflect known developments
(e.g. revisions to cost estimates and to the estimated lives of
operations) and are subject to formal review at regular intervals
each year.
The initial closure provision together with subsequent movements in
the provisions for close down and restoration costs, including
those resulting from new disturbance, updated cost estimates,
changes to the estimated lives of operations and revisions to
discount rates are capitalized within Property, plant and
equipment. These costs are then depreciated over the remaining
useful lives of the related assets. The amortization or unwinding
of the discount applied in establishing the net present value of
the provisions is charged to the Consolidated Income Statement as a
financing cost.
Environmental remediation costs
Environmental remediation costs are accounted for based on the
estimated present value of the costs of the Group’s
environmental clean-up clean-up
Restructuring costs
Provisions for restructuring are recorded when Constellium’s
management is demonstrably committed to the restructuring plan and
where such liabilities can be reasonably estimated. The Group
recognizes liabilities that primarily include one-time
Legal, tax and other potential claims
Provisions for legal claims are made when it is probable that
liabilities will be incurred and when such liabilities can be
reasonably estimated. For asserted claims and assessments,
liabilities are recorded when an unfavorable outcome of a matter is
deemed to be probable and the loss is reasonably estimable.
Management determines the likelihood of an unfavorable outcome
based on many factors such as the nature of the matter, available
defenses and case strategy, progress of the matter, views and
opinions of legal counsel and other advisors, applicability and
success of appeals, process and outcomes of similar historical
matters, amongst others. Once an unfavorable outcome is considered
probable, management weights the probability of possible outcomes
and the most likely loss is recorded.
Legal matters are reviewed on a regular basis to determine if there
have been changes in management’s judgment regarding the
likelihood of an unfavorable outcome or the estimate of a potential
loss. Depending on their nature, these costs may be charged to the
line Cost of sales or Other gains / (losses)—net in the
Consolidated Income Statement. Included in other potential claims
are provisions for product warranties and guarantees to settle the
net present value portion of any settlement costs for potential
future legal actions, claims and other assertions that may be
brought by Constellium’s customers or the end-users
When any legal action, claim or assertion related to product
warranty or guarantee is settled, the net settlement amount
incurred is charged against the provision established in the
Consolidated Statement of Financial Position. The outstanding
provision is reviewed periodically for adequacy and reasonableness
by Constellium management.
Management establishes tax reserves and accrues interest thereon,
if deemed appropriate, in expectation that certain tax return
positions may be challenged and that the Group might not succeed in
defending such positions, despite management’s belief that
the positions taken were fully supportable. |
| Pension, other post-employment benefits and other long-term employee benefits | Pension, other post-employment plans and other long-term
employee benefits
For defined contribution plans, the contribution paid in respect of
service rendered over the service year is recognized in the
Consolidated Income Statement. This expense is included in Cost of
sales, Selling and administrative expenses or Research and
development expenses, depending on its nature.
For defined benefit plans, the retirement benefit obligation
recognized in the Consolidated Statements of Financial Position
represents the present value of the defined benefit obligation as
reduced by the fair value of plan assets. The effects of changes in
actuarial assumptions and experience adjustments are presented in
the Consolidated Statement of Comprehensive Income / (Loss). The
amount charged to the Consolidated Income Statement in respect of
these plans is included within the Income / (Loss) from operations
except for the net Interest costs which are included within Finance
costs—net.
The defined benefit obligations are assessed using the projected
unit credit method. The most significant assumption is the discount
rate.
Other post-employment benefit plans mainly relate to health and
life insurance benefits to retired employees and in some cases to
their beneficiaries and covered dependents. Eligibility for
coverage is dependent upon certain age and service criteria. These
benefit plans are unfunded and are accounted for as defined benefit
obligations, as described above.
Other long-term employee benefits mainly include jubilees and other
long-term disability benefits. For these plans, actuarial gains and
losses arising in the year are recognized immediately in the
Consolidated Income Statement. |
| Taxation | Taxation
The current Income tax (expense) / benefit is calculated on the
basis of the tax laws enacted or substantively enacted at the
Consolidated Statement of Financial Position date in the countries
where the Company and its subsidiaries operate and generate taxable
income.
The Group is subject to income taxes in the Netherlands, France,
United States and numerous other jurisdictions. Certain of
Constellium’s businesses may be included in consolidated tax
returns within the Company. In certain circumstances, these
businesses may be jointly and severally liable with the entity
filing the consolidated return, for additional taxes that may be
assessed.
Deferred income tax assets and liabilities are recognized for the
estimated future tax consequences attributable to temporary
differences between the Consolidated Financial Statement carrying
amounts of existing assets and liabilities and their respective tax
bases. This approach also requires the recognition of deferred
income tax assets for operating loss carryforwards and tax credit
carryforwards.
The effect on deferred tax assets and liabilities of a change in
tax rates and laws is recognized as income tax benefit/ (expense)
in the year when the rate change is substantively enacted. Deferred
income tax assets and liabilities are measured using tax rates that
are expected to apply in the year when the asset is realized or the
liability is settled, based on the tax rates and laws that have
been enacted or substantively enacted at the date of the
Consolidated Statement of Financial Position. Deferred income tax
assets are recognized only to the extent that it is probable that
future taxable profit will be available against which the temporary
differences can be utilized. |
| Presentation of financial statements | Presentation of financial statements
The Consolidated Financial Statements are presented in millions of
Euros, except Earnings per share in Euros. Certain
reclassifications may have been made to prior year amounts to
conform to the current year presentation.
The net interest cost component of pension and other benefits
expense which was previously presented as an expense in income from
operations has been reclassified in Finance costs—net for
€15 million, €17 million and
€21 million for years ended December 31, 2018, 2017
and 2016 respectively. The change in presentation is expected to
improve comparability with peers. |
| Judgments in applying accounting policies and key sources of estimation uncertainty | 2.7 Judgments in applying accounting policies and key sources of
estimation uncertainty
Many of the amounts included in the Consolidated Financial
Statements involve the use of judgment and/or estimation. These
judgments and estimates are based on management’s best
knowledge of the relevant facts and circumstances, giving
consideration to previous experience. However, actual results may
differ from the amounts included in the Consolidated Financial
Statements. Key sources of estimation uncertainty that have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year
include the items presented below.
Impairment tests for goodwill, intangible assets and property,
plant and equipment
The determination of fair value and value in use of cash-generating
units or groups of cash-generating units depends on a number of
assumptions, in particular market data, estimated future cash flows
and discount rates.
These assumptions are subject to risk and uncertainty. Any material
changes in these assumptions could result in a significant change
in a cash-generating units’ recoverable value or in a
goodwill impairment. Details of the key assumptions applied are set
out in NOTE 17—Intangible assets (including goodwill) and in
NOTE 16—Property, plant and equipment.
Pension, other post-employment benefits and other long-term
employee benefits
The present value of the defined benefit obligations depends on a
number of factors that are determined on an actuarial basis using a
number of assumptions and its determination requires the
application of judgement. Assumptions used and judgements made in
determining the defined benefit obligations and net pension costs
include discount rates, rates of future compensation increase as
well as the criteria considered to determine, in the context of a
plan amendment, when the plan amendment has occurred.
Any material changes in these assumptions could result in a
significant change in employee benefit expenses recognized in the
Consolidated Income Statement, actuarial gains and losses
recognized in Equity and prepaid and accrued benefits. Details of
the key assumptions made and judgments applied are set out in NOTE
24—Pensions and other post-employment benefit
obligations.
Taxes
Significant judgment is sometimes required in determining the
accrual for income taxes as there are many transactions and
calculations for which the ultimate tax determination is uncertain
during the ordinary course of business. The Group recognizes
liabilities based on estimates of whether additional taxes will be
due. Where the final tax outcome of these matters is different from
the amounts that were recorded, such differences will impact the
current and deferred income tax provisions, results of operations
and possibly cash flows in the year in which such determination is
made.
Management judgment is required to determine the extent to which
deferred tax assets can be recognized. In assessing the recognition
of deferred tax assets, management considers whether it is more
likely than not that the deferred tax assets will be utilized. The
deferred tax assets will be ultimately utilized to the extent that
sufficient taxable profits will be available in the years in which
the temporary differences become deductible. This assessment is
conducted through a detailed review of deferred tax assets by
jurisdiction and takes into account the scheduled reversals of
taxable and deductible temporary differences, past, current and
expected future performance deriving from the budget, the business
plan and tax planning strategies. Deferred tax assets are not
recognized in the jurisdictions where it is less likely than not
that sufficient taxable profits will be available against which the
deductible temporary differences can be utilized.
Provisions
Provisions have been recorded for: (a) close-down and
restoration costs; (b) environmental remediation and
monitoring costs; (c) restructuring programs; (d) legal
and other potential claims including provisions for income tax
risks, product warranty and guarantees, at amounts which represent
management’s best estimates of the expenditure required to
settle the obligation at the date of the Consolidated Statement of
Financial Position. Expectations are revised each year until the
actual liability is settled, with any difference accounted for in
the year in which the revision is made. Main assumptions used are
described in NOTE 25—Provisions. |
