Full Press Release Details
HALF-YEAR FINANCIAL REPORT
| 1 CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS | 2 | |||
| CONSOLIDATED BALANCE SHEETS ASSETS | 2 | |||
| CONSOLIDATED BALANCE SHEETS LIABILITIES AND EQUITY | 3 | |||
| CONSOLIDATED INCOME STATEMENTS | 4 | |||
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | 5 | |||
| CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | 6 | |||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | 8 | |||
| NOTES TO THE CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2017 | 10 | |||
| A/ Basis of preparation of the half-year financial statements and accounting policies | 10 | |||
| B/ Significant information for the first half of 2017 | 14 | |||
| C/ Events subsequent to June 30, 2017 | 37 |
The condensed half-year consolidated financial statements are unaudited but have been subject to a review by the statutory
auditors in accordance with professional standards applicable in France.
1 CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS ASSETS
| ( million) | Note | June 30, 2017 | December 31, 2016 | |||||||||
| Property, plant and equipment | B.2. | 9,633 | 10,019 | |||||||||
| Goodwill | B.3. | 40,964 | 40,287 | |||||||||
| Other intangible assets | B.3. | 13,849 | 10,879 | |||||||||
| Investments in associates and joint ventures | B.5. | 2,841 | 2,890 | |||||||||
| Other non-current assets | B.6. | 2,928 | 2,820 | |||||||||
| Deferred tax assets | 4,556 | 4,669 | ||||||||||
| Non-current assets | 74,771 | 71,564 | ||||||||||
| Inventories | 7,246 | 6,892 | ||||||||||
| Accounts receivable | B.7. | 6,857 | 7,311 | |||||||||
| Other current assets | 2,091 | 2,211 | ||||||||||
| Cash and cash equivalents | B.9. | 10,877 | 10,273 | |||||||||
| Current assets | 27,071 | 26,687 | ||||||||||
| Assets held for sale or exchange | B.21. | 28 | 6,421 | |||||||||
| TOTAL ASSETS | 101,870 | 104,672 |
The accompanying notes on pages 10 to 37 are an integral part of the condensed half-year consolidated financial statements.
2 | Sanofi 2017 Half-Year
CONSOLIDATED BALANCE SHEETS LIABILITIES AND EQUITY
| ( million) | Note | June 30, 2017 | December 31, 2016 | |||||||||
| Equity attributable to equity holders of Sanofi | 57,631 | 57,554 | ||||||||||
| Equity attributable to non-controlling interests | 161 | 170 | ||||||||||
| Total equity | B.8. | 57,792 | 57,724 | |||||||||
| Long-term debt | B.9. | 15,186 | 16,815 | |||||||||
| Non-current liabilities related to business combinations and to non-controlling interests | B.11. | 1,287 | 1,378 | |||||||||
| Provisions and other non-current liabilities | B.12. | 8,412 | 8,834 | |||||||||
| Deferred tax liabilities | 2,128 | 2,292 | ||||||||||
| Non-current liabilities | 27,013 | 29,319 | ||||||||||
| Accounts payable | 4,303 | 4,297 | ||||||||||
| Other current liabilities | 9,277 | 10,175 | ||||||||||
| Current liabilities related to business combinations and to non-controlling interests | B.11. | 234 | 198 | |||||||||
| Short-term debt and current portion of long-term debt | B.9. | 3,241 | 1,764 | |||||||||
| Current liabilities | 17,055 | 16,434 | ||||||||||
| Liabilities related to assets held for sale or exchange | B.21. | 10 | 1,195 | |||||||||
| TOTAL LIABILITIES AND EQUITY | 101,870 | 104,672 |
The accompanying notes on pages 10 to 37 are an integral part of the condensed half-year consolidated financial statements.
Half-Year Financial Report Sanofi | 3
CONSOLIDATED INCOME STATEMENTS
| ( million) | Note | June 30, 2017 (6 months) (a) | June 30, 2016 (6 months) (a) | December 31, 2016 (12 months) (a) | ||||||||||||
| Net sales | B.20.4. | 17,311 | 15,926 | 33,821 | ||||||||||||
| Other revenues | 519 | 310 | 887 | |||||||||||||
| Cost of sales | (5,670 | ) | (4,970 | ) | (10,702 | ) | ||||||||||
| Gross profit | 12,160 | 11,266 | 24,006 | |||||||||||||
| Research and development expenses | (2,667 | ) | (2,514 | ) | (5,172 | ) | ||||||||||
| Selling and general expenses | (5,046 | ) | (4,609 | ) | (9,486 | ) | ||||||||||
| Other operating income | B.15. | 173 | 265 | 355 | ||||||||||||
| Other operating expenses | B.15. | (71 | ) | (195 | ) | (482 | ) | |||||||||
| Amortization of intangible assets | B.3. | (990 | ) | (877 | ) | (1,692 | ) | |||||||||
| Impairment of intangible assets | B.4. | (12 | ) | (52 | ) | (192 | ) | |||||||||
| Fair value remeasurement of contingent consideration | B.6.-B.11. | (100 | ) | (67 | ) | (135 | ) | |||||||||
| Restructuring costs and similar items | B.16. | (364 | ) | (627 | ) | (879 | ) | |||||||||
| Other gains and losses, and litigation | B.17. | (7 | ) | 211 | ||||||||||||
| Operating income | 3,076 | 2,590 | 6,534 | |||||||||||||
| Financial expenses | B.18. | (218 | ) | (241 | ) | (924 | ) | |||||||||
| Financial income | B.18. | 95 | 50 | 68 | ||||||||||||
| Income before tax and associates and joint ventures | 2,953 | 2,399 | 5,678 | |||||||||||||
| Income tax expense | B.19. | (610 | ) | (497 | ) | (1,326 | ) | |||||||||
| Share of profit/(loss) of associates and joint ventures | 38 | 98 | 134 | |||||||||||||
| Net income excluding the exchanged/held-for-exchange Animal Health business | 2,381 | 2,000 | 4,486 | |||||||||||||
| Net income of the exchanged/held-for-exchange Animal Health business | B.21. | 4,421 | 286 | 314 | ||||||||||||
| Net income | 6,802 | 2,286 | 4,800 | |||||||||||||
| Net income attributable to non-controlling interests | 64 | 41 | 91 | |||||||||||||
| Net income attributable to equity holders of Sanofi | 6,738 | 2,245 | 4,709 | |||||||||||||
| Average number of shares outstanding (million) | B.8.7. | 1,260.3 | 1,287.6 | 1,286.6 | ||||||||||||
| Average number of shares outstanding after dilution (million) | B.8.7. | 1,270.6 | 1,296.6 | 1,296.0 | ||||||||||||
| Basic earnings per share (in euros) | 5.35 | 1.74 | 3.66 | |||||||||||||
| Basic earnings per share excluding the exchanged/held-for-exchange Animal Health business (in euros) | 1.84 | 1.52 | 3.42 | |||||||||||||
| Diluted earnings per share (in euros) | 5.30 | 1.73 | 3.63 | |||||||||||||
| Diluted earnings per share excluding the exchanged/held-for-exchange Animal Health business (in euros) | 1.82 | 1.51 | 3.39 |
The accompanying notes on pages 10 to 37 are an integral part of the condensed half-year consolidated financial statements.
4 | Sanofi 2017 Half-Year
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
| ( million) | Note | June 30, 2017 (6 months) | June 30, 2016 (6 months) | December 31, 2016 (12 months) | ||||||||||||
| Net income | 6,802 | 2,286 | 4,800 | |||||||||||||
| Attributable to equity holders of Sanofi | 6,738 | 2,245 | 4,709 | |||||||||||||
| Attributable to non-controlling interests | 64 | 41 | 91 | |||||||||||||
| Other comprehensive income: | ||||||||||||||||
| Actuarial gains/(losses) | B.8.8. | 282 | (924 | ) | (106 | ) | ||||||||||
| Tax effects | B.8.8. | (60 | ) | 253 | (22 | ) | ||||||||||
| Sub-total: items not subsequently reclassifiable to profit or loss (a) | 222 | (671 | ) | (128 | ) | |||||||||||
| Available-for-sale financial assets | 325 | (422 | ) | (105 | ) | |||||||||||
| Cash flow hedges | (28 | ) | 31 | |||||||||||||
| Change in currency translation differences | B.8.8. | (2,011 | ) | (37 | ) | 1,090 | ||||||||||
| Tax effects | B.8.8. | (51 | ) | 83 | 40 | |||||||||||
| Sub-total: items subsequently reclassifiable to profit or loss (b) | (1,765 | ) | (376 | ) | 1,056 | |||||||||||
| Other comprehensive income/(loss) for the period, net of taxes (a+b) | (1,543 | ) | (1,047 | ) | 928 | |||||||||||
| Comprehensive income | 5,259 | 1,239 | 5,728 | |||||||||||||
| Attributable to equity holders of Sanofi | 5,203 | 1,203 | 5,634 | |||||||||||||
| Attributable to non-controlling interests | 56 | 36 | 94 |
The accompanying notes on pages 10 to 37 are an integral part of the condensed half-year consolidated financial statements.
Half-Year Financial Report Sanofi | 5
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
| ( million) | Share capital | Additional paid-in capital and retained earnings | Treasury shares | Stock options and other share- based payment | Other comprehensive income (a) | Attributable to equity holders of Sanofi | Attributable to non- controlling interests | Total equity | ||||||||||||||||||||||||
| Balance at January 1, 2016 | 2,611 | 52,010 | (298 | ) | 2,814 | 912 | 58,049 | 161 | 58,210 | |||||||||||||||||||||||
| Other comprehensive income for the period | (671 | ) | (371 | ) | (1,042 | ) | (5 | ) | (1,047 | ) | ||||||||||||||||||||||
| Net income for the period | 2,245 | 2,245 | 41 | 2,286 | ||||||||||||||||||||||||||||
| Comprehensive income for the period | 1,574 | (371 | ) | 1,203 | 36 | 1,239 | ||||||||||||||||||||||||||
| Dividend paid out of 2015 earnings ( 2.93 per share) | (3,759 | ) | (3,759 | ) | (3,759 | ) | ||||||||||||||||||||||||||
| Payment of dividends to non-controlling interests | (54 | ) | (54 | ) | ||||||||||||||||||||||||||||
| Share repurchase program (b) | (1,402 | ) | (1,402 | ) | (1,402 | ) | ||||||||||||||||||||||||||
| Reduction in share capital (b) | (45 | ) | (1,655 | ) | 1,700 | |||||||||||||||||||||||||||
| Share-based payment plans: | ||||||||||||||||||||||||||||||||
| Exercise of stock options | 1 | 16 | 17 | 17 | ||||||||||||||||||||||||||||
| Issuance of restricted shares | 7 | (7 | ) | |||||||||||||||||||||||||||||
| Proceeds from sale of treasury shares on exercise of stock options | ||||||||||||||||||||||||||||||||
| Value of services obtained from employees | 117 | 117 | 117 | |||||||||||||||||||||||||||||
| Tax effects of the exercise of stock options | (14 | ) | (14 | ) | (14 | ) | ||||||||||||||||||||||||||
| Change in non-controlling interests without loss of control | (21 | ) | (21 | ) | 14 | (7 | ) | |||||||||||||||||||||||||
| Balance at June 30, 2016 | 2,574 | 48,158 | 2,917 | 541 | 54,190 | 157 | 54,347 | |||||||||||||||||||||||||
| Other comprehensive income for the period | 544 | 1,423 | 1,967 | 8 | 1,975 | |||||||||||||||||||||||||||
| Net income for the period | 2,464 | 2,464 | 50 | 2,514 | ||||||||||||||||||||||||||||
| Comprehensive income for the period | 3,008 | 1,423 | 4,431 | 58 | 4,489 | |||||||||||||||||||||||||||
| Payment of dividends to non-controlling interests | (56 | ) | (56 | ) | ||||||||||||||||||||||||||||
| Share repurchase program (b) | (1,503 | ) | (1,503 | ) | (1,503 | ) | ||||||||||||||||||||||||||
| Share-based payment plans: | ||||||||||||||||||||||||||||||||
| Exercise of stock options | 6 | 196 | 202 | 202 | ||||||||||||||||||||||||||||
| Employee share ownership plan | 4 | 96 | 100 | 100 | ||||||||||||||||||||||||||||
| Value of services obtained from employees | 110 | 110 | 110 | |||||||||||||||||||||||||||||
| Tax effects of the exercise of stock options | 5 | 5 | 5 | |||||||||||||||||||||||||||||
| Change in non-controlling interests without loss of control | 19 | 19 | 13 | 32 | ||||||||||||||||||||||||||||
| Change in non-controlling interests arising from divestment | (2 | ) | (2 | ) | ||||||||||||||||||||||||||||
| Balance at December 31, 2016 | 2,584 | 51,477 | (1,503 | ) | 3,032 | 1,964 | 57,554 | 170 | 57,724 |
6 | Sanofi 2017 Half-Year
| ( million) | Share capital | Additional paid-in capital and retained earnings | Treasury shares | Stock options and other share- based payment | Other comprehensive income (a) | Attributable to equity holders of Sanofi | Attributable to non- controlling interests | Total equity | ||||||||||||||||||||||||
| Balance at December 31, 2016 | 2,584 | 51,477 | (1,503 | ) | 3,032 | 1,964 | 57,554 | 170 | 57,724 | |||||||||||||||||||||||
| Other comprehensive income for the period | 222 | (1,757 | ) | (1,535 | ) | (8 | ) | (1,543 | ) | |||||||||||||||||||||||
| Net income for the period | 6,738 | 6,738 | 64 | 6,802 | ||||||||||||||||||||||||||||
| Comprehensive income for the period | 6,960 | (1,757 | ) | 5,203 | 56 | 5,259 | ||||||||||||||||||||||||||
| Dividend paid out of 2016 earnings ( 2.96 per share) | (3,710 | ) | (3,710 | ) | (3,710 | ) | ||||||||||||||||||||||||||
| Payment of dividends to non-controlling interests | (55 | ) | (55 | ) | ||||||||||||||||||||||||||||
| Share repurchase program (b) | (1,697 | ) | (1,697 | ) | (1,697 | ) | ||||||||||||||||||||||||||
| Reduction in share capital (b) | (73 | ) | (2,709 | ) | 2,782 | |||||||||||||||||||||||||||
| Share-based payment plans: | ||||||||||||||||||||||||||||||||
| Exercise of stock options | 3 | 96 | 99 | 99 | ||||||||||||||||||||||||||||
| Issuance of restricted shares | 7 | (7 | ) | |||||||||||||||||||||||||||||
| Value of services obtained from employees | 126 | 126 | 126 | |||||||||||||||||||||||||||||
| Tax effects of the exercise of stock options | 13 | 13 | 13 | |||||||||||||||||||||||||||||
| Other movements related to issuance of restricted shares (c) | 16 | 16 | 16 | |||||||||||||||||||||||||||||
| Change in non-controlling interests without loss of control | 27 | 27 | (5 | ) | 22 | |||||||||||||||||||||||||||
| Change in non-controlling interests generated by divestment | (5 | ) | (5 | ) | ||||||||||||||||||||||||||||
| Balance at June 30, 2017 | 2,521 | 52,150 | (418 | ) | 3,171 | 207 | 57,631 | 161 | 57,792 |
The accompanying notes on pages 10 to 37 are an integral part of the condensed half-year consolidated financial statements.
Half-Year Financial Report Sanofi | 7
CONSOLIDATED STATEMENTS OF CASH FLOWS
| ( million) | Note | June 30, 2017 (6 months) (a) | June 30, 2016 (6 months) (a) | December 31, 2016 (12 months) (a) | ||||||||||||
| Net income attributable to equity holders of Sanofi | 6,738 | 2,245 | 4,709 | |||||||||||||
| Net (income)/loss of the exchanged/held-for-exchange Animal Health business | (4,421 | ) | (286 | ) | (314 | ) | ||||||||||
| Non-controlling interests, excluding BMS (b) | 21 | (3 | ) | 5 | ||||||||||||
| Share of undistributed earnings of associates and joint ventures | (9 | ) | (57 | ) | (83 | ) | ||||||||||
| Depreciation, amortization and impairment of property, plant and equipment and intangible assets | 1,762 | 1,572 | 3,301 | |||||||||||||
| Gains and losses on disposals of non-current assets, net of tax (c) | (79 | ) | (27 | ) | (244 | ) | ||||||||||
| Net change in deferred taxes | (269 | ) | (477 | ) | (542 | ) | ||||||||||
| Net change in provisions (d) | (204 | ) | (107 | ) | 20 | |||||||||||
| Cost of employee benefits (stock options and other share-based payments) | 126 | 111 | 241 | |||||||||||||
| Impact of the workdown of acquired inventories remeasured at fair value | 176 | |||||||||||||||
| Unrealized (gains)/losses recognized in income | (9 | ) | (122 | ) | (83 | ) | ||||||||||
| Operating cash flow before changes in working capital and excluding the exchanged/held-for-exchange Animal Health business | 3,832 | 2,849 | 7,010 | |||||||||||||
| (Increase)/decrease in inventories | (502 | ) | (514 | ) | (323 | ) | ||||||||||
| (Increase)/decrease in accounts receivable | 150 | 103 | 168 | |||||||||||||
| Increase/(decrease) in accounts payable | 110 | 74 | 447 | |||||||||||||
| Net change in other current assets, current financial assets and other current liabilities (e) | (1,034 | ) | 27 | 536 | ||||||||||||
| Net cash provided by/(used in) operating activities excluding the exchanged/held-for-exchange Animal Health business (f) | 2,556 | 2,539 | 7,838 | |||||||||||||
| Net cash provided by/(used in) operating activities of the exchanged/held-for-exchange Animal Health business | 68 | 346 | ||||||||||||||
| Acquisitions of property, plant and equipment and intangible assets | B.2. B.3. | (998 | ) | (1,200 | ) | (2,083 | ) | |||||||||
| Acquisitions of investments in consolidated undertakings, net of cash acquired (g)/(i) | B.1. | (381 | ) | (345 | ) | (426 | ) | |||||||||
| Acquisitions of available-for-sale financial assets | (105 | ) | (123 | ) | (208 | ) | ||||||||||
| Proceeds from disposals of property, plant and equipment, intangible assets and other non-current assets, net of tax (h) | 440 | 264 | 209 | |||||||||||||
| Net change in loans and other financial assets | (18 | ) | (10 | ) | (3 | ) | ||||||||||
| Net cash provided by/(used in) investing activities excluding the exchanged/held-for-exchange Animal Health business | (1,062 | ) | (1,414 | ) | (2,511 | ) | ||||||||||
| Net cash provided by/(used in) investing activities of the exchanged/held-for-exchange Animal Health business | (56 | ) | (126 | ) | ||||||||||||
| Net cash inflow from the exchange of the Animal Health business for BI s Consumer Healthcare business (j) | B.1. B.21. | 4,349 | ||||||||||||||
| Issuance of Sanofi shares | B.8.1. | 99 | 17 | 305 | ||||||||||||
| Dividends paid: | ||||||||||||||||
| to shareholders of Sanofi | (3,710 | ) | (3,759 | ) | (3,759 | ) | ||||||||||
| to non-controlling interests, excluding BMS (b) | (11 | ) | (9 | ) | (21 | ) | ||||||||||
| Transactions with non-controlling interests, other than dividends | (37 | ) | (11 | ) | ||||||||||||
| Additional long-term debt contracted | B.9.1. | 1 | 1,787 | 4,773 | ||||||||||||
| Repayments of long-term debt | B.9.1. | (7 | ) | (2,582 | ) | (2,576 | ) | |||||||||
| Net change in short-term debt | 173 | 1,856 | 96 | |||||||||||||
| Acquisitions of treasury shares | B.8.2. | (1,700 | ) | (1,404 | ) | (2,908 | ) | |||||||||
| Disposals of treasury shares, net of tax | ||||||||||||||||
| Net cash provided by/(used in) financing activities excluding the exchanged/held-for-exchange Animal Health business | (5,192 | ) | (4,094 | ) | (4,101 | ) |
8 | Sanofi 2017 Half-Year
| ( million) | Note | June 30, 2017 (6 months) (a) | June 30, 2016 (6 months) (a) | December 31, 2016 (12 months) (a) | ||||||||||||
| Net cash provided by/(used in) financing activities of the exchanged/held-for-exchange Animal Health business | (9 | ) | 111 | |||||||||||||
| Impact of exchange rates on cash and cash equivalents | (47 | ) | (103 | ) | (101 | ) | ||||||||||
| Net change in cash and cash equivalents | 604 | (3,072 | ) | 1,125 | ||||||||||||
| Cash and cash equivalents, beginning of period | 10,273 | 9,148 | 9,148 | |||||||||||||
| Cash and cash equivalents, end of period | B.9. | 10,877 | 6,076 | 10,273 |
| Income tax paid (excluding the Animal Health business, see note (j) ) | (1,324 | ) | (1,180 | ) | (2,096 | ) | ||||||
| Interest paid (excluding cash flows on derivative instruments used to hedge debt) | (114 | ) | (180 | ) | (401 | ) | ||||||
| Interest received (excluding cash flows on derivative instruments used to hedge debt) | 30 | 28 | 56 | |||||||||
| Dividends received from non-consolidated entities | 14 | 3 | 9 |
The accompanying notes on pages 10 to 37 are an integral part of the condensed half-year consolidated financial statements.
Half-Year Financial Report Sanofi | 9
NOTES TO THE CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2017
Sanofi, together with its subsidiaries
(collectively Sanofi or The Company ), is a global healthcare leader engaged in the research, development and marketing of therapeutic solutions focused on patient needs.
Sanofi is listed in Paris (Euronext: SAN) and New York (NYSE: SNY).
The condensed consolidated financial statements for the six months ended June 30, 2017 were reviewed by the Sanofi Board of Directors at the Board
meeting on July 28, 2017.
A/ Basis of preparation of the half-year financial statements and accounting policies
A.1. INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)
The half-year consolidated financial statements have been prepared and presented in condensed format in accordance with IAS 34 (Interim Financial Reporting).
The accompanying notes therefore relate to significant events and transactions of the period, and should be read in conjunction with the consolidated financial statements for the year ended December 31, 2016.
The accounting policies used in the preparation of the consolidated financial statements as of June 30, 2017 comply with international financial
reporting standards (IFRS) as endorsed by the European Union and as issued by the International Accounting Standards Board (IASB). The accounting policies applied as of June 30, 2017 are identical to those described in the notes to the
published consolidated financial statements as of December 31, 2016.
IFRS as endorsed by the European Union as of June 30, 2017 are
available via the following web link:
A.2. USE OF ESTIMATES
The preparation of financial
statements requires management to make reasonable estimates and assumptions based on information available during the review and finalization of the financial statements. Those estimates and assumptions may affect the reported amounts of assets,
liabilities, revenues and expenses in the financial statements, and disclosures of contingent assets and contingent liabilities as at the date of the review of the financial statements. Examples of estimates and assumptions include:
10 | Sanofi 2017 Half-Year
Actual results could differ from these estimates.
Management is also required to exercise judgment in assessing whether the criteria specified in IFRS 5 (Non-Current Assets Held for Sale and Discontinued
Operations) are met, and hence whether a non-current asset or asset group should be classified as held for sale or exchange and whether a discontinued operation should be reported separately. Such assessments are reviewed at each
reporting date based on the facts and circumstances.
For half-year financial reporting purposes, and as allowed under IAS 34, Sanofi has determined
income tax expense on the basis of an estimate of the effective tax rate for the full financial year. This rate is applied to business operating income plus financial income and minus financial expenses, and before (i) the share of profit/loss
of associates and joint ventures and (ii) net income attributable to non-controlling interests. The estimated full-year effective tax rate is based on the tax rates that will be applicable to projected pre-tax profits or losses arising in the
various tax jurisdictions in which Sanofi operates.
A.3. SEASONAL TRENDS
Sanofi s activities are not subject to significant seasonal fluctuations.
Half-Year Financial Report Sanofi | 11
A.4. FAIR VALUE OF FINANCIAL INSTRUMENTS
Under IFRS 13 (Fair Value Measurement) and IFRS 7 (Financial Instruments: Disclosures), fair value measurements must be classified using a hierarchy based on
the inputs used to measure the fair value of the instrument. This hierarchy has three levels:
table below sets forth the principles used to measure the fair value of the principal financial assets and liabilities recognized by Sanofi in its balance sheet:
| Method used to determine fair value | ||||||||||||||||
| Market data | ||||||||||||||||
| Note | Type of financial instrument | Measurement model | Level in fair value hierarchy | Valuation technique | Valuation model | Exchange rate | Interest rate | Volatility | ||||||||
| B.6. | Available-for-sale financial assets (quoted equity securities) | Fair value | 1 | Market value | Quoted market price | N/A | ||||||||||
| B.6. | Available-for-sale financial assets (quoted debt securities) | Fair value | 2 | Income approach | Quoted market price | N/A | ||||||||||
| B.6. | Available-for-sale financial assets (contingent consideration receivable) | Fair value | 3 | Income approach | Under IAS 39, contingent consideration receivable on a divestment is a financial asset. The fair value of such assets is determined by adjusting the contingent consideration at the end of the reporting period using the method described in Note D.7. to the consolidated financial statements for the year ended December 31, 2016. | |||||||||||
| B.6. | Long-term loans and advances and other non-current receivables | Amortized cost | N/A | N/A | The amortized cost of long-term loans and advances and other non-current receivables at the end of the reporting period is not materially different from their fair value. | |||||||||||
| B.6. | Financial assets recognized under the fair value option (a) | Fair value | 1 | Market value | Net asset value | N/A | ||||||||||
| B.10. | Forward currency contracts | Fair value | 2 | Present value of future cash flows | Mid Market Spot | < 1 year: Mid Money Market > 1 year: Mid Zero Coupon | N/A | |||||||||
| B.10. | Interest rate swaps | Fair value | 2 | Income approach | Present value of future cash flows | Mid Market Spot | < 1 year: Mid Money Market and LIFFE interest rate futures > 1 year: Mid Zero Coupon | N/A | ||||||||
| B.10. | Cross-currency swaps | Fair value | 2 | Present value of future cash flows | Mid Market Spot | < 1 year: Mid Money Market and LIFFE interest rate futures > 1 year: Mid Zero Coupon | N/A | |||||||||
| B.9. | Investments in mutual funds | Fair value | 1 | Market value | Net asset value | N/A | ||||||||||
| B.9. | Negotiable debt instruments, commercial paper, instant access deposits and term deposits | Amortized cost | N/A | N/A | Because these instruments have a maturity of less than three months, amortized cost is regarded as an acceptable approximation of fair value as disclosed in the notes to the consolidated financial statements. | |||||||||||
| B.9. | Debt | Amortized cost (b) | N/A | N/A | In the case of debt with a maturity of less than three months, amortized cost is regarded as an acceptable approximation of fair value as reported in the notes to the consolidated financial statements. For debt with a maturity of more than three months, fair value as reported in the notes to the consolidated financial statements is determined either by reference to quoted market prices at the end of the reporting period (quoted instruments) or by discounting the future cash flows based on observable market data at the end of the reporting period (unquoted instruments). | |||||||||||
| B.11. | Liabilities related to business combinations and to non-controlling interests (CVRs) | Fair value | 1 | Market value | Quoted market price | N/A | ||||||||||
| B.11. | Liabilities related to business combinations and to non-controlling interests (other than CVRs) | Fair value (c) | 3 | Income approach | Under IAS 32, contingent consideration payable in a business combination is a financial liability. The fair value of such liabilities is determined by adjusting the contingent consideration at the end of the reporting period using the method described in Note B.11. |
12 | Sanofi 2017 Half-Year
A.5. CONSOLIDATION AND FOREIGN CURRENCY TRANSLATION OF THE FINANCIAL STATEMENTS OF VENEZUELAN SUBSIDIARIES
In 2017, Sanofi continues to account for subsidiaries based in Venezuela using the full consolidation method, on the basis that the criteria for
control as specified in IFRS 10 (Consolidated Financial Statements) are still met.
Since the reforms of February 2016, the Venezuelan foreign exchange
system has consisted of two categories:
Given these changes to the foreign exchange system, recent economic and political developments and the
scarcity of US dollar cash in Venezuela, Sanofi recorded a foreign exchange loss of 102 million in the first half of 2016.
PRONOUNCEMENTS ISSUED BY THE IASB AND APPLICABLE FROM 2018 OR LATER
During the first half of 2017, Sanofi continued to assess the impact of the
first-time application in 2018 of IFRS 9 (Financial Instruments) and IFRS 15 (Revenue from Contracts with Customers). That assessment confirmed that the new standards are expected to have only a minor impact.
An analysis of the new disclosures that may be required to comply with the new standards is ongoing. As regards IFRS 9, Sanofi has yet to decide whether or
not to publish restated comparatives. If the comparatives were to be restated, some impairment losses taken against equity investments might be reclassified from prior period profit or loss to Other comprehensive income.
During the first half of 2017 the IASB issued IFRS 17 (Insurance Contracts), which applies to entities that issue insurance and reinsurance contracts and
hence does not apply to Sanofi.
In June 2017, the IASB issued IFRIC 23 (Uncertainty over Income Tax Treatments), which clarifies how to apply the
recognition and measurement requirements of IAS 12 (Income Taxes) when there is uncertainty over an income tax treatment. IFRIC 23 is mandatorily applicable to annual accounting periods beginning on or after January 1, 2019, subject to
endorsement by the European Union. Sanofi has not early adopted IFRIC 23.
Half-Year Financial Report Sanofi | 13
B/ Significant information for the first half of 2017
B.1. IMPACT OF CHANGES IN THE SCOPE OF CONSOLIDATION
Finalization of the exchange of Sanofi s Animal Health business for Boehringer Ingelheim s Consumer Healthcare business
On January 1, 2017, Sanofi finalized the exchange of its Animal Health business (Merial) for Boehringer Ingelheim s Consumer Healthcare business.
After taking account of preliminary enterprise value adjustments, the exchange values of the two businesses as effectively transferred during the first
half of 2017 were determined at 10,320 million for Sanofi s Animal Health business and 6,271 million for Boehringer Ingelheim s Consumer Healthcare business. Finalization of the divestment of Merial de Mexico SA de CV
is expected in the second half of 2017.
Divestment of the Animal Health business
Sanofi has recognized a pre-tax gain of 6,137 million within the line item Net income of the exchanged/ held-for-exchange Animal Health
business, and an after-tax gain of 4,421 million. This amount may be subject to change to reflect any impact from the price adjustments specified in the exchange agreement.