2024 universal registration document

5. 2024 Consolidated Financial Statements

Revenue recognition: estimate of items deducted from revenue

See Note 3 “Operating items - Sector-specific information - Accounting principles – Revenue“, to the consolidated financial statements

Risk identified Our response

Risk identified

Your Group's revenue is presented net of product returns and discounts, rebates and other benefits granted to distributors or consumers (such as commercial cooperation), as described in Note 3 to the consolidated financial statements.

These various deductions from revenue are recorded simultaneously with the recognition of sales in particular on the basis of contractual conditions and statistical data from past experience.

At the end of the financial year, revenue valuation thus includes estimates related to the amounts deducted, which we considered to be (i) complex, due to the diversity of contractual agreements and commercial conditions existing in your Group’s various markets, (ii) sensitive, the revenue being a key indicator in the valuation of the Group’s and its Management’s performance, and (iii) significant, given their impact in the financial statements.

We considered the valuation of product returns, discounts, rebates and other benefits granted to customers to be a key audit matter.

Our response

We assessed the appropriateness of the Group's accounting principles relating to the recognition of product returns, discounts, rebates and other benefits granted to customers, in accordance with IFRS.

We obtained an understanding of the internal control system put in place in the Group’s commercial entities, which allows to evaluate and record the items deducted from revenue, especially at closing, and we tested, by sampling, the main controls of this system.

We also carried out substantial tests in order to assess the reasonableness of the product returns and customer benefits estimates.

These tests specifically consisted in:

  • analyzing the valuation methods used, in particular, by critically examining the assumptions used, checking the permanence of the methods and analyzing the anteriority and unwinding of the previous financial year provisions;
  • reconciling the statistical data from the past experience and contractual conditions with the data contained in the information systems used to manage commercial conditions;
  • verifying the arithmetic accuracy of the calculation of the corresponding entries (including the residual commitment at closing), their recording in the accounts and their presentation in the consolidated financial statements.
Valuation of provisions for tax risks and uncertain tax positions

See Notes 6 “Income taxes“ and 12 “Provisions for risks and expenses – Contingent liabilities and significant outstanding litigation” to the consolidated financial statements

Risk identified Our response

Risk identified

Your Group is exposed to various business risks, including tax risks.

When the amount or maturity can be estimated with sufficient reliability, a tax liability is recognized for these risks. Otherwise, your Group discloses information on contingent liabilities in the notes to the consolidated financial statements.

Note 12.2.1 "Tax disputes" to the consolidated financial statements sets out, in particular, the state of tax disputes in Brazil and in India, for which the administration's claims amount to M€ 631 and M€ 234, respectively.

The uncertain tax positions are classified in the balance sheet on the non-current tax liabilities line for M€ 224 as at December 31, 2024.

We considered the identification and valuation of these items to be a key audit matter, given:

  • the high level of judgment required of Management to determine the risks which need to be provisioned, and to assess the amounts to be provisioned with sufficient reliability;
  • the potential significant impact of these provisions on your Group's income.

Our response

In order to identify and obtain an understanding of all uncertain tax positions, existing liabilities and related judgments, we had discussions with tax departments at different levels of the organization, in France and abroad.

We obtained an understanding of the internal control system put in place to identify and assess these risks. We reconciled the list of identified tax disputes with the information provided by the Group’s tax departments and the main tax advisors.

As for the main uncertain tax positions and tax risks for which a liability is made, we assessed the quality of Management's estimates by considering the data and assumptions used, as well as the calculations made.

We also conducted a retrospective analysis by comparing the amounts paid over the last few years with the amounts previously provisioned.

By including tax experts into our team when necessary, we:

  • examined procedural matters and/or tax or technical opinions issued by external advisors selected by Management, in order to assess the appropriateness of a liability;
  • carried out, on the basis of the information submitted to us, a critical review of the risk estimates, and verified that the assessments used by Management are within the acceptable ranges;
  • verified the continuation of the methods used for these assessments, when necessary.

With regard to contingent liabilities, by including tax experts when necessary, we examined the procedural items and/or the tax or technical opinions issued by external advisors chosen by Management in order to assess the appropriateness of a lack of provision.

We assessed the appropriateness of the information given in the notes to the consolidated financial statements.