CONSOLIDATED FINANCIAL STATEMENTS 2017 1 4.2 Notes to the consolidated financial statements CONSOLIDATED FINANCIAL STATEMENTS 2017 ................................................................................................................. 1 4.2.1 CONSOLIDATED INCOME STATEMENT ............................................................................................................... 3 4.2.2 CONSOLIDATED COMPREHENSIVE INCOME ...................................................................................................... 4 4.2.3 CONSOLIDATED FINANCIAL POSITION................................................................................................................ 5 4.2.4 CHANGES IN SHAREHOLDERS’ EQUITY .............................................................................................................. 7 4.2.5 CONSOLIDATED CASH FLOWS ............................................................................................................................ 8 4.2.6 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT .............................................................................. 10 4.2.6.1 Information on operating segments and regions ................................................................................................. 10 A – Information by operating segment .............................................................................................................................. 11 A1 – Consolidated income statement by operating segment ......................................................................................... 11 A2 – Consolidated financial position by operating segment ........................................................................................... 13 A3 – Consolidated cash flows by operating segment..................................................................................................... 15 A4 – Other information for the Automotive segments: net cash position or net financial indebtedness and operational free cash flow ....................................................................................................................................................................... 18 B – Information by region .................................................................................................................................................. 20 4.2.6.2 Accounting policies and scope of consolidation .................................................................................................. 21 Note 1 – Approval of the financial statements ............................................................................................................... 21 Note 2 – Accounting policies ......................................................................................................................................... 21 Note 3 – Changes in the scope of consolidation ............................................................................................................ 33 4.2.6.3 Consolidated income statement .......................................................................................................................... 37 Note 4 – Revenues ....................................................................................................................................................... 37 Note 5 – Operating margin: Details of income and expenses by nature ......................................................................... 37 Note 6 – Other operating income and expenses............................................................................................................ 38 Note 7 – Financial income (expenses) .......................................................................................................................... 39 Note 8 – Current and deferred taxes ............................................................................................................................. 39 Note 9 – Basic and diluted earnings per share .............................................................................................................. 42 4.2.6.4 Operating assets ad liabilities, shareholders’ equity ............................................................................................ 43 Note 10 – Intangible assets and property, plant and equipment .................................................................................... 43 Note 11 – Impairment tests on fixed assets (other than leased assets) ......................................................................... 45 Note 12 – Investment in Nissan..................................................................................................................................... 46 Note 13 – Investment in other associates and joint ventures ......................................................................................... 50 Note 14 – Inventories .................................................................................................................................................... 53 Note 15 – Sales financing receivables ........................................................................................................................... 53 Note 16 – Automotive receivables ................................................................................................................................. 54 Note 17 – Other current and non-current assets ............................................................................................................ 55 Note 18 – Shareholders’ equity ..................................................................................................................................... 56 Note 19 – Provisions for pensions and other long-term employee benefit obligations .................................................... 61 Note 20 – Change in provisions .................................................................................................................................... 65 Note 21 – Other current and non-current liabilities ........................................................................................................ 66 4.2.6.5 Financial assets and liabilities, fair value and management of financial risks ...................................................... 67 Note 22 – Financial assets – cash and cash equivalents ............................................................................................... 67 Note 23 – Financial liabilities and sales financing debts ................................................................................................ 68 Note 24 – Financial instruments by level, fair value and impact on net income .............................................................. 75 Note 25 – Derivatives and management of financial risks ............................................................................................. 79 4.2.6.6 Cash flows and other information ....................................................................................................................... 87 Note 26 – Cash flows .................................................................................................................................................... 87 Note 27 – Related parties ............................................................................................................................................. 88 Note 28 – Off-balance sheet commitments and contingent assets and liabilities ........................................................... 89 Note 29 – Fees paid to statutory auditors and their network .......................................................................................... 90 Note 30 – Subsequent events ....................................................................................................................................... 90 Note 31 – Consolidated companies ............................................................................................................................... 91 2 4.2.1 Consolidated income statement (€ million) Notes 2017 (1) 2016 Revenues 4 58,770 51,243 Cost of goods and services sold (46,477) (40,256) Research and development expenses 10-A (2,590) (2,370) Selling, general and administrative expenses (5,849) (5,335) Operating margin 5 3,854 3,282 Other operating income and expenses 6 (48) 1 Other operating income 6 214 727 Other operating expenses 6 (262) (726) Operating income (loss) 3,806 3,283 Cost of net financial indebtedness 7 (369) (284) Cost of gross financial indebtedness 7 (441) (385) Income on cash and financial assets 7 72 101 Other financial income and expenses 7 (135) (39) Financial income (expenses) 7 (504) (323) Share in net income (loss) of associates and joint ventures 2,799 1,638 Nissan 12 2,791 1,741 Other associates and joint ventures 13 8 (103) Pre-tax income 6,101 4,598 Current and deferred taxes 8 (891) (1,055) Net income 5,210 3,543 Net income – non-controlling interests’ share 96 124 Net income – parent-company shareholders’ share 5,114 3,419 Basic earnings per share (2) (in €) 18.87 12.57 Diluted earnings per share (2) (in €) 18.68 12.46 Number of shares outstanding (in thousands) For basic earnings per share 9 271,080 271,968 For diluted earnings per share 9 273,749 274,331 (1) The revenues of the joint venture Alliance Rostec Auto B.V. and the AVTOVAZ Group, which together make up the AVTOVAZ segment, are fully consolidated from January 1, 2017. The relevant figures are provided