carrefour df 2006

8/14/2019 CARREFOUR DF 2006

1/78

FINANCIALREPORT61 61 Manag ement Report

CONSOLIDATED

FINANCIAL

STATEMENTS

70 Consolida ted Financial Stateme nts

76 Notes on the Consolida ted Financial State ments

115 Sta tuto ry aud itors rep ort

116 LSF REPORT 2006

129 TOTAL STORES

133 COMMERCIAL STATISTICS

135 ADDRESSES OF PRINCIPAL SUBSIDIARIES

5


2/78

In the pa ge s tha t fo llow, the Carrefour Group Financ ial Rep ort p resents the Group s results for the three fisc al years 2004, 2005and 2006.

It co mp rises the following:

the Group Mana gem ent Repo rt presents the ac tivity and ma in figures for 2006, for the Group in its entirety a nd fo r eac h of the

geographical operating regions: France, Europe (excluding France), Latin America and Asia. It ends by focusing on recent

deve lopme nts and the Group s 2007 ob jectives, as presented at the time o f the p ublic ation of t he c onsolida ted ea rnings on

8 Ma rc h 2007;

the Consolida ted Financ ial Statem ents and the Notes to the Consolida ted Financ ial Statem entspresent all summa ry sta tem ents

and c omm ents on the Group s financ ial situation, including bo th the pa rent c omp any a nd its subsidiaries;

the Manag ement Repo rt;

the text of the prop osed resolutions tha t will be subm itted to the shareho lders for approval, during the Shareho lders Mee ting

convened on 20 April 2007 and to be reconvened on 30 April 2007 if a quorum is not present at the first meeting;

the repo rt by the Cha irman of the Supe rvisory Board on corporate governance and internal control procedures;

and fina lly, the store network and co mm ercial statistics summarizing ten years worth of trends in the number of consolidated

stores in ea c h c ount ry and sund ry sta tistics, in pa rticular as reg ards sales areas and the numb er of b rande d stores.

0

61 Consolidate d Financ ial Stat eme nts 61 Managemen t Report 70 Consolidated Financial Statements


3/78

ConsolidatedFinanc ia l Sta tementsMANAGEMENT REPORT

The Group d ec ided in 2005 to ma ke a c hange in the estimate

of its buildings depreciation period, raising it from 20 to 40

years. In 2004, the depreciation allowances presented in the

ta bles below are still sta ted over 20 years.

The Ca rrefour Group consolida ted financ ial sta tem ents for the

fisc al year 2006 have bee n d raw n up in ac co rda nce with IAS/

IFRS internationa l ac c ount ing sta ndards.

The following a re presente d for prior pe riod s: the Inc ome

State ment a s of 31 Dec emb er 2004 restated in acc ordanc e

with IFRS 5 (Non-c urrent Assets Held fo r Sa le a nd Discontinued

Op erations) for ope rat ions disc ontinued in 2005 and 2006, as

we ll as the Inc om e Sta tem ent a s of 31 Dec em be r 2005,

resta ted for ope rat ions disc ontinued in 2006.

ACCOUNTING PRINCIPLES

ACTIVITY RESULTS

By foc using on the two main priorities of o ur strateg y customers

and profit growth we reached our objectives in 2006:

net sales increased by 6.6% at current exchange rates

and by 6.4% at constant exchange rates (an increase

of over two p oints co mp ared w ith growth rates rec orded

in 2005 and 2004);

growth in our grocery market share was posted for the

second consecutive year in france (up 0.5% according to

TNS Worldpane l);

we c reate d 1.4 million sq.m o f sales area by op ening nearly

1,000 reta il outlets, includ ing 103 hyperma rkets (more tha ndo uble the store op enings c omp leted in 2004).

We c ontinued to implement the major comp onents of our

strategy:

we are strengthening our promotions and low pricing policy

in a European context that c ontinues to be charac terized b y

both w eak growth in groc ery consumption and deflation;

we are constantly expanding our product l ines and

services;

we a re strengthening the p otency and public rec ognition

of our brand in all countries in which we op erate.

Annual figures

(in millions of euros)2006 2005

% Var.2006/ 2005

2004

Net sa les 77,901 73,060 6.6% 69,113

Ac tivity contribution 3,258 3,152 3.4% 3,190

Net inco me from recurringop erations - Group share 1,857 1,798 3.3% 1,733

Net income fromdisco ntinued op erations- Group share

412 (362) - (142)

Net income - Group sha re 2,269 1,436 58.0% 1,591

6

76 Notes on the Consolidated Financia l Sta tements 115 Statutory auditors report


4/78

Net sales

(in millions

of euros)

2006 2005 % Var.

% Var.2006/2005

at con-stant ex-change

rates

2004

2006 a tconstant

ex-change

rates

France 37,212 35,577 4.6% 4.6% 35,167 37,212

Europe(excl.France)

29,850 28,102 6.2% 6.7% 26,404 29,993

LatinAmerica 5,928 5,075 16.8% 12.5% 3,938 5,710

Asia 4,911 4,306 14.0% 12.4% 3,603 4,838

Total 77,901 73,060 6.6% 6.4% 69,113 77,753

Net sales am ounted to 77,901 million euros, up 6.4% c ompa red

with 2005 sales at c onstant e xcha nge rates. Afte r the p ositive

impact of exchange rates, sales increased by 6.6%.

Breakdo wn o f net sales

by bu siness

In % 2006 2005 2004

Hypermarkets 58.9% 58.0% 59.1%

Supermarkets 17.4% 18.1% 17.7%

Hard Disc ount stores 9.1% 8.8% 8.4%

Other 14.6% 15.1% 14.8%

Total 100.0% 100.0% 100.0%

Breakdo wn o f net sales

by g eog rap hic region

In % 2006 2005 2004

France 47.8% 48.7% 50.9%

Europe (excl. France) 38.3% 38.5% 38.2%

Latin America 7.6% 6.9% 5.7%

Asia 6.3% 5.9% 5.2%

Total 100.0% 100.0% 100.0%

ACTIVITY CONTRIBUTION

(in millions

of euros)

2006 2005 % Var.

% Var.2006/2005

at con-stant ex-change

rates

2004

Dec.2006 at

constantex-

changerates

Franc e 1,718 1,713 0.3% 0.3% 1,964 1,718

Europe(excl.France)

1,208 1,145 5.5% 5.7% 968 1,210

LatinAmerica 161 133 21.8% 15.2% 88 153

Asia 171 162 5.4% 3.8% 170 169

Total 3,258 3,152 3.4% 3.1% 3,190 3,249

Activity contribution amounted to 3,258 million euros and

represented 4.2% of o ur sales as aga inst 4.3% in 2005. It increased

by 3.4% compared to 2005.

Breakdo wn o f ac tivity c ontribution

by g eographic region

In % 2006 2005 2004

France 52.7% 54.3% 61.6%


Latin America 5.0% 4.2% 2.8%

Asia 5.3% 5.2% 5.3%

Total 100.0% 100.0% 100.0%

DEPRECIATION AND PROVISIONS

Depreciation and provisions totalled 1,587 million euros,

representing 2.0% of sa les.

NON-CURRENT INCOME AND EXPENSES

Non-current income and expenses represented net income

of 16 million euros. This inc lude d:

costs of restructuring or closing sites in the amount of

98 million euros;

an expe nse o f 69 million e uros relat ing to stoc k op tions;

asset d ep recia tion in the amo unt of 26 million euros;

c a pita l ga ins or losses from sales rep resent ing inc om e o f

211 million euros (ma inly from sa les of shop ping ma lls in Italy,Poland and Franc e);

other non-rec urring item s tot alling 2 million euros.

2



5/78

EBIT

EBIT amo unte d to 3,274 million euros and represented 4.2% of

our sales as against 4.3% in 2005. It increased by 4.6%

compared to 2005.

EBIT

by g eographic region

In % 2006 2005 2004

France 50.1% 50.7% 62.4%


Latin America 4.9% 4.3% (0.3%)

Asia 4.7% 4.9% 5.2%

Total 100.0% 100.0% 100.0%

FINANCIAL INCOME (EXPENSE)

Interest a mounted to a net e xpense o f 480 million euros, down

by 6.6% on 2005 and rep resent ing 0.6% of sales as in 2005. Theincrea se in inte rest e xpense this yea r is primarily explained by

the rise in interest rates and the inc rease in the g roup s average

amo unt of financial debt.

Thus, de sp ite the g row th in Ac tivity Cont rib ution b efore

de prec iation and reserves co verag e of financial expenses

rose from 10.2 x in 2005 to 10.1 x in 2006.

INCOME TAX

The effec tive inc ome tax expense was 810 million euros in 2006.

This represented 29.0% of inc om e before taxes as aga inst 29.3%

in 2005. This sligh t reduc tion in the e ffec tive ta x rat e c an be

explained by the slight drop in taxation rates in Franc e and b y

improved performance in Poland and Belgium, where the

results were not ta xed in view o f d eferred losses.

CONSOLIDATION BY THE EQUITY METHOD

Income from equity affiliates fell slightly to 36 million euros

(15 million euros less than in 2005). This trend wa s primarily d ue

to the full co nsolida tion of Hypa rlo.

MINORITY INTERESTS

The sha re o f m inority inte rests in inc om e rose from 7.7% in 2005

to 8.1% in 2006 (not including income from discontinued

operations). Minority interests were up by more than 9%

(or 14 million euros), due to the g rowth of e arnings ge nerate d

by subsidiaries in suc h c ount ries as China and Greec e.

NET INCOME FROM RECURRING OPERATIONS -GROUP SHARE

This line a mo unted to 1,857 million euros, up 3.3% c om pared

with net incom e from rec urring op erations - Group share 2005,

wh ich stood at 1,798 million e uros.

NET INCOME FROM DISCONTINUED OPERATIONS -GROUP SHARE

This line represented inco me of 412 million euros in the 2006

Inco me State ment and breaks dow n a s follows:

(in millions of euros)

Inc ome from sale of Korea 430

Inc ome from sale of Puntoc ash 17

Expense from Slovakia (15)

Expense from sale of supermarkets in China (9)

Expense from Champion supermarkets (7)Operating expense from c losed Brazilian supe rmarkets (6)

Expense from sale in the Czech Repub lic (1)

Inc ome from Supeco 1

Inc ome from sale of Food service 1

Total 412

Withdrawa l from South Korea

On 26 Sep temb er 2006, the Group sold its subsidia ry in South

Korea to E-Land for the sum of 1.5 billion euros. Income from

the sale wa s rep orted in Net incom e from d isco ntinued

op erations in ac c orda nc e w ith IFRS 5.

Sa le o f Punto cash

On 21 May 2006, afte r obta ining the c onsent of the c omp etition

au tho rities, Carrefour d ispo sed of its Ca sh & Ca rry subsidiary

in Spa in to the Miquel Alimentac io group.

6



6/78

Withd rawa l from Slovakia and the Czec h Rep ub lic

On 30 Sep tem be r 2005 Ca rrefour anno unc ed its intent to

ac q uire Tesco Taiwa n a nd to transfer its op erat ions in the

Czech Rep ub lic and Slovakia to Tesco. Carrefour desired t o sell

i ts 11 hypermarkets in the Czech Republic and its four

hypermarkets in Slovakia to Tesco .

On 21 January 2006, the European Union approved the

transac tion in the C zec h Rep ublic, but referred the de c ision

on Slovakia to the Slovak a utho rities.

On 31 May 2006, Ca rrefour and Tesco fina lized the t ransac tion

c onc erning Ca rrefours withdrawa l from the Czec h Rep ublic

and the acquisition o f Tesco s business in Ta iwan.

On 29 Dec em be r 2006, the Slovak aut horities announc ed

their opp osi t ion to the sale for rea sons of c om pe ti t ion.

The G roup is c urrent ly stud ying va rious withd raw al sc ena rios

for fisc a l yea r 2007.

CASH FLOW AND INVESTMENTS

Cash flow stood at 3,586 million euros, stable compared with

2005. Ca sh flow was imp ac ted in 2006 by non-rec urring items

related to the restructuring of certain operations which had

been rec orded as paya bles in 2005. Examp les include the final

c losing o r the d isposal of stores in Spa in and Brazil, as we ll as

the programme designed to optimize logistics and central

service s in Franc e. We estimate that op erating c ash flow from

continuing operations, excluding these non-recurring items,

would have increased by 4% over the period, closer to the

grow th in EBIT b efore d ep rec iation a nd a mo rtizat ion. It

represent ed 56.8% of net deb t in 2006 versus 52.7% in 2005.

Net investments for the year amo unted t o 1,885 million e uros,

as aga inst 2,425 million euros in 2005.

The Group s tang ible and intangible investme nts am ounted

to 3,368 million euros.

Financ ial investm ent s for 2006 rep resented 594 million e uros.

Divestments that impacted our cash flow in 2006 amounted

to 2,078 million euros.

SHAREHOLDERS EQUITY

This amo unte d t o 10,503 million e uros at 31 Dec em be r 2006

as against 9,386 million eu ros the p reced ing yea r.

NET DEBT

The Group s net de bt dec reased from 6,790 million euros at the

end of 2005 to 6,309 million e uros at the end of 2006. At the e nd

of 2006, net debt represented 60% of the net position before

distribution of dividends, as against 72% at the end of 2005.

France

The c onsolida ted store netw ork in Franc e a t 31 Dece mb er

2006 stood as follows:

2006

Hypermarkets 192

Supermarkets 615

Hard Disc oun t sto res 811

Other stores 101

Total 1,719

In 2006, the network expanded by 13 hypermarkets,

20 supermarkets, and by 29 hard discount stores, and

de c rea sed by 7 C ash a nd Ca rry stores.

37,21235,577

2005 2006

Net sales


1,7181,713

2005 2006

Activity co ntribution(in millions of euros)

Sa les in Franc e inc reased by 4.6%. The a c tivity c ont ribution

dec reased slightly from 4.8% of sa les in 2005 to 4.6% of sa les in

2006, amo unting to 1,718 million euros. The grow th of EBIT wa s

less rapid than sales growth, primarily due to costs related to

increa sed sta ff on the sales floor, the d evelop me nt of service s

and the e xpansion of produc t offerings.

Op erationa l investme nts in Franc e tot alled 1,095 million euros,representing 2.9% of sa les.

4



7/78

Europ e (excluding France )

The c onsolida ted store network in Europ e a t 31 Dec em be r

2006 stood as follows:

2006

Hypermarkets 365

Supermarkets 746

Hard Disc oun t sto res 2,969

Other stores 241

Total 4,321

The c onso l ida ted ne two rk expa nde d t h i s yea r by

44 hypermarkets, 180 hard discount stores, 17 convenience

stores and 1 Cash and Carry store, and decreased by

19 supermarkets.

29,85028,102

2005 2006

Net sales(in millions of euros)

1,2081,145

2005 2006

Activity contribution(in millions of euros)

Sales in Europe increased by 6.2%, thanks to very good results

in the m ain Europ ea n c ountries. The a c tivity c ontribution

amounted to 4.0% of sales at 31 December 2006 as against

4.1% in 2005. EBIT rose sligh tly less tha n sa les, by 5.5%. This trend

can be attributed primarily to a smaller contribution from Italy,

where the macro-economic environment and di f f icul t

c ompe titive co nd itions weighed on the results. Excluding Ita ly,EBIT from the Europ e Zone inc rea sed by 8%. We w ere

pa rtic ularly satisfied w ith the p erformanc e o f c ountries such

as Belgium, Greece and Poland, which posted double-digit

EBIT growth .

Operational investments in Europe totalled 1,529 million euros,

represent ing 5.1% of sa les.

La tin Am erica

The c onso l ida ted sto re ne t wo rk i n La t i n Am er ic a a t

31 Dece mb er 2006 stoo d as follows:

2006

Hypermarkets 204

Supermarkets 118


Other stores -

Total 861

In 2006, the network expande d by 19 hard d iscount stores and

56 hypermarkets while the number of supermarkets fell by

31 sto res. This trend wa s primarily due to the 34 sup erma rkets

in Brazil that w ere converted to a new format c omp arab le to

the Ca rrefour Express sto res launc hed in Spa in.

5,9285,075

2005 2006


161133

2005 2006

Activity contribution(in millions of euros)

Sales increased by 16.8% from 2005 to 2006, strong ly affec ted

by exchange rate fluctuations. At constant exchange rates,

sales increased by 12.5%. Activity c ontribution increa sed

from 2.6% of sales in 2005 to 2.7% of sales in 2006, standing at

161 million euros. This pe rformanc e c an b e exp lained by a n

increased ma rgin on c ontinuing op erations, whic h reflec ts theturnaround in Arge ntina whe re market c ond itions returned to

normal, and by the effectiveness of our sales strategy in

hypermarkets in Brazil, as well as by the results of our stores

c onverted t o the Ca rrefour Bairro trade nam e.

Op erationa l investments totalled 436 million euros, represent ing

7.4% of sa les.

6



8/78

Asia

The c onsolida ted store ne two rk in Asia a t 31 Dec em be r 2006

stood as follows:

2006

Hypermarkets 202

Supermarkets -


Other stores -

Total 457

In 2006, the network expanded by 11 hypermarkets and

30 hard discount stores, while the number of supermarkets

de creased by 8, as a result of the withdrawa l from supe rmarkets

in China.

4,9114,306

2005 2006


171162

2005 2006

Activity co ntribution(in millions of euros)

Sales in Asia inc reased by 14.0%. At c onsta nt e xcha nge rates,

sales grew b y 12.4%. This trend reflec ts the ac c elerate d rate

of store openings. Activity contribution decreased from 3.8%

of sales in 2005 to 3.5% of sales in 2006, amo unting to 171 million

euros.

Operational investments in Asia totalled 309 million euros,representing 6.3% of sa les.

RECENT CHANGES

On 1 December 2006, the Group signed a memorandum

of agreement concerning the acquisition of Ahold Polska

for a price of 1375 million . This tran sac tion is still sub jec t to

ap proval by the relevant autho rities.

Aho ld Polska c urrent ly op erat es 194 sto res, includ ing

15 Hypernova hypermarkets, with the rest being Albert

supermarkets, having a total combined surface area of

180,000 sq.m. Ahold Polska generated 2005 gross sales of

1591 million. This transa c tio n w ill position C a rrefo ur Polska

in sec ond plac e a mong the c ountrys groce ry reta ilers.

This ac qu isition represents a new sta ge in the Carrefour group s

strat eg y, wh ich c onsists in b uilding lea d ership p ositions in

all markets in which it has chosen to operate, and particularly

in countries with high growth potential. It is in keeping with

the ongo ing p olicy o f organic growth ca rried out by the Group

sinc e 2005. Ca rrefo ur Polska g en era te d g ross sa les of

1,359 million euros in 2006, and included 42 hypermarkets and

83 supermarkets as of 31 December 2006, with a total

combined surface area of nearly 416,000 sq.m.

OBJECTIVES

The Group has set the follow ing o bjec tives for 2007:

Unde r current compe titive c ond itions, we foresee 2007 sales

growth, at constant exchange rates, higher than or equal

to 2006 growth. The a chievement o f this ob jec tive will involve

a certain amount of tactical acquisitions.

Growth in ac tivity co ntribution w ill be less tha n sales growth,

which is a d irect consequence of our determination

to consolidate our leadership position through low prices

and the c ontinuation of our expansion policy.

6



9/78

FINANCIAL RISKS

Foreign exchange risk

The G roup s operations througho ut the world a re p erformed

by subsidiaries operating primarily in their own countries

(with purchasing and sales in local currencies). As a result,

the G roup s exposure to excha nge rate risk in c omm ercial

op erations is na turally limited.

It ma inly involves imp orts. The risk relate d to fixed imp ort

transactions is hedged by forward currency purchases.

Investments planned in foreign countries are sometimes

c overed by opt ions.

Loc al financ ing o perations are ge nerally co nduc ted in the

loca l c urrency.

The m a turity of foreign exc ha ng e tran sa c tions is less tha n

18 mon ths.

The va lue of c urrent p ositions at yea r end is presente d in

Note 26 to the financial stat eme nts.

Interest rate risk

Interest rate risk is managed centrally by our Coordination

Ce ntre in Brussels. The la tter has a rep orting ob liga tion fo r its

operations and measures monthly performance in order to

identify:

the outco me o f ac tions taken;

whether or not the actions undertaken comply with the

Group s risk policy.

The c ontrol of c om plianc e with internal risk limits and the

monitoring o f the Carrefour Group s policy b y the Coordination

Ce ntre a re the responsibility of the Risks Co mm ittee. The la tte r,

chaired by the Groups Chief Financial Officer, meets at least

onc e every two months.

The ma nage ment p roc edures of the C oordination Ce ntre a re

subject to ap proval by the Audit Co mmittee.

To a c hieve its aims, the Coo rdination C entre ha s various

reporting schedules (weekly, monthly and annual).

The G roup s net e xposure t o inte rest rate fluctua tion risk is

reduc ed by the use of financ ial instruments com prising interest

rate swa ps and op tions.

The typ es of hed ges as of 31 Decemb er 2006 and the a mount

of c ap ital hedge d a re p resented in Note 26 to the financialstatements.

We ha ve c alc ulated our susc ep tibility to c hang es in rate s in

ac co rda nce with the COB rec omm enda tion of January 2003.

The result of the c alculation (on short-term d eb t in ac cordanc e

with paragraph 6.4.2 of the recommendation) is as follows:

in the event of a de c line o f 1% in rates, interest inco me wou ld

improve by 41 million euros, or 8.5% of interest income;

in the event of a rise of 1% in rates, interest income would fall

by less than 6 million euros, or 1.25% of interest income.

Liquidity risk

Following the renego tiation o f syndic ated loans in 2004, the

Group is no longe r subjec t to any financ ial covena nts.

The breakdo wn of d eb t by expiration da te a nd c urrenc y is

presented in Note 25 and t he c omm itments received from

financ ial institutions in No te 29.

Sha re risk

As of 31 Dec em be r 2006, the G roup held o nly one trea suryshare and thus is not exposed to share risk.

Furthermore, marketable securities and financial investments

are primarily composed of monetary investments, where

Group exposure is low.

LEGAL RISKS

In the no rmal c ourse o f business, the Group s comp an ies are

involved in a certain number of legal proceedings or litigation,

including d isput es with tax a nd soc ial sec urity a uthorities.

A provision for contingency and loss has been set aside

for expenses that can be estimated with sufficient reliability

and are deemed probable by the companies and their

expert assessors.

The a mo unt of provision ma de for after-sales servic es, ta x, soc ial

security and legal expenses and risks relating to the Groups

operations totalled 1,549 million euros at 31 December 2006.

None of the disputes in progress involving the Groups

c om pa nies are, in the o p inion of their expe rt assessors, likely to

affec t the ac tivity, results or financ ial situation of the Group in

any significant way.

RISK MANAGEMENT

6



10/78

INSURANCE

Ca rrefours insuranc e strateg y is a imed , first of all, a t p rotec ting

its c ustome rs, sta ff and assets.

As a result, the Group has negot iated ac ross-the-boa rd g loba l

schemes ( in part icular physical damage, civi l l iabi l i ty,

environmenta l, construction a nd t ransport c overage ) ensuring

uniform c over for a ll its subsidia ries, whatever the ir forma ts and

whe rever they are loc ate d, with a few exce ptions (Brazil, for

examp le, which d oes not a llow t his type of a rrang eme nt).

Furthermore, the Group ensures tha t t he ne w ac quisitions

mad e over the year rap idly obta in its ac ross-the-board c over

or, where a pp lic able, benefit from its DIC/ DIL c over po lic ies.

Ca rrefours insuranc e strategy ide ntifies and assesses existing

and eme rging risks in close c ollab oration with op erational

mana gers, Quality Mana gem ent and Safety Ma nag eme nt,

and puts in p lace prevent ion measures th rough both

c entralized and local po lic ies, tha nks to links in eac h c ount ry.

The G roup c ove rs a ll its transferred risks throug h the insuranc e

market using top -rate d international insuranc e c omp anies.

Monitoring and ma nag ement metho ds are regularly controlled

and inspected by independent parties: brokers, insurers, the

c ap tive reinsuranc e c omp any m ana ge r, as well as in-house,

through Ca rrefours Corporate Insuranc e Depa rtment, which

repo rts to the Qua lity, Liab ility a nd Risks Dep artm ent.

The following informa tion is provide d for informat iona l purposes

only, in order to illustrate the scope of action in 2006, and

should not be c onsidered d efinitive and inviolab le, inasmuc h

as, by de finition, insuranc e must antic ipate chang e and ad apt

to it. Indeed, the Group s insuranc e strategy a lso d ep end s on

ma rket c ond itions, its opp ortunities and any risk assessme nts

that may be conducted by general management.

Furthermore, in order to optimize its insurance costs andmanage its risks appropriately, Carrefour has a policy for the

maintena nc e o f its freq uenc y c laims, throug h its c ap tive

reinsurance company and, since 1 January 2005, through its

own insuranc e c omp any loca ted in Ire land: Ca r re four

Insurance Limited, accredited by the Irish authorities. Its results

are c onsolida ted in the Group s financial state ments.

This d irec t insuranc e c ompany primarily covers risks of p rope rty

damage and operating losses for subsidiaries in Europe on a

Free Provision of Services basis. Subsidiaries located outside

the Europ e Zone a re re-insured by the Group. A stop -loss pe r

c laim a nd p er insuranc e year has be en put in plac e in orde r

to p rotec t the interests of the cap tive and limit its comm itments.

Beyond a c erta in limit, risks a re transferred to t he insuranc e

market.This same subsc ription strateg y a pp lies to c ivil liab ility risks, but

only as regards re-insurance; these risks are reinsured by the

Groups capt ive insuranc e c ompa ny. The c ap tive re-insuranc e

companys exposure is limited per claim and per insurance

year. Beyond these limits, depending on results, risks are

transferred to the traditional insurance market.

Dama ge to property and Operating Loss coverag e

The p urpose o f this insuranc e is to p rote c t the c omp any s

assets show n on its ba lanc e sheet.

The p olicy in force is in the fo rm of a n a ll risks with e xce ptions

policy issued on the basis of existing guarantees on the

insurance market. It covers the traditional risks of this type of

coverage, including fire, theft, natural disasters, operating

losses, et c .

Deduc tibles are app rop riate to the d ifferent store formats and

countries. For certa in sto re forma ts, Ca rrefo ur has a Self Insured

Retention po licy a da pte d to a well targete d loss experience.

The p rogramm e p ut in place by the Group offers a g uarantee

limit of 200 million euros pe r claim in d irec t d am ag es and

op erating losses comb ined. This prog ramm e includes sub-limits,

pa rtic ularly in the a rea o f na tural disasters. Over the c ourse o f

the ye ar, c erta in sub-limits have be en revised upw ards.

The e xclusions in forc e in this c ont rac t c om ply w ith ma rket

prac tices. The c ontrac t wa s renewed on 31 Dece mb er 2006.

Civil liability coverage

This c overs the fina nc ial co nseq uenc es of C a rrefour s c ivil

lia bility in c ases in which it is pursued and found lia ble a s a

result of bodily injury, property damage or consequential

da mag e (in the latte r case with sub-limits and de pe nding on

the legislation in force) suffered by a third party which may

have b een c aused by the G roup, both d uring ope rations and

aft er de livery.

The ma jority of the Ca rrefour Group s sites are c lassified a s ERP

sites (Esta b lishme nts Rec eiving the Pub lic ); a s a result, its

expo sure to the risks inherent in this ac tivity must b e spec ifica lly

taken into c onsideration and requires great vigilance .

Ded uc tibles vary from c ountry to c ountry. The exc lusions in

force in this contract comply with market practices and

primarily concern certain substances recognized as toxic,

ca rcinogenic, etc .

Ca rrefour is c overed for the risk of harm to the environment as

part of its global civil liability insurance scheme.

Such risk req uires a spec ifically designed app roa ch due to the

c ond itions impo sed by re-insurers, whic h o ffer more limited

gua rantees for grad ua l po llution risks.

Nevertheless, Carrefour has set up specific coverage

de dica ted to t hese typ es of risk.

The m aximum cover amount is 15 million e uros pe r loss and pe r

insurance ye ar for so-c alled grad ual p ollution risks.

8



11/78

Spec ia l risks

This essentia lly me ans coverag e fo r co rporate o ffice rs.

Coverage for these risks is adapted as closely as possible to

the Groups exposure. Given the sensitive nature of this

informa tion, the c overage am ounts for these va rious contrac ts

rema in co nfidential.

Construction c overag e

This c ove rs op erat ors d uring c on struc tion , a s we ll a s the

c onseq uenc es that ma y a rise from their actions.

The c overag e am ounts put in plac e a re in line with ma rket

prac tices and the limits ava ilab le on the insuranc e m arket for

this type of risk.

Emp loyee b enefits co verag e

In compliance with current legislation and with collective

bargaining agreements and other company agreements,

sc hem es for cove ring the risks of oc c upa tiona l injury, me dic al

expenses and welfare and retireme nt c osts have be en p ut in

place in eac h c ountry.

INDUSTRIAL AND ENVIRONMENTAL RISKS

The C arrefour Group is strongly co mm itted to a p olic y of

environmental responsibility.

Since our business does not involve major direc t environme nta l

risk, we have identified the main environmental impacts on

which the Group has taken ac tion:

prevention of risks relate d to the operation of service sta tions

(ground pollution, hydrocarbons, etc.);

co ntrol of the co nsump tion of refrigerants and e nergy;

pollution by automobiles (car parks, distribution of less

po lluting fuels);

logistics: reduction of atmospheric emissions and research

into less polluting alternative transport systems;

cont rol of nuisanc es for loc al resident s (via no ise reduc tion,

landsc ap ing, etc .);

management of natural resources (fish stocks, wood, etc.);

reduc tion of the environmenta l impa c t of p ac kaging (via

ec ologica lly designed pa ckag ing a nd reduc tions in the use

of packaging);

waste co nversion and rec ycling;

water management.

The c osts incurred to reduc e the environme ntal impa c t of our

activities are included, in part, in the operating costs of the

Quality and Sustainab le Develop ment Depa rtment a nd its

c ounte rpa rts in the c ountries in which w e ope rate. The largest

proportion, howeve r, is the op erationa l share c orrespo nding to

the amounts allocated to specific projects.

Environmental policies and risk management are inherent to

and managed by each sector and are not managed solely

by the Q uality and Sustainab le Developm ent Dep artment .

6



12/78


Consolidated

Financ ia l Sta tements

INTRODUCTION

Similarly, the c ash flow ta b les as of 31 Dec em be r 2004 and 2005

must present the impact of these operations on distinct lines

for operational, investment and financing activities.

The 2004 and 2005 ba lanc e shee ts remain unc hang ed ,however.

The Group d ec ided in 2005 to cha nge its me thod of estima ting

the depreciation period for its buildings, raising it from 20 to

40 years. In 2004, the depreciation allowances presented in

the t ables below a re still presente d over 20 yea rs.

The ma in agg regate va lues f rom the a c c ounts as o f

31 Dec em be r 2004 resta ted in ac c orda nc e w ith IFRS 5

and presenting dep recia tion ove r 40 years, are a s follows:

Net sa les = 169,113 million;

EBIT = 13,334 million;

Net incom e - Group share = 11,702 million.

The following a re presente d for prior pe riod s: the Inco me

Stateme nt as of 31 Dec emb er 2004 restated in acc ordanc e

with IFRS 5 (Non-c urrent a ssets held for sa le and d isc ontinued

operations) for operations discontinued in 2005 and 2006, aswell as the Income Sta tem ent a s of 31 Dec embe r 2005, resta ted

for op erations disc ontinued in 2006.

IFRS 5 spec ifies the reporting rules c oncerning assets he ld for

sale, and the p resenta tion and information required conc erning

disc ontinued op erations. In p articular, the sta nda rd requires

that assets held for sale b e p resented separately in the b alanc e

sheet and that the results of d isc ontinued op erations be

presente d sep arate ly in the incom e sta tem ent. A discontinued

operation is a component of an enti ty which has been

separated from the entity or which is classified as being held

for sale a nd :

which represents a line of activity or a primary and distinct

geographic region;

is pa rt of a unique and c oordinated plan for its sepa ration

from a line of ac tivity or from a distinc t g eog rap hic region;

or is a subsidiary acquired exclusively for purposes of resale.

The standard req uires tha t the results of d iscont inued o pe rat ions

be presented separately in the income statement for all

com parative p eriod s. Thus, as of 31 Dec em ber 2006, the results

of o pe rations dispo sed of in 2006 must a lso b e resta ted in the

ac co unts of 31 Decem ber 2004 and of 31 Dece mb er 2005.

Conseque ntly, the co mp arative income state ments as of

Dec embe r 2004 and Dec embe r 2005 differ from those p ublished

previously.

0


13/78


CONSOLIDATED INCOME STATEMENT

Sign co nvention (- expenses + inco me )

(in millions of euros) Notes 31/ 12/ 2006 % Var. 31/ 12/ 2005 31/ 12/ 2004

Net sa les 4 77,901.1 6.6% 73,059.5 69,112.6

Other income 5 1,042.5 5.4% 989.4 980.4

Total income 78,943.6 6.6% 74,048.9 70,093.0

Cost of sa les 6 (61,203.6) 6.5% (57,480.2) (54,264.2)

Gross margin from Current operations 17,740.1 7.1% 16,568.7 15,828.8

Sa les, genera l and administra tive expenses 7 (12,894.8) 7.6% (11,986.5) (11,140.6)

Deprec iation, amortization and p rovisions 8 (1,586.9) 11.0% (1,429.7) (1,497.9)

Activity contribution 3,258.4 3.4% 3,152.5 3,190.3

Non-recurring inc ome 9 256.5 (2.9%) 264.2 219.7

Non-recurring expenses 9 (240.6) (15.6%) (285.0) (274.7)

EBIT 3,274.3 4.6% 3,131.7 3,135.2

Interest inc ome 10 (479.6) 6.6% (449.9) (480.7)

Net debt expense (424.1) (398.3) (393.2)

Other financ ia l income and expenses (55.5) (51.5) (87.5)

Income before taxes 2,794.7 4.2% 2,681.8 2,654.5

Income tax 11 (810.2) (785.1) (806.7)

Net income from recurring operations

of consolidated companies 1,984.5 4.6% 1,896.7 1,847.9

Net income from companies consolidatedby the equity method 35.8 (29.2%) 50.6 40.7,

Net income from recurring opera tions 2,020.3 3.8% 1,947.3 1,888.6

Net income from d isc ontinued opera tions 12 411.3 ns (365.1) (143.2)

Total net income 2,431.6 53.7% 1,582.1 1,745.4

of which Net income - Group share 2,268.5 58.0% 1,436.0 1,591.2

of which Net income from recurring operations- Group share

1,856.9 3.3% 1,797.6 1,733.1

of which Net income from discontinued operations- Group share

411.7 ns (361.6) (141.9)

of whic h Net income - minority share 163.4 9.2% 149.6 154.2

(in euros) 31/ 12/ 2006 % Var. 31/ 12/ 2005 31/ 12/ 2004

Earnings per share from rec urring o pe rat ions(before dilution) 2.64 2.5% 2.57 2.49

Earnings per share from rec urring o pe rat ions(after dilution) 2.63 2.4% 2.57 2.49

7


14/78


ASSETS

(in millions of euros) Notes 31/ 12/ 2006 31/ 12/ 2005 31/ 12/ 2004*

Goodwill 14 10,852 10,235 9,329

Other intangib le assets 14 1,038 862 730Tangib le fixed assets 15 13,736 13,401 12,617

Financ ia l assets 16 1,111 1,175 1,141

Investments in companies acc ounted for by the equity method 16 417 467 247

Deferred tax on assets 17 922 1,029 1,066

Investment p roperties 18 455 463 481

Consumer c redit from financ ia l c ompanies 1,656 1,398 1,594

Non-current assets 30,187 29,030 27,205

Inventories 19 6,051 6,110 5,621

Commerc ia l rec eiva bles 20 3,620 3,451 3,147

Consumer c redit from financ ia l c ompanies short term 2,586 2,357 1,627

Tax receivab les 553 598 423Other assets 21 815 813 900

Cash and c ash equiva lents 22 3,697 3,733 3,203

Assets classified as held for sale (1) 23 158

Current assets 17,346 17,220 14,921

Total assets 47,533 46,250 42,126

2


15/78


LIABILITIES

(in millions of euros) Notes 31/ 12/ 2006 31/ 12/ 2005 31/ 12/ 2004*

Shareholders equity, Group share 9,486 8,385 6,947

Shareholders equity, minority interest 1,017 1,001 929Shareholders equity 10,503 9,386 7,876

Borrowings 25 7,532 7,628 7,340

Provisions 23 2,256 2,325 1,954

Deferred tax liab ilities 280 226 353

Consumer c redit refinanc ing 516 264 255

Non-current liabilities 21,087 19,830 17,778

Borrowing - under 1 year 25 2,474 2,895 2,632

Trade paya bles 16,449 16,025 14,721

Consumer c redit refinanc ing short term 3,427 3,199 2,654

Tax paya b les 1,172 1,241 1,388

Other lia b ilities 24 2,910 3,022 2,952Liab ilities cla ssified as he ld fo r sale (1) 13 38

Current liabilities 26,446 26,420 24,347

Total liabilities and shareholders equity 47,533 46,250 42,126

* IAS sta nd ard s 32 and 39 pe rtaining to financ ial instrume nts were ap p lied as of 1 Janua ry 2005. Only the fina nc ial sta tem ent s as of 31Decem ber 2005 and 31 Decem ber 2006 are impa cte d by the ap plica tion o f these stand ards.

(1) In 2005, the assets and liabilities held for sale correspo nd to the assets and liabilities of C ash & Carry op erations in Spa in, the Czech

Rep ub lic and Slovakia. In 2006, the assets and liab ilities held for sale correspo nd to the assets and liab ilities of o pe rations in Slovakia.

7


16/78


CONSOLIDATED CASH FLOW STATEMENT

(in millions of euros) 31/ 12/ 2006 31/ 12/ 2005 31/ 12/ 2004

Income be fore tax (1) 2,795 2,682 2,555

Ope rating ac tivities

Tax (783) (752) (827)

Provision for amortiza tion 1,666 1,514 1,887

Ca pita l ga ins and losses on sa les of assets (129) (160) (58)

Changes in p rovisions and impa irment 63 302 (157)

Dividends on companies ac c ounted for by the equity method 8 6 (47)

Impac t of d iscontinued ac tivities (34) (10) 78

Cash flow from operations 3,586 3,582 3,432

Change in working ca pita l 101 41 861

Impac t of d iscontinued ac tivities (227) 153 14

Change in cash flow from operating activities(exc luding financia l compa nies) (126) 194 4,307

Change in consumer c red it commitments 10 (27) (5)

Net cash from operating activities 3,469 3,749 4,302

Investing activities

Ac quisitions of tangib le and intangib le fixed assets (3,368) (2,899) (2,463)

Ac quisitions of financ ia l assets (65) (51) (123)

Ac quisitions of subsid ia ries (529) (751) (315)

Disposals of subsid ia ries 1,345 565 19

Disposals of fixed assets 688 686 544

Disposals of investments 45 26 375

Subtotal Investments net of Disposals (1,885) (2,425) (1,963)

Other uses (14) (85) (74)

Impac t of d iscontinued ac tivities (135) (107) (110)

Net cash from investing activities (2,033) (2,617) (2,148)

Financing activities

Proceeds on issue of shares 6 88 (368)

Dividends paid by Carrefour (parent c ompany) (705) (656) (525)

Dividends paid by c onsolida ted companies to minority interests (109) (102) (152)

Change in shareholders equity and other instruments (92) 0

Change in borrowings (799) 125 (1,641)

Impac t of d iscontinued ac tivities 214 3 45

Net cash from financing activities (1,485) (542) (2,641)

Net change in cash and cash equivalent before currency impact (50) 590 (487)

Impac t of currency fluc tuations 14 (59) (27)

Net change in cash and cash equivalent after currency impact (36) 531 (514)

Cash and equivalents at beginning of year 3,733 3,202 3,717

Cash and equivalents at end of year 3,697 3,733 3,202

(1) Inc luding financ ial inte rest for 568 million e uros at 31 Dec em be r 2006 and 569 million eu ros a t 31 Dece mb er 2005.

4


17/78


VARIATION IN CONSOLIDATED SHAREHOLDERS EQUITY BEFORE ALLOCATION OF INCOME


Capital

Reservesrelating tovariations

in sha re-holdersequity

Currencytranslation

adjustment,

Groupshare

Reserves forfair valuevariation

in financialinstruments

Otherreserves

andincome

Share-holdersequity,

Groupshare

Minority

interests

Tota lshare-

holderssequity

Shareholders equity at 01/ 01/ 2004before allocation

1,790 0 0 0 4,408 6,198 1,036 7,234

Foreign currency transla tion ad justment 66 66 1 67

Income and expenses rec orded direc tlyas shareholders equity at 31/ 12/ 2004

0 66 0 0 66 1 67

Income 2004 1,591 1,591 154 1,745

Total income and expenses rec ordedfor the period 2004

0 66 0 1,591 1,657 155 1,812

Dividends 2003 (525) (525) (103) (628)

Adjustment to capital and premiums (1) (28) (353) (381) 8 (373)

Effects of changes in consolidation scopeand other movements(2) (3) (3) (167) (170)

Shareholders equity at 31/ 12/ 2004before allocation 1,762 0 66 0 5,118 6,947 929 7,876

Impact of IAS 32/ 29 (257) (48) (305) (79) (384)

Shareholders equity at 01/ 01/ 2005after impact of IAS 32/ 29

1,762 (257) 66 (48) 5,118 6,642 850 7,492

Foreign currency transla tion ad justment 697 697 60 757

Adjustment to the fa ir va lue of financ ia l instruments 221 41 262 (3) 259


221 697 41 959 57 1,016

Income 2005 1,436 1,436 146 1,582

Total income and expenses recorded for 2005 221 697 41 1,436 2,395 203 2,598

Dividends 2004 (656) (656) (101) (758)

Change in ca pita l and premiums 31 31 75 106

Imp ac t of cha nges in consolida tion sco peand other movements (27) (27) (26) (52)

Shareholders equity at 31/ 12/ 2005before allocation 1,762 (36) 763 (7) 5,902 8,385 1,001 9,386

Foreign currency transla tion ad justment (393) (393) (43) (436)

Adjustment to the fa ir va lue of financ ia l instruments (5) (5) 3 (2)


0 (393) 0 (5) (398) (40) (439)

Income 2006 2,269 2,269 163 2,432

Total income and expenses recorded for 2006 0 (393) 0 2,264 1,870 123 1,993

Dividends 2005 (706) (706) (106) (812)

Change in ca pita l and premiums 7 7

Imp ac t of cha nges in consolida tion sco peand other movements (64) (64) (8) (72)

Shareholders equity at 31/ 12/ 2006before allocation

1,762 (36) 370 (7) 7,396 9,486 1,017 10,503

(1) The c hang e in c ap ital and premiums in 2004 was due to the c anc ellation o f treasury stoc k. The d ifference be twee n shareho lderseq uity in the stat utory financ ial state ment s and the c onsolida ted financ ial stat eme nts ca n be explained by 216,000 shares c lassifiedas shares for c anc ellation in the sta tutory financ ial sta teme nts and ca nce lled in the co nsolida ted financ ial state ment s.

(2) The reduc tion in c onsolida ted reserves in 2004 arose from the rede mp tion o f c erta in minority sha res, ma inly in Spa in, Brazil and France.

.

7


18/78

NOTE 1: ACCOUNTING PRINCIPLES

The C arrefour group s c onsolida ted financ ial sta tem ents forfisc al yea r 2006 were d raw n up in euros, the c om pa nys

func tional currenc y, in ac corda nce with Internat ional Financ ial

Rep orting Sta nd ards (IFRS), app lica b le since 1 Janua ry 2005,

as app roved by the Europ ea n Union.

The c onsolida ted financ ial stateme nts as of 31 December 2006

were ad opted by the Mana gem ent Board on 27 February 2007.

The c onsolida ted financial state ments were drawn up on the

ba sis of historic c ost, with the excep tion of c erta in assets and

lia bilities sta ted in ac c orda nc e w ith IAS sta nda rds 32 and 39,

pe rtaining t o financ ial instrumen ts. The asset and lia bility

ca tego ries co ncerned are de sc ribed , where a pp lica ble, in the

c orrespo nding notes be low.

Non-current assets and groups of a ssets held for sale are va lued attheir book va lue or fa ir value minus sale costs, whichever is lower.

The p repa ration o f the c onsolida ted financ ial state ments

involves the consideration o f estima tes and assump tions made

by the Groups manag ement, which may a ffec t the b ook value

of certain asset and liability items, income and expenses, as

well as information p rovided in the not es to the financ ial

sta tem ents. The Group s ma nag em ent review s its estimates

and assumptions regularly, in order to ensure their relevance

to past experience and to the current economic situation.

Depending on the changes in these assumptions, items

ap pe aring in future financ ial state ments may b e different from

c urrent estimates.

The ma in estimates mad e by ma nag eme nt when p reparing

the financ ial state ments conc ern the va luations and usefullives of intang ible (Note 14) and tang ible (Note 15) op erating

assets and go od will (Note 14), the amo unt o f p rovisions for risks

and othe r provisions relating to the business (Note 23), as well

as assumpt ions made fo r the ca lcu la t ion o f pension

commitments (Note 23) or deferred taxes (Note 17).

Details of the ma in assump tions mad e b y the Group a re

provide d in ea c h of the paragrap hs in the App endix devoted

to the financial stat eme nts.

The only assumption ma de by Ma nag ement which ha s or mayhave a significa nt impac t on the financial statem ents c once rns

the a c c ounting po sition a do pte d w hile wa iting for the IASBs

final position on t he treatm ent of c omm itments for the b uy-out

of m inority interests de sc ribe d in the sec tion on Financ ial deb t

and derivatives in Note 1.

IAS sta nda rds 32 and 39 perta ining to financ ial instrument s

were ap plied a s of 1 January 2005.

IFRS 5 pertaining to non-current assets held for sale and

discontinued operations was app lied ea rly, as of 1 Janua ry 2004.

NEW STANDARDS AND INTERPRETATIONSAPPLICABLE IN 2006

In accordance with IFRIC Interpretation 4, an analysis wasconducted on contracts not having the legal status of a

lease contract, but which could be characterized as such.

This an alysis d id not result in any impa c t on t he fina nc ial

statements.

The a mendme nt to IAS 19 (Emp loyee b enefits) introduc ed

the o ption o f including in shareholders eq uity the a c tuarial

gains and losses relating to defined pension plans and

spec ifies the a dd itional informa tion to b e supp lied . The Group

dec ided not to take ad vantage o f this option.

The a me nd me nt to IAS 21 (Effec ts of c ha ng es in foreign

c urrency exc hang e rate s) pe rtaining t o ne t investme nts in

foreign operations speci f ies that the exchange rate

differentials ge nerate d b y mone tary fac tors as part of a net

investme nt in a foreign op eration, rega rdless of w hethe r theyare denominated in a currency other than the functional

currency of the entity or the currenc y of the foreign ope ration,

are rec lassified under eq uity. This am end ment d id no t ha ve

an effect on the financial da ta p resented.

The amendments to IAS 39 have no effec t on the c onsolidated

financial state ments.

NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS

6

61 Consolidate d Financ ial Stat eme nts 61 Ma na gem ent Re po rt 70 Co nso lid ate d Fina nc ia l Sta te me nts


19/78

The a mendme nt to IAS 39 (Financ ial instruments: Rec og nition

and Mea sureme nt - c ash flow he dg es of forec ast intrag roup

transac tions), spe c ifies that it is now po ssible to qualify as an

item hedged against exchange risk in a cash flow hedge ,

a future intra-group forecast transaction which is highly

proba ble, provide d that this transac tion is de nominate d in

a currency other than the entitys functional currency and

provided that it has an effect on the income statement.

The a me ndme nt to IAS 39 (Fa ir value o pt ion) limits the fair

value option to financial instruments that fulfi l certain

c ond itions and stipula tes that t his designa tion is irrevoc able

and must be m ad e at t he time of the initial po sting.

The am end me nt to IAS 39 and IFRS 4 rela ting to Financ ial

Guarantee Contracts specifies that financial guarantee

c ontrac ts are included in the scop e of a pp lic ation of IAS 39.

The inte rpreta tion of IFRIC 4 (Dete rmining w het her an

Arrang eme nt c onta ins a Lease) explains the c ircum stanc es

under which c ontrac ts that d o not ha ve the legal stat us of

a lease contract must nonetheless be booked as such, in

ac c orda nc e with IAS 17. This interpreta tion did not ha ve aneffect on the Groups financ ial stat eme nts.

The Group s elec trica l eq uipment d istribution ac tivities are

not directly concerned by IFRIC interpretation 6 (Liabilities

a rising from Participa ting in a Sp ec ific Ma rket - Waste

Elec trica l and Elec tronic Equipme nt). The European Unions

Directive on Waste Electrical and Electronic Equipment

(WEEE) stipulate s tha t the c ost of wa ste m ana ge me nt for

eq uipment t hat ha s be en sold to private households be fore

13 August 2005 should b e b orne b y p rod uce rs of t hat type

of equipment that are in the market during the period

spe c ified in the a pp lic ab le legislation of the individual

memb er sta te. This interpretation d id not have any significant

effect on the Groups financ ial stat eme nts.

NEW STANDARDS AND INTERPRETATIONSFOR SUBSEQUENT APPLICATION APPROVEDBY THE EUROPEAN UNION

The stand ards, am end me nts and interpreta tions existing a s of

31 December 2006 and appl icable by the Group as of

1 Janua ry 2007 were not ap plied in adva nce by the G roup .

The G roup is c urrently c ond uc ting studies in order to me asure

the p ossib le effect of their app l ic at ion on t he f inanc ial

statements.

IFRS 7 (Financial instruments: disc losures) and the amendme nt

to IAS 1 (Present at ion of financ ial sta tem ents - Ca pita l

disc losures), req uire the disc losure o f informa tion pe rtaining

to the exten t of the use of financ ial instruments in view o f thefinancial situation and pe rformanc e o f the entity, as well as

qua litat ive and qua ntitative information on the nature and

the extent of the risks arising from financial instruments to

which the entity is exposed. Additional informa tion pertaining

to financ ial instruments and c ap ital will be p resented in the

Group s 2007 financ ial sta te me nts, as per IFRS 7 and the

am end ment to IAS 1.

IFRIC Interpretation 7 (App lying the restate ment ap proac h

und er IAS 29: Financ ial repo rting in hyp erinflat ionary

ec ono mies), spe c ifies how IAS 29 should b e a pp lied when

an ec onomy bec ome s hyperinflationary, particularly w ith

rega rd to the rea ssessment of no n-moneta ry elements and

the report ing of deferred tax that resul ts therefrom.

Applica tion o f IFRIC 7 is ma ndatory in the 2007 consolidated


IFRIC Interpreta tion 8 (Scop e o f IFRS 2 - Share-ba sed payme nt)

requires that IFRS 2 be app lied to all transac tions as a p art o f

which a n entity makes share-based p aym ents whe n the

consideration g iven ap pe ars to b e less tha n the fair value of

the eq uity instruments granted. The a pp lica tion o f IFRIC 8 is

mand ato ry in the 2007 c onsolida ted financial state ments.

IFRIC Interpretat ion 9 (Reassessment of embedded

de rivat ives) requires an ent ity, whe n it first b ec om es a pa rty

to a co ntrac t or when a c hange in the terms of the c ontrac t

signific an tly mod ifies the c ash flows tha t otherwise wo uld be

required under the contract, to assess whether any

embe dd ed derivatives are conta ined in the contract a ndwhe ther they must be a c c ounted for ac c ording to IAS 39.

Applica tion o f IFRIC 9 is ma ndatory in the 2007 consolidated


IFRIC Interpretation 10 (Interim financial reporting and

impa irment ) p rohibits the reversal o f a n imp airment loss

rec ognised at the ba lance sheet d ate of a p revious interim

pe riod in respe c t o f go od will or an investme nt in either an

equity instrument or a financial asset carried at cost. IFRIC

Interpretation 10 is ap plic ab le prospe c tively as of the da te

of the first a pp lic ation o f IAS 36 (c onc erning the imp airment

of g ood will) and the first a pp lica tion of IAS 39 (co nce rning

impairment losses on investments in equity instruments or

financ ial assets ca rried at cost), which is on 1 Janua ry 2004.

The ac c ounting method s presented below w ere ap pliedcontinuously to all periods presented in the consolidated

financial statements and uniformly by the Groups entities.

CHANGE IN ESTIMATE

In 2005, the Group d ec ided t o ma ke a c hang e in estimate a s

to the duration of the depreciation of its buildings, increasing

it from 20 to 40 years.

The c hang e in estimate, reflec ted in a prospec tive cha nge in

the d uration o f de prec iation as of 1 Janua ry 2005, c an b e

justified by the fact that the contribution values of the stores,

as determined by expert assessors as part of plans to create

the European property company, Carrefour Property,

demonstrated in 2005 that the buildings still have significant

ma rket value a fter 20 years. Following the c reation o f Ca rrefourProp erty, the G roup de c ided to e nga ge in an overall review

of the useful e c ono mic life of its assets. AFREXIM (an a ssoc iation

of property experts) thus conducted a sectoral study of the

ec onom ic life spa n o f a building. The p rop erty experts repo rt

concluded in 2005 that the economic life span of a building

within the Group is 40 years.

7

76 Notes on the Consolidated Financ ial Statements 115 Statutory auditors report


20/78

SCOPE METHOD OF CONSOLIDATION

The c om pa nies over w hich Ca rrefour e xerc ises exclusive

c ontrol, either d irec tly or indirec tly, are fu lly c onsolidat ed .

Control exists whe n the Group ha s the p ower to direc t the

financ ial and op erational p olicies of the e ntity direc tly or

indirec tly, in order to ob ta in ad vantag es from its op erations. Toassess the de gree of c ontrol, the po tential vot ing rights that

can currently be exercised or converted are taken into

account. Furthermore, the companies in which the Group

exercises signific ant influenc e o r joint c ontrol are c onsolidated

by the eq uity method . The c onsolida ted financial stat eme nts

include the Group share in the to ta l amount of profits and losses

rec orded by the c omp anies co nsol ida ted by the eq uity

method, after making adjustments to bring their accounting

methods into conformity with those of the Group, as of the

da te on w hich a significant influence w as exerc ised up through

the date on which the significant influence ceased.

When Carrefour has no significant influenc e over the op erationa l

or financial decisions of the companies in which the Group

ow ns sec urities, the se a re he ld a s finan c ial a sset s. The sesec urities ma y, whe re ap prop riate, be subjec t to a p rovision for

am ortizat ion. The method of a mo rtizat ion is presente d in the

sec tion on Financ ial Assets.

The Group d oes not have a ny ad hoc entities.

SEGMENT-BASED INFORMATION

The Ca rrefour Group is organized by geograp hic region (France,

Europ e e xcluding Franc e, Asia a nd Lat in America) as the first

level of segm ent-ba sed information, and then b y the following

sto re fo rma ts: Hype rma rkets, Sup erma rket s, Hard Disc oun t

stores and O ther forma ts (Convenienc e, Ca sh & Carry, Financ ial

companies, etc.), constituting the second level of segment-

ba sed information.

The a cc ounting p rinc iples used for segment-ba sed informa tion

are identica l to those used for prep aring t he c onsolida ted

financial stat eme nts.

BUSINESS COMBINATIONS

The Group ha s chosen the option o ffered b y IFRS 1, wh ich d oe s

not restate business combinations prior to 1 January 2004 in

ac corda nce with IFRS 3.

As from 1 January 2004, all business combinations are entered

in the a c c ounts by a pp lying the p urc hase method . The

differenc e b etween the purchase co st, which inc ludes expenses

direc tly attributa ble to the a c quisition, and the fair value of t he

assets acquired, net of liabilities and any liabilities assumed

within the fram ewo rk of the group ing, is shown a s go od will.Nega tive go od will resulting from the a cquisition is immediately

rec ognized in the inco me state ment.

For co mp anies ac quired during the c ourse o f the fisc al year

and increases in equity interests, only the incom e for the pe riod

after the ac quisition d ate is shown in the co nsolida ted inc ome

sta tem ent. For co mp anies dispo sed of d uring the c ourse of t he

fiscal yea r and d ilutions, only the income for the period p rior to

the disposal date is shown in the consolidated income

statement.

CONVERSION OF FINANCIAL STATEMENTSOF FOREIGN COMPANIES

For companies operating in countries with high inflation rates

(e.g ., Turkey in 2005, but none d uring fisc a l yea r 2006):

fixed assets, equity investments, shareholders equity and other

non-monetary items are revalued based on the reduction inthe g eneral purc hasing pow er of the loca l currency during

the fiscal year; these items are restated by means of a

relevant p rice index a s of the b alanc e sheet d ate;

all balance sheet items, with the exception of the Groups

sha re of shareho lders equity, are the n c onverte d into e uros

on the basis of the exchange rates in effect at the end of

the fiscal year;

with respe c t to the Group s share o f shareho lders eq uity, the

op ening ba lance is c arried forward at the value in euros at

the end of the previous fiscal year; other movements are

c onverted at c urrent foreign c urrenc y excha nge rate s. The

difference thus created between the assets and liabilities in

the b alanc e sheet is recorded in a foreign c urrency translation

ad justment ac co unt included as shareholders eq uity Group share;

the inco me stateme nt in loc al c urrency is ad justed for the

effects of inflation b etwee n the d ate of the t ransac tions and

the e nd o f the fisc al yea r. All items are then c onverted ba sed

on the exc hang e rate s in effect a t the year end.

For other companies:

ba lance sheet items are c onverted on the ba sis of the c losing

rate;

inco me stateme nt items are c onverted at the average rate

for the yea r when this is not ma terially different from the rate

in effec t on the d ate of the transac tions.

CONVERSION RATE ADJUSTMENTFOR FOREIGN COMPANIES

In acc orda nc e w ith the op tion offered unde r IFRS 1, the G roup

has chosen to restate the translation ad justments ac cumulated

at 1 January 2004 under c onsolida ted reserves. This op tion

has no impa c t o n the Groups total shareholders eq uity; it

involves a rec lassificat ion w ithin sha reholde rs eq uity from the

ent ry Translation a d justments to the ent ry Other reserves,

totalling 3,236 million euros.

FIXED ASSETS

Goodwil l

In ac corda nc e w ith IFRS 3, go od will has not b een am ortized

sinc e 1 Janua ry 2004. Inste a d , go od will is sub jec t to animpa irment t est during the sec ond half of ea ch yea r.

The method s of de prec iation are desc ribe d in the pa rag rap h

entitled Imp airment tests .

Intang ible fixed a ssets

Othe r inta ngib le fixed assets basic ally co rrespo nd t o softwa re

program s that a re d eprec iated over a p eriod ranging from

one to five years.

1)

2)

8



21/78

Tang ible fixed a ssets

In ac corda nce with IAS 16, Tangible fixed assets, land, buildings

and equipm ent, fixtures and fittings are e valuated at their cost

price at acquisition or at production cost, less depreciation

and loss in value.

The c ost of b orrow ing is not inc luded in the ac quisition price

of fixed assets.

Tang ible fixed assets in prog ress a re posted at c ost less any

ident ified loss in va lue.

Dep reciat ion of the se a ssets beg ins whe n the assets are rea dy

for use.

Tang ible fixed assets are de prec iated on a straight line basis

ac c ording to the following average useful lives:

Construction:

Buildings 40 yea rs

Grounds 10 yea rs

Ca r pa rks 6 2/3 yea rs

Equipme nt, fixtures and fittings6 2/3 yea rs to 8 years

Other fixed assets 4 to 10 yea rs

Depreciation methods, useful life values and residual values

are revised at the c lose o f ea c h fisca l year.

Acquisitions of fixed assets made through a financial lease

agreement, i.e., a contract whose impact is to transfer to a

substantial extent the risks and advantages inherent in the

ownership o f an a sset t o the lessee , are rec orded as follows:

the a ssets are c apita lized at the fa ir value of the lea sed asset

or, if it is lower, at the discounted value o f the minimum lea sing

insta lments. These assets are d ep recia ted over the sam e

durations as tangible fixed assets owned by the Group or

over the duration of the contract if this is shorter than the

useful life of the asset;

the c orrespo nding de bt is recorded in the ba lance sheet a s

a liability;

the lease instalments pa id are a llocated between the financ ial

expense and am ortization of the ba lanc e of the d ebt.

Impairment tests

In ac cordance w ith IAS 36, Imp airment o f assets , whe n events

or cha nge s in the ma rket e nvironment indic ate the risk of a loss

in value of ta ngible a nd intang ible assets, these a re the subjec t

of a d eta iled review in orde r to determine whethe r the net book

value is lower than the ir recove rable va lue, de fined as their fair

value (minus d ispo sal c ost) or the ir useful va lue, wh ichever is

higher. The useful value is de termined by d iscount ing future c ash

flows expected from the use of the asset.

If the recoverable amount is lower than the net book value,

the loss in value is recorded as the difference between these

two am ounts. Losses in the va lue of t ang ible and intangib le

assets with a de fined useful life ma y be reversed at a later da te

if the recoverable value b ec omes higher than the net bo ok

value (within the limits of the initially reco rde d de prec iation)

and of the a mortization that would have been reco rded if no

loss of va lue had be en o bserved.

These imp airmen t te sts are p erformed for all fixed assets on a n

annual b asis.

3)

-

-

-

4)

a) Impa irment of goo dwil l

IAS 36 (Impa irment o f assets) stipulates tha t an impa irment test

must be performed, either for each Cash-Generating Unit

(CGU) to w hic h goo dw ill has bee n alloc ated or for eac h group

of CG Us within a sec tor of a ct ivity or geo grap hical segm ent

for which the return on investme nt o f the ac quisitions isappraised.

The level of a na lysis at whic h Carrefour ap praises the p resent

value of go od will gene rally co rrespo nds to c ountries or to

op erations pe r co untry.

As stipulate d in IAS 36, go od will must b e a lloc ated to e ac h

CGU or to each group of CGUs that may benefit from the

synergies of the c omb ined c omp anies. Eac h unit or group o f

units to which goodwill is allocated must represent the lowest

level within the entity at which the goodwill is monitored for

internal mana gem ent p urposes, and must not b e larger than

a seg ment ba sed on either the entitys primary or sec onda ry

reporting forma t de termined in ac c ordanc e with IAS 14,

Segm ent Rep orting (a c tivity or ge og rap hic region).

The useful value is estimated by d isc ount ing future c ash flows

over a p eriod of four years with de termination of a final value

calculated by discounting the fourth-year figures at the

pe rpetua l rate of growth to infinity and the use of a disc ount

rate specific to each country.

The spe c i fic d isc ount rate for eac h c ountry ta kes into

consideration a countrys specific risk.

These d isc ounting rate s are va l ida ted by the Group s

Management Board and ranged between 7.7% and 10.85%

for the fiscal yea r 2006, de pe nding on t he c ount ry. They b reak

do wn as follows:

Europ e: b etw een 7.7% and 9.55%

Lat in America : be twe en 8.55% and 10.85%

Asia: be twe en 7.7% and 9.7%

b) Imp airment o f tan gib le fixed a ssets

In ac corda nc e w ith IAS 36, fixed assets that show ident ifiable

signs of a loss in value (or negative activity contribution) are

the subject of a deta iled review to dete rmine w hether their

net b ook value is lower than the ir recoverab le value, this be ing

their ma rket value or useful va lue, wh icheve r is higher.

The useful value is estimated by d isc ount ing future c ash flows

over a p eriod of te n yea rs plus a residual value, and the market

value is evaluated with regard to recent transactions or

professional p rac tice s.

The d isc ount rates used are the same as for impa irment te sting

of goodwill.

7



22/78

FINANCIAL ASSETS

In a c corda nce w ith IAS 39, financ ial assets are c lassified on t he

ba sis of the five c ate go ries be low:

financial assets measured at fair value through the income

statement;

derivatives;

loans and rece ivables;

assets held to maturity;

assets ava ilable for sale.

The c lassific at ion dete rmines the a c c ounting treatm ent o f

these instruments. It is determined by the Group on the date

on w hich it is initially rec orded, on the b asis of the purp ose for

wh ich these assets were ac qu ired . Sales and ac qu isitions of

financ ial assets are rec orded o n the transac tion date, i.e., the

da te on w hich the Group b ought or sold the a sset.

Financia l assets repo rted a t fa ir va lue

in the inco me statem ent

These a re financ ial assets held by the Group in order to ma ke

a short-term profit on the sale, or financial assets voluntarily

classified in this category.

These assets are va lued at the ir fair value w ith variat ions in value

rec ognized in the inco me state ment.

Classified as current assets in the cash flow equivalents, these

financial instruments inc lude , in p articula r, UCITS cash shares.

Loa ns a nd rece ivab les

Loans and receivables are financial assets whose payment is

fixed or ca n be d etermined, whic h are not listed on an a c tive

market and which are neither held for transaction purposes

nor available for sale.

These a ssets are initially valued at fair value and then at their

amortized cost on the b asis of the effective rate of interest method .

For short term rec eivab les without a d ec lared rate o f interest, the

fair value will be the sam e as the amount on the o riginal invoice ,

unless the e ffect ive interest rate has a significant impa ct.

These assets are sub jec t to impa irment te sting w hen there is

evidenc e tha t they ha ve d iminished in value. An impa irment

loss is reco gnized if the b ook value is higher tha n the estimate d

recoverable value.

Debts pertaining to equity interests, other d eb ts and rec eivables

and comm ercial rec eivab les are included in this cate go ry. They

ap pe ar as financial assets and c omm ercial rec eivables.

Assets he ld to ma turity

Assets held un til maturity a re financ ial assets, othe r than loans

and rec eivables, with a fixed maturity da te, who se p aym ents

are determined or ca n be d etermined a nd w hich the Group

has the intention and capacity of holding until this maturity

da te. These a ssets are initially boo ked a t fair value a nd then at

their amortized cost on t he b asis of the effec tive rate o f interest

method.

These assets are sub jec t to impa irment te sting w hen there is

evidenc e tha t they ha ve d iminished in value. An impa irment

loss is reco gnized if the b ook value is higher tha n the estimate d

recoverable value.

Assets held to ma turity are rec og nized as financ ial assets.

1)

2)

3)

Assets ava ilab le for sa le

Assets held for sale a re financ ial assets that are no t p art o f the

aforeme ntioned c at eg ories. They are va lued a t fair value.

Unrea lized capita l ga ins or losses are reco rded as shareholders

eq uity until they a re sold. When, howeve r, the re is an ob jec tive

indic ation o f the impa irment of a n asset a vailab le for sale, theaccumulated loss is recognized in the income statement.

Imp airment losses reco rde d on va ria ble inco me sec urities

ca nnot be reversed at a later ba lanc e sheet da te.

For listed securities, the fair value corresponds to the market

price . For non -listed sec urities, it is de term ined by referenc e t o

rec ent transac tions or by valuation te chniques that a re b ased

on reliable and observable market data. When, however, it is

impossible to reasonably estimate the fair value of a security,

it is va lued a t its histo ric c ost. These assets are the n sub jec t to

impairment testing in order to evaluate the extent to which

they are rec overable.

This c at eg ory c onta ins primarily non-co nsolida ted eq uity

sec urities and marketab le sec urities that do not c omp ly with

other de finitions of financ ial assets. They a re show n as financ ialassets.

INVESTMENT PROPERTIES

With rega rd to IAS 40, investme nt p rop erties are ta ngib le a sset

items (buildings or land ) owne d for leasing or ca pita l valuat ion.

As for the c riteria that app ly to this sta ndard, those a ssets not

used for operational purposes are generally shopping malls

within the Group. The Group c onsiders tha t shopp ing malls (i.e.,

a ll the b usinesses and services estab lished behind the sto res

cash registe rs) in full ow nership or c o-ow nership a re investment

properties.

Investme nt p rop erties are p osted at their historic va lue and

de prec iated over the sam e p eriod as tangible fixed assets of

the sam e nature.

An assessment of the fair value of investment properties is

performe d o n an annua l ba sis. This assessme nt is performe d by

ap plying a mult ip le tha t is a func tion of the c alculated

profitability of each shopping mall and a capitalization rate

ba sed on the c ountry to t he a nnualized gross rents gene rate d

by e ac h investment property.

The fa ir va lue is p resented in Note 18.

INVENTORIES

Inventories are valued at the m ost rec ent p urc hase p ric e p lus

any a dd itiona l costs, a m etho d t hat is well suited t o rap id

inventory turn-around a nd d oes not gene rate a significa nt

differenc e w ith the FIFO m etho d. The c ost p ric e includes allc osts that co nstitute the purcha se c ost o f the go od s sold (w ith

the exception of foreign currency losses and gains) and also

takes into co nsideration all the c ond itions ob ta ined a t the time

of p urcha se a nd from supp lier service s.

In ac c orda nc e w ith IAS 2 (Invento ries), inventories are va lued

at their prod uc tion c ost o r their net p resent value, whichever

is lower.

The ne t p resent value is the estima ted sales price less ad d itional

c osts necessary for the sale.

4)

0



23/78

OPERATING RECEIVABLES

Ope rating receivables generally include trad e rec eivables,

franchisee receivables and rents receivable from shopping

malls. Where appropriate, they are subject to depreciation,

which takes into a cc ount the de btors ca pa city to honour its

deb t and the co llec tion period o f the rece ivab le.

OUTSTANDING CUSTOMER RECEIVABLES /REFINANCING TO FINANCIAL SERVICE COMPANIES

Custom er rec eivab les due to financ ial service c ompa nies refer

primarily to co nsumer credit granted to c ustome rs of c omp anies

within the Group s scop e of c onsolidat ion. These loa ns, tog ether

with the amounts outstand ing from refinanc ing that ba ck them,

are considered to be assets and liabilities held until their

maturity date and are classified on the basis of their maturity

da te as current or non-c urrent assets and liabilities.

CASH AND CASH EQUIVALENTS

Ca sh equivalents are short-te rm investments tha t are highly liquid,

can easily be converted into a known cash amount and aresubjec t only to a negligible risk of a chang e in value.

Cash refers to c ash in hand a nd d ema nd d eposits.

PROVISIONS

In ac corda nc e w ith IAS 37 (Provisions, Contingent liabilities and

Contingent assets), provisions are posted when, at year end,

the Group ha s a present, legal or implicit ob liga tion a rising from

a p ast event, the am ount of w hich ca n be relia bly estimated

and the settlement of w hic h is expec ted to result in an outflow

of resources rep resenta tive of ec ono mic ad vanta ge s. This

ob liga tion may be o f a lega l, regulato ry or c ontractual nature.

These provisions are e stima ted on the b asis of their type, in view

of the m ost likely assump tions. The a mo unts are disc oun ted

when the impa c t of the pa ssag e of t ime is significant .

EMPLOYEE BENEFITS

The Group s employee s enjoy short-term b enefits (pa id leave ,

sick leave, profit-sharing), long-term benefits (long-service

meda ls, seniority bonuses, etc .) and po st-emp loyment b enefits

with defined contributions and benefits (retirement bonuses

and bene fits, etc .).

a) Defined c ontribution sche me s

Defined c ontribution sc hemes are sc heme s whereby the

Company makes periodic fixed contributions to external

benefit agencies that provide administrative and financial

ma nag eme nt. These sc heme s free the em ployer from any

further obligation, with the ag enc y ta king respo nsibility forpayment to employees of the amounts owed to them (basic

Soc ial Sec urity p ension sc hem e, c om plem enta ry pe nsion

scheme, pension fund with fixed contributions).

These c ontributions are reco gnized as expenses when t hey

are due.

b) Defined b enefit sche me s and long -term b enefits

The Ca rrefour Group ma kes provision for the various de fined

benefit schem es dep endent on the ac cumulated yea rs of

servic e within the Group t hat a re not tota lly pre-financ ed .

This c om mitme nt is c alc ulated ann ually on the b asis of the

method of projected units of credit, on an actuarial basis,

ta king into c onsideration fa c tors suc h a s salary inc reases,

retireme nt a ge , morta lity, pe rsonnel rotat ion and disc ount

rates.

The d isc ount rate is eq ua l to the interest rate, at t he b alanc e

sheet date, of top-rated bonds with a due date close to the

due da te o f the Group s c omm itments. The c alc ulations are

made by a qua l i f ied actuary us ing the pro jected un i t

method.

The Group has decided to a pp ly the c orridor method ,

whe reby the effect of va riations in a c tuarial terms is not

recognized on the income statement, as long as the former

rema in within a range of 10%. Thus, ac tua rial d ifferenc es

exceed ing 10% betw een the value of the c ommitment a ndthe va lue of the hed ging assets whic hever is higher on the

incom e stateme nt are spread over the expec ted average

working life of employees benefiting from this scheme.

In accorda nc e w ith the opt ion offered by IFRS 1, the G roup has

elec ted to rec og nize its ac tua rial ga ins and losses on its pe nsion

co mmitments that ha ve not yet b een recog nized in the Frenc h

financ ial sta tem ents at 31 Dece mb er 2003, direc tly by offsett ing

shareho lders equity a t 1 Janua ry 2004.

c) Share-ba sed c om pe nsation

In accorda nc e w ith the opt ion offered by IFRS 1, the G roup has

elected to limit the ap plic ation o f IFRS 2 to stoc k op tion plans

pa id in sha res, alloc ated af ter 7 Novemb er 2002, the rights to

whic h had not yet be en a c quired a t 1 Janua ry 2004. This

ap plica tion had no effect on tota l shareholders equity at 1

January 2004.

The p lans granted be tween 2003 and 2006 fall within the scop e

of IFRS 2 (Sha re-ba sed c om pensat ion). These a re subsc ription

or purcha se o ptions reserved for emp loyees with no spe c ial

acquisition conditions, aside from effective presence at the

end of the vesting period.

The b enefits granted that are remunerate d b y these sc heme s

are p osted as expe nses, offsett ing a c apita l inc rease over the

vesting p eriod . The expense rec og nized for eac h p eriod

correspo nds to the fa ir value o f the a ssets and services rec eived

on the ba sis of the Black-Scholes formula on the da te on whic h

these we re grante d a nd sprea d o ver the vesting pe riod .

The free share a lloc at ion plans granted by the Group a lso g iverise to the recognition of an expense spread over the vesting

pe riod . The p lans granted in 2004 and 2005 are d ep end ent o n

the achievement of non-market objectives; since, however, it

is thought to be un likely tha t these ob ject ives will be a chieved ,

no expense has been recognized for these plans.

The p lans grante d in 2006 are c ond itiona l, in pa rt, on the

effective presenc e of the be neficiary at the e nd o f the vesting

pe riod a nd in pa rt on the ac hieveme nt of qualitative objectives.

The 2006 pla ns ga ve rise to the rec og nition of a n exp ense

du ring the fiscal yea r.

8



24/78

In view o f the size a nd non-recurrence of p lans grante d in 2006

(number of beneficiaries, vesting period, introduction of free

shares), the expenses related to share-based compensation

wa s kept in non-c urrent e xpenses at 31 Decem be r 2006.

Detai ls of share al location plans are provided in the

manag ement report.

INCOME TAX

Deferred taxes are ca lculated at the tax rate in effect a t the

be ginning of t he following fisc al yea r, on the ba sis of the c arry-

forwa rd metho d. Deferred taxes are reviewed annua lly whe n

the accounts are closed.

Tax exp ense for the fisc al yea r inc ludes tax pa yab le and

de ferred tax.

Deferred tax is calculated according to the balance sheet

method of tax effec t ac co unting on the b asis of temp orary

differences between the book value entered in the c onsolida ted

financ ial sta tem ents and the t ax bases of a ssets and lia bilities.

Deferred t axes are ac co unted for based o n the way in whic hthe Group expe c ts to rea lize or sett le the bo ok value of a ssets

and liab ilities, using tax rates that have be en ena c ted by the

ba lanc e sheet date .

Deferred tax assets and liabilities are not discounted and are

c lassified in the b ala nc e sheet a s non-c urrent assets and

lia bilities.

Deferred tax a ssets are rec ognised for ded uct ible t emp orary

differenc es, unused ta x losses and unused ta x cred its to t he

extent that it is probable that taxable profit will be available

against which the deductible temporary differences can be

utilised.

FINANCIAL DEBT AND FINANCIAL INSTRUMENTS

Financial debt includes:

bonds;

outstand ing ac c rued interest;

outstand ing am ounts relating to financ ial lease a greeme nts;

bank loans and facilities;

subo rdinated loans of unspe c ified durat ion (PSDI);

sec uritized de bt fo r which the group incurs c redit risk;

minority share buyb ac k com mitments.

a) Accounting principle

Financ ial deb ts are reco rded on the ba sis of the princ iple of

amortized cost. Initially, they were recorded at market value,net o f transac tion co sts and premiums direc tly attributa ble to

their issue.

Derivative instruments intended to cover exposure to interest

rate risk are ente red a t ma rket va lue and used as fair value o r

c ash flow hedg es.

Cash flow hedg e: Derivatives intend ed to hed ge the floating

rate of b orrowing a re considered to b e financ ial cash flow

hed ge s. The ga in or loss relating to va ria tions in fa ir value

deemed to be effective is stated as equity until the hedged

transaction is itself recognized in the Groups financial

sta tem ents. The p ortion c onside red to be ineffect ive is direc tly

recorded as financial income/expense.

Fair value hed ge : Issue sw

carrefour df 2006

Documents