Accounting policy

Interest on borrowings is recognized in costs of borrowings as incurred, with the exception of borrowing costs directly attributable to the acquisition, construction, and production of qualifying assets (see note F22 Property, Plant and Equipment).

Net foreign exchange gains or losses on financial items and changes in fair value of derivative financial instruments related to net indebtedness are presented in “Other gains and losses on net indebtedness”, with the exception of changes in fair value of derivative financial instruments that are hedging instruments in a cash flow hedge relationship, and which are recognized on the same line as the hedged item, when the latter affects profit or loss.

In € million





Cost of borrowings





Interest on loans and short term deposits





Other gains and losses on net indebtedness





Net cost of borrowings





Cost of discounting provisions





Impact of change of discount rate on provisions





Net financial charges





Details are included in note F36 Net indebtedness.

The decrease of the net cost of borrowings is explained mainly by:

  • the lower cost of borrowing, following (a) the repayment at maturity (June 2018) of the remaining outstanding amount of the EMTN bond (€ 382 million), already partially early repaid (€ 118 million) in 2017, and (b) the partial early repayment of the two $ Cytec bonds in 2017. The cost of borrowing in 2017 included one-off accretion costs (acceleration) linked to the early repayment for € (10) million; and
  • the reduction in other gains and losses on net indebtedness from € (44) million for the year ended December 31, 2017 to € (1) million for the year ended December 31, 2018, resulting mainly from (a) the further optimization of Solvay subsidiary capital structure and swap needs and (b) the one-off premiums incurred in 2017 (€ (15) million) relating to the early repayment of the above-mentioned bonds.

The decrease of cost of discounting provisions relates to post-employment benefits (€ 8 million) and to environmental provisions (€ 12 million) and is explained mainly by the evolution of the applicable discount rates (see also note F34 Provisions).