Accounting policy

As explained in the basis of preparation, the Group adopted IFRS 15 on January 1, 2018 using the modified retrospective approach. Hereinafter are disclosed the accounting policies applied in 2018 (IFRS 15 Revenue from Contracts with Customers).  For accounting policies applied in 2017 (IAS 18 Revenue), reference is made to the 2017 Annual Report. Transition impacts have been discussed in the Basis of preparation.

IFRS 15 establishes a five-step model to account for revenue arising from contracts with customers:

  • identify the contract;
  • identify the performance obligations;
  • determine the transaction price;
  • allocate the transaction price to the performance obligations in the contract; and
  • recognize revenue when or as the Group satisfies a performance obligation.

Under IFRS 15, revenue is recognized at an amount that reflects the consideration to which the Group expects to be entitled in exchange for transferring goods or services to a customer.

Sale of goods: Contracts can be short-term (including those based only on a purchase order) or long-term, some have minimum off-take requirements. As the Group is in the business of selling chemicals, contracts with customers generally concern the sale of goods. As a result, revenue recognition generally occurs at a point in time when control of the chemicals is transferred to the customer, generally on delivery of the goods.

Distinct elements: a good or service that is promised to a customer is distinct if both of the following criteria are met: (a) the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e. the good or service is capable of being distinct); and (b) the Group’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e. the promise to transfer the good or service is distinct within the context of the contract).

The revenue of the Group consists mainly of sales of chemicals, which qualify as separate performance obligations. Value-added services – mainly customer assistance services – corresponding to Solvay’s know-how are rendered predominantly over the period that the corresponding goods are sold to the customer.

Variable consideration: some contracts with customers provide trade discounts or volume rebates. Trade discounts and volume rebates give rise to variable consideration under IFRS 15, and are required to be estimated at contract inception and subsequently at each reporting date. IFRS 15 requires the estimated variable consideration to be constrained to prevent overstatement of revenue.

Moment of recognition of revenue: revenue is recognized when (or as) the Group satisfies a performance obligation by transferring a promised good or service (i.e. an asset) to a customer. An asset is transferred when (or as) the customer obtains control of that asset. Substantially all revenue stems from performance obligations satisfied at a point in time, i.e. the sale of goods. Revenue recognition for those takes into account the following:

  • the Group has a present right to payment for the asset;
  • the customer has legal title to the asset;
  • the Group has transferred physical possession of the asset;
  • the customer has the significant risks and rewards of ownership of the asset (in this respect, Incoterms are considered); and
  • the customer has accepted the asset.

The Group sells its chemicals to its customers, (a) directly, (b) through distributors, and (c) with the assistance of agents. When the Group delivers a product to distributors for sale to end customers, the Group evaluates whether that distributor has obtained control of the product at that point in time. No revenue is recognized upon delivery of a product to a customer or distributor if the delivered product is held on consignment. Indicators of consignment inventory include:

  • the product is controlled by the Group until a specified event occurs, such as the sale of the product to a customer of the distributor or until a specified period expires;
  • the Group is able to require the return of the product or transfer the product to a third party (such as another distributor); and
  • the distributor does not have an unconditional obligation to pay for the product (although he might be required to pay a deposit).

Agents facilitate sales and do not purchase and resell the goods to the end customer.

Products sold to customers generally cannot be returned, other than for performance deficiencies. Customer acceptance clauses are in many cases a formality that would not affect the Group’s determination of when the customer has obtained control of the goods.

Revenue from services is recognized in the period in which those services were rendered.

Warranties: warranties provide a customer with assurance that the related product will function as the parties intended because it complies with agreed-upon specifications. Substantially all warranties do not provide the customer with a service in addition to the assurance that the product complies with agreed-upon specifications, and are hence accounted for in accordance with IAS 37 Provisions, Contingent Liabilities, and Contingent Assets.

An Operating Segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the entity’s chief operating decision maker, and for which discrete financial information is available. The Solvay Group’s chief operating decision maker is the Chief Executive Officer.

General

Solvay is organized into four Operating Segments:

  • Advanced Materials offers high-performance materials for multiple applications primarily in the automotive, aerospace, electronics, and health markets. In particular, it provides sustainable mobility solutions, reducing weight and improving CO2 and energy efficiency;
  • Advanced Formulations serves primarily the consumer goods, agro and food, and energy markets. It offers customized specialty formulations that impact surface chemistry and alter liquid behavior, to optimize efficiency and yield, while minimizing the environmental impact;
  • Performance Chemicals operates in mature and resilient markets and has leading positions in chemical intermediates. Success is based on economies of scale and state-of-the-art production technology. It serves mainly the consumer goods and food markets;
  • Corporate & Business Services includes corporate and other business services, such as the Research & Innovation Center, and energy services.

See the Business Review for more information on Operating Segments and GBUs figures.

External net sales by cluster

In € million

 

2018

 

2017

Advanced Materials

 

4,385

 

4,370

Specialty Polymers

 

2,009

 

2,025

Composite Materials

 

1,082

 

1,038

Silica

 

442

 

443

Special Chem

 

852

 

865

Advanced Formulations

 

3,057

 

2,966

Novecare

 

2,000

 

1,937

Technology Solutions

 

643

 

662

Aroma Performance

 

414

 

366

Performance Chemicals

 

2,808

 

2,766

Soda Ash & Derivatives

 

1,562

 

1,629

Peroxides

 

654

 

600

Coatis

 

509

 

410

Functional Polymers

 

82

 

126

Corporate & Business Services

 

7

 

23

CBS and NBD

 

7

 

23

Total

 

10,257

 

10,125

Sales by market

Sales by market are presented in the Business Review, see note B1.

Net sales by country and region

The sales disclosed below are allocated based on the customers’ location.

In € million

 

2018

 

%

 

2017

 

%

Belgium

 

153

 

1%

 

156

 

2%

Germany

 

727

 

7%

 

716

 

7%

Italy

 

444

 

4%

 

444

 

4%

France

 

402

 

4%

 

383

 

4%

Netherlands

 

105

 

1%

 

112

 

1%

United Kingdom

 

279

 

3%

 

303

 

3%

Spain

 

191

 

2%

 

210

 

2%

European Union – other

 

501

 

5%

 

478

 

5%

European Union

 

2,802

 

27%

 

2,803

 

28%

Europe – Other

 

103

 

1%

 

98

 

1%

United States

 

3,001

 

29%

 

2,921

 

29%

Canada

 

160

 

2%

 

159

 

2%

North America

 

3,161

 

31%

 

3,079

 

30%

Brazil

 

681

 

7%

 

709

 

7%

Mexico

 

193

 

2%

 

176

 

2%

Latin America – other

 

234

 

2%

 

200

 

2%

Latin America

 

1,108

 

11%

 

1,084

 

11%

Australia

 

100

 

1%

 

104

 

1%

China

 

942

 

9%

 

912

 

9%

Hong Kong

 

77

 

1%

 

108

 

1%

India

 

191

 

2%

 

170

 

2%

Indonesia

 

105

 

1%

 

104

 

1%

Japan

 

357

 

3%

 

365

 

4%

Russia

 

62

 

1%

 

79

 

1%

Saudi Arabia

 

110

 

1%

 

88

 

1%

South Korea

 

279

 

3%

 

264

 

3%

Thailand

 

177

 

2%

 

181

 

2%

Turkey

 

73

 

1%

 

65

 

1%

Other

 

610

 

6%

 

621

 

6%

Asia and rest of the world

 

3,083

 

30%

 

3,060

 

30%

Total

 

10,257

 

100%

 

10,125

 

100%

Information per segment

2018
In € million
Income statement items

 

Advanced Formulations

 

Advanced Materials

 

Performance Chemicals

 

Corpo­rate & Business Services

 

Group Total

(1)

Underlying EBITDA is a key performance indicator followed by management and includes other elements than those presented above (see Business Review section – 5. Reconciliation of underlying with IFRS figures).

Net sales (including the inter-segment sales)

 

3,060

 

4,386

 

2,831

 

7

 

10,283

Inter-segment sales

 

(3)

 

 

 

(23)

 

 

 

(26)

Net sales

 

3,057

 

4,385

 

2,808

 

7

 

10,257

Revenue from non-core activities

 

19

 

33

 

312

 

678

 

1,042

Gross margin

 

787

 

1,474

 

737

 

37

 

3,035

Depreciation and amortization

 

264

 

435

 

198

 

47

 

944

Earnings from associates and joint ventures

 

5

 

10

 

27

 

1

 

44

Underlying EBITDA(1)

 

521

 

1,197

 

729

 

(218)

 

2,230

EBIT

 

 

 

 

 

 

 

 

 

986

Net financial charges

 

 

 

 

 

 

 

 

 

(195)

Income taxes

 

 

 

 

 

 

 

 

 

(95)

Profit for the year from discontinued operations

 

 

 

 

 

 

 

 

 

201

Profit for the year

 

 

 

 

 

 

 

 

 

897

2018
In € million
Statement of financial position and other items

 

Advanced Formulations

 

Advanced Materials

 

Performance Chemicals

 

Corpo­rate & Business Services

 

Group Total

Capital expenditures (continuing operations)

 

148

 

355

 

149

 

58

 

711

Capital expenditures (discontinued operations)

 

 

 

 

 

122

 

 

 

122

Investments (continuing operations)

 

 

 

12

 

 

 

4

 

16

 

 

 

 

 

 

 

 

 

 

 

Working capital

 

 

 

 

 

 

 

 

 

 

Inventories

 

446

 

900

 

326

 

13

 

1,685

Trade receivables

 

396

 

535

 

482

 

21

 

1,434

Trade payables

 

345

 

437

 

381

 

275

 

1,439

Capital expenditures relate to property, plant, and equipment and to intangible assets.

Investments include acquisitions of subsidiaries and other investments (joint operations, joint ventures, and associates).

2017
In € million
Income statement items

 

Advanced Formulations

 

Advanced Materials

 

Performance Chemicals

 

Corpo­rate & Business Services

 

Group Total

(1)

Underlying EBITDA is a key performance indicator followed by management and includes other elements than those presented above (see Business Review section – 5. Reconciliation of underlying with IFRS figures).

Net sales (including the inter-segment sales)

 

2,972

 

4,371

 

2,797

 

23

 

10,163

Inter-segment sales

 

(6)

 

(2)

 

(31)

 

 

 

(38)

Net sales

 

2,966

 

4,370

 

2,766

 

23

 

10,125

Revenue from non-core activities

 

26

 

47

 

159

 

627

 

859

Gross margin

 

764

 

1,514

 

761

 

46

 

3,086

Depreciation and amortization

 

280

 

432

 

263

 

79

 

1,054

Earnings from associates and joint ventures

 

8

 

10

 

27

 

 

 

44

Underlying EBITDA(1)

 

524

 

1,202

 

749

 

(244)

 

2,230

EBIT

 

 

 

 

 

 

 

 

 

976

Net financial charges

 

 

 

 

 

 

 

 

 

(298)

Income taxes

 

 

 

 

 

 

 

 

 

197

Profit for the year from discontinued operations

 

 

 

 

 

 

 

 

 

241

Profit for the year

 

 

 

 

 

 

 

 

 

1,116

2017
In € million
Statement of financial position and other items

 

Advanced Formulations

 

Advanced Materials

 

Performance Chemicals

 

Corpo­rate & Business Services

 

Group Total

Capital expenditures (continuing operations)

 

130

 

366

 

152

 

68

 

716

Capital expenditures (discontinued operations)

 

 

 

 

 

105

 

 

 

105

Investments (continuing operations)

 

 

 

28

 

 

 

28

 

56

 

 

 

 

 

 

 

 

 

 

 

Working capital

 

 

 

 

 

 

 

 

 

 

Inventories

 

403

 

802

 

288

 

10

 

1,504

Trade receivables

 

410

 

546

 

430

 

76

 

1,462

Trade payables

 

327

 

411

 

324

 

268

 

1,330

Capital expenditures relate to property, plant, and equipment and to intangible assets.

Investments include acquisitions of subsidiaries and other investments (joint operations, joint ventures, and associates).

Non-current assets, and capital expenditures and investments, by country and region (continuing operations)

 

 

Non-current assets

 

Capital expenditures and investments

In € million

 

2018

 

%

 

2017

 

%

 

2018

 

%

 

2017

 

%

Belgium

 

304

 

2%

 

376

 

3%

 

(51)

 

7%

 

(24)

 

3%

Germany

 

402

 

3%

 

413

 

3%

 

(33)

 

5%

 

(41)

 

5%

Italy

 

581

 

4%

 

592

 

4%

 

(74)

 

10%

 

(87)

 

11%

France

 

2,906

 

21%

 

2,875

 

21%

 

(111)

 

15%

 

(124)

 

16%

United Kingdom

 

207

 

1%

 

211

 

2%

 

(28)

 

4%

 

(51)

 

7%

Spain

 

140

 

1%

 

138

 

1%

 

(15)

 

2%

 

(23)

 

3%

European Union – other

 

304

 

2%

 

318

 

2%

 

(20)

 

3%

 

(24)

 

3%

European Union

 

4,844

 

35%

 

4,923

 

35%

 

(332)

 

46%

 

(374)

 

49%

Europe – other

 

 

 

0%

 

3

 

0%

 

1

 

0%

 

 

 

0%

United States

 

7,239

 

52%

 

7,057

 

51%

 

(249)

 

34%

 

(265)

 

34%

Canada

 

176

 

1%

 

180

 

1%

 

(11)

 

2%

 

(8)

 

1%

North America

 

7,415

 

53%

 

7,237

 

52%

 

(261)

 

36%

 

(273)

 

35%

Brazil

 

256

 

2%

 

257

 

2%

 

(30)

 

4%

 

(27)

 

3%

Latin America – other

 

36

 

0%

 

27

 

0%

 

(8)

 

1%

 

(2)

 

0%

Latin America

 

292

 

2%

 

284

 

2%

 

(38)

 

5%

 

(29)

 

4%

Russia

 

168

 

1%

 

187

 

1%

 

 

 

0%

 

 

 

0%

Thailand

 

123

 

1%

 

124

 

1%

 

(6)

 

1%

 

(5)

 

1%

China

 

579

 

4%

 

604

 

4%

 

(41)

 

6%

 

(54)

 

7%

South Korea

 

123

 

1%

 

135

 

1%

 

(8)

 

1%

 

(12)

 

2%

India

 

234

 

2%

 

214

 

2%

 

(35)

 

5%

 

(18)

 

2%

Singapore

 

42

 

0%

 

44

 

0%

 

(1)

 

0%

 

(1)

 

0%

Japan

 

18

 

0%

 

17

 

0%

 

(2)

 

0%

 

(1)

 

0%

Egypt

 

 

 

0%

 

4

 

0%

 

 

 

0%

 

 

 

0%

Other

 

184

 

1%

 

196

 

1%

 

(3)

 

0%

 

(5)

 

1%

Asia and rest of the world

 

1,470

 

10%

 

1,525

 

11%

 

(96)

 

13%

 

(96)

 

12%

Total

 

14,022

 

100%

 

13,971

 

100%

 

(727)

 

100%

 

(772)

 

100%

Non-current assets are those other than deferred tax assets, loans, and other assets. Capital expenditures and investments include acquisitions of property, plant, and equipment, intangible assets, investments in subsidiaries and other investments (joint operations, joint ventures, and associates). Both exclude discontinued operations.