Accounting policy

Share capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issuance of new share capital are directly recognized in equity as a deduction, net of tax, from the equity issuance proceeds.

Reserves

The reserves include:

  • treasury shares;
  • perpetual hybrid bonds that qualify as equity in the absence of any unavoidable contractual obligation to repay the principal and interest of the perpetual hybrid bonds (no maturity, interest is payable annually but can be deferred indefinitely at the issuer’s discretion);
  • retained earnings;
  • currency translation differences from the consolidation process relating to the translation of the financial statements of foreign operations prepared in a non-euro functional currency to the euro presentation currency;
  • the impacts of the fair value remeasurement of equity instruments measured at fair value through other comprehensive income;
  • the impacts of the fair value remeasurement of financial instruments documented as hedging instruments in cash flow hedges;
  • actuarial gains and losses related to defined benefit plans.

Non-controlling interests

Those represent the share of non-controlling interests in the net assets and comprehensive income of subsidiaries of the Group, and corresponds to the interests in subsidiaries that are not held by the Company or its subsidiaries.

Perpetual hybrid bonds

To strengthen its capital structure, Solvay issued undated deeply subordinated perpetual bonds (“perpetual hybrid bonds”) of respectively € 1.2 billion (€ 1,194 million net of issuance costs) in 2013 following the acquisition of Chemlogics, € 1.0 billion (€ 994 million net of issuance costs) in 2015 for the financing of the acquisition of Cytec, and € 300 million (€ 298 million net of issuance costs) in November 2018.

All perpetual hybrid bonds are classified as equity in the absence of any unavoidable contractual obligation to repay the principal and interest of the perpetual hybrid bonds, specifically:

  • no maturity, yet the issuer has a call option at every reset date to redeem the instrument;
  • at the option of the issuer, interest payments can be deferred indefinitely.

The coupons related to the perpetual hybrid bonds are recognized as equity transactions and are deducted from equity upon declaration (see consolidated statement of changes in equity):

  • amounting to € 57 million in 2018 (€ 57 million in 2017) for the 2013 € 1.2 billion issuance (€ 700 million NC5.5 at 4.199% and € 500 million NC10 at 5.425%);
  • amounting to € 55 million in 2018 (€ 55 million in 2017) for the 2015 € 1.0 billion issuance (€ 500 million NC5.5 at 5.118% and € 500 million NC8.5 at 5.869%).

Should Solvay have elected not to pay any interests to the perpetual hybrid bond holders, then any payment of dividends to the ordinary shareholders or repayment of ordinary shares would trigger a contractual obligation to pay previously unpaid interests to the perpetual hybrid bond holders.

Tax impacts relating to the perpetual hybrid bonds are recognized directly in equity.

Number of shares (in thousands)

 

 

2018

 

2017

Shares issued and fully paid at January 1

 

105,876

 

105,876

Shares issued and fully paid at December 31

 

105,876

 

105,876

Treasury shares held at December 31

 

2,723

 

2,558