FINANCIAL INFORMATION CONCERNING THE GROUP’S ASSETS AND LIABILITIES, FINANCIAL POSITIONAND PROFITS AND LOSSES 20 Research and development Rented fixtures are depreciated over the term of their lifetime or Research costs are recorded in the Financial Statements as over the term of the rental agreement, whichever is shorter. expenses. The depreciation periods used are the following: In accordance with IAS 38, development costs are recognized Property, plant and equipment item Depreciation period in the Financial Statements as intangible assets only if all of the following criteria are met: Fixtures and improvements in 9 years structures (a) i t is technically feasible to complete the development of the Research and development / 5 to 10 years project; production tools (b) i ntention on the part of the Company to complete the project Computer equipment 3 years and to utilize it; Office equipment and furniture 5 years (c) capacity to utilize the intangible asset; 3.5 Financial assets (d) proof of the probability of future economic benefits associated with the asset; Financial assets include assets available for sale, assets owned until maturity, loans and receivables, cash and cash equivalents. (e) availability of the technical, financial and other resources for completing the project; and The valuation and the accounting treatment of the financial (f) reliable evaluation of the development expenses. assets and liabilities are defined by IAS 39 Financial Instruments: Recognition and Measurement (“IAS 39”), with the exception of Because of the risks and uncertainties related to regulatory deposits and guarantees in relation to lease agreements, which authorizations and to the research and development process, the are classified under non-current financial assets on the statement Company believes that the six criteria stipulated by IAS 38 have of financial position and measured at cost. not been fulfilled to date and the application of this principle has Assets owned until maturity resulted in all development costs to be expensed as incurred in all periods presented. These securities are exclusively fixed income or determinable income and have fixed maturities, other than loans and accounts Software receivable, that the Company has the intention and the ability to The costs related to the acquisition of licenses for software keep until maturity. After their initial posting at their fair value, are recognized as assets on the basis of the costs incurred to they are valued and recognized in the Financial Statements at the acquire and to implement the software. They are amortized amortized cost on the basis of the effective interest rate (“EIR”) using the straight-line method over a period of one to three years method. depending on the anticipated period of use. The assets owned until maturity are monitored for any objective License indication of impairment. A financial asset is impaired if its In February 2013, the Company entered into a partnership carrying value is greater than its recoverable amount as estimated agreement with Novartis Pharma AG (“Novartis”) which provides during impairment tests. The impairment is recognized in the for exclusive in-licenses for two patent families. The Company Consolidated Statement of Income (Loss). issued 670,588 ordinary shares as consideration paid for the Loans and receivables exclusive licenses. Given that the fair value of the licenses cannot This category includes other loans and accounts receivable and be reliably estimated, in accordance with IFRS 2, the amount commercial receivables. of the intangible asset being recognized has been determined by reference to the fair value of the ordinary shares that were These instruments are initial ly recognized in the Financial granted by the Company, based on an independent valuation. The Statements at their fair value and then at the amortized cost licenses are amortized over 15 years from the date the agreement calculated with the EIR method. The short-term receivables without was signed, which corresponds to the expected useful life of the an interest rate are valued at the amount of the original invoice, licenses. unless the application of an implicit interest rate has a significant effect. For the loans and variable-rate accounts receivable, a 3.4 Property, plant and equipment periodic re-estimation of the cash flows, in order to reflect the Property, plant and equipment are recorded at their acquisition change in the market interest rate, modifies the effective interest cost or, if applicable, at their production cost. rate and therefore the valuation of the loan or of the receivable. Property, plant and equipment are depreciated using the straight- The loans and receivables are monitored for any objective line method over the estimated useful period of the property. indication of impairment. A financial asset is impaired if its 192– GENSIGHT BIOLOGICS – 2017 Registration Document