FINANCIAL INFORMATION CONCERNING THE GROUP’S ASSETS AND LIABILITIES, FINANCIAL POSITIONAND PROFITS AND LOSSES 20 book value is greater than its recoverable amount as estimated Short-term investments are generally comprised of term deposits during impairment tests. The impairment is recognized in the that have a maturity exceeding three months and are measured Consolidated Statement of Income (Loss). on the basis of the IAS 39 categories under which they fall. Assets at fair value through the statement of income (loss) Cash equivalents and short-term investments are measured at The assets considered to be held for trading purposes include the their fair value, and the changes in value are recognized through assets that the Company intends to resell in the near future in financial income or loss. Given the nature of these assets, their fair order to realize a capital gain, which is part of a managed portfolio value is generally close to their net carrying value. of financial instruments classified as cash, cash equivalents and 3.8 Share capital marketable securities for which there exists a practice of selling in the short term. The assets held for trading may also include Ordinary shares are classified under shareholders’ equity. The assets voluntarily classified in this category, in a manner that is costs of share capital transactions that are directly attributable to independent of the criteria listed above, in accordance with the the issue of new shares or options are recognized in shareholders’ fair value option accounting principle under IFRS. equity as a deduction from the revenue from the issue, net of tax. Assets available for sale 3.9 Share-based payment The assets available for sale include, primarily, securities that Free shares (Attributions gratuites d’Actions, or “AGA”), stock- do not meet the criteria of the definition of the other categories options (Options de souscription et/ou d’achat d’actions, or “SO”) of financial assets. They are valued at their fair value, and the and employee warrants (Bons desouscription de parts de créateur changes in value are recognized in other comprehensive income d’entreprise, or “BCE”) are awarded to employees or executives. within shareholders’ equity. Non-employee warrants (Bons de souscription d’actions, or “BSA”) are primarily awarded to directors and scientific consultants. The fair value corresponds to the market price for those securities Pursuant to IFRS 2, these awards are measured at their fair value that are listed on a stock exchange or to an estimate of the value on the date of grant. The fair value is calculated with the most for unlisted securities, determined on the basis of the financial relevant formula regarding the settlement and the conditions criteria most appropriate for the specific security. When there of each plan. The fair value is recorded in personnel expenses is an objective indication of the impairment of these securities, (allocated by function in the Consolidated Statement of Income) the accumulated impairment is recognized in Consolidated on a straight-line basis over each milestone composing the vesting Shareholders’ Equity in the Consolidated Statement of Income period with a corresponding increase in shareholders’ equity. (Loss). At each closing date, we re-examine the number of options likely 3.6 Recoverable amount of the intangible assets and property, to become exercisable. If applicable, the impact of the review plant and equipment of the estimate is recognized in the Consolidated Statement of The property, plant and equipment and intangible assets that Income with a corresponding adjustment in equity. have an established lifetime are subject to an impairment test 3.10 Financial liabilities when the recoverability of their book value is called into question by the existence of indications of impairment. An impairment is Borrowings and other financial liabilities are measured initially at recognized in the Financial Statements up to the amount of the their fair value and then at amortized cost, calculated on the basis excess of the book value over the recoverable value of the asset. of the EIR method. The recoverable value of an asset corresponds to its fair value The transaction expenses that are directly attributable to the minus the costs of sale or its use value, whichever is higher. acquisition or to the issue of a financial liability reduce that 3.7 Cash and cash equivalents financial liability. These expenses are then amortized actuarially over the lifetime of the liability, on the basis of the EIR. Cash equivalents are owned for the purpose of meeting short-term cash commitments rather than for the objective of investment The EIR is the rate that equalizes the anticipated flow of future or for other purposes. They are readily convertible into a known cash outflows with the current net book value of the financial amount of cash and are subject to a negligible risk of change in liability in order to deduct its amortized cost therefrom. value. Cash and cash equivalents are liquid assets that are available 3.11 Research tax credit, subsidies and conditional advances immediately, long-term investments that can be liquidated immediately without a penalty and money market funds, which are Research tax credit readily convertible into a known amount of cash and are subject to a The research tax credit (Crédit d’Impôt Recherche, or “CIR”) negligible risk of change in value. Cash equivalents are valued on the (the “Research Tax Credit”) is granted to companies by the basis of the IAS 39 categories under which they fall. French tax authorities in order to encourage them to conduct GENSIGHT BIOLOGICS – 2017 Registration Document– 193