N° 2000

2017

Manual of Accounting
Policies (MAP)

Shareholders Equity

This procedure is strictly confidential and is for internal use of ArcelorMittal. Only ArcelorMittal staff may have access to this procedure.
No copy of it can be given to somebody outside ArcelorMittal without the written approval of the designated responsible person.
The divulgation of this technical note without the appropriate approval will be considered as an improper conduct.
N° 2000 - Shareholders Equity
Contents
1 – Objective and overview 3
2 – Definitions 4
3 – Guidance 5
3.1 What are the different types of dividends? 5
3.2 When are dividends booked in BPM? 5
3.3 What are the recurring intercompany differences 4.3 Capital increase or decrease 7
on dividend declaration? 5
3.4 How is intercompany dividend reconciliation done? 5
3.5 Why is it important to share with the counterparty all
documentation related to dividend distribution? 5
3.6 Do we have to declare the gross or net dividend? 5
3.7 Where is withholding tax on dividends booked? 5
3.8 Which accounts have to be used? 5
3.9 Which flows have to be used in BPM
to declare final dividends? 5
2
3.10 How to present interim dividend and cash paid? 6
3.11 What are IFRS requirements in terms of dividend
recognition as a liability? 6
4 – EXAMPLES 7
4.1 Appropriation of the result 7
4.2 Distribution of dividends 7
4.3.1 For the subsidiary package 7
4.3.2 For the holding package 8
4.4 Other flows 8
5 – REPORTING 9
5.1 Number of shares 9
5.2 Statement of financial position 9
N° 2000 - Shareholders Equity 3

1 - Objective and Overview

The objective of this procedure is to describe - Treasury shares are presented as a deduction
the group accounting policy regarding the from equity
shareholders’ equity (capital, reserves, result of
the period, foreign exchange). - Incremental costs that are directly
attributable to issuing or buying back own
It deals with the following IFRS standards: equity instruments are recognized directly
IAS 1 – Presentation of financial statements in equity
IAS 32 – Financial Instruments: Presentation
- Gains and losses on transactions in an entity’s
Overview: own equity instruments are reported directly
in equity, not in the statement of operations.
- An instrument is classified as an equity
instrument only if it does not contain a
contractual obligation for the issuer to deliver
cash or another financial asset to another
entity, or to exchange financial assets or
financial liabilities with another entity under
conditions that are potentially unfavorable to
the issuer.
N° 2000 - Shareholders Equity
2 - Definitions
An equity instrument is any contract that
evidences a residual interest in the assets of an
entity after deducting all of its liabilities.
Shareholders’ equity is the net worth of a com-
pany. It represents the stockholders’ portion
of a business’ assets after all creditors have
been paid. Shareholders’ equity is also referred
to as Owner’s or Stockholders’ equity. It can
be calculated by taking the total assets and
subtracting the total liabilities (equity = assets
– liabilities)
Shareholders’ equity usually comes from two
places:
- the first is cash paid in by investors when the
company sold stock;
- the second is retained earnings, which are
the accumulated profits a business has held
on to and not paid out to its shareholders as
dividends. Because these are two ways a com-
pany generally creates shareholders’ equity, the
statement of financial position is organized to
show the contribution of each part.
The book value of equity will increase if the
company’s assets increase more than its
liabilities.
For example, if a company is making profits and
receives more cash for its products than the
cost at which it produced these goods, and so
in the act of making a profit it is increasing its
assets. Also, an issuance of new equity in which
the company obtains new capital, the sharehol-
ders’ equity increases.
Equity will decrease, for example, when
machinery depreciates, which is registered
as a decline in the value of the asset, and on
the equity side of the company’s statement
of financial position as a decrease in sharehol-
ders’ equity.
Other comprehensive income (“OCI”) is the
difference between the net result as disclosed
in the statement of operations (P&L accounts)
and comprehensive income, and corresponds to
certain gains and losses of the unit not immedia-
tely recognized in the statement of operations
of the period (gains/losses related to derivatives
qualifying for cash flow hedge accounting,
translation reserve related to the consolidation
of entities whose reporting currency is not the
consolidation currency, unrealized gains/losses
related to fair value adjustments with respect to
available-for-sale financial assets, etc.).
As required by the IFRS Standards, some ele-
ments previously recognized in OCI have to be
recycled to profit or loss upon disposal of the
underlying or when the underlying transaction
affects profit or loss.
Shareholders equity mainly includes the
following captions:
Share capital: Initial and subsequent invest-
ment made by the owner or shareholders.
The amount of share capital of a company is
subject to changes which can be:
- cash based: shares issued or redeemed lea-
ding to a capital increase/decrease
- non-cash based: share capital increase/
decrease following a transfer of reserves or
retained earnings
Share capital can be composed of both com-
mon shares and preferred shares (including
specific dividend rights and voting rights).
Treasury Shares: Shares issued by the
company but reacquired at a later stage for
various purposes (management of stock
price, obligations resulting from stock option
plans, employee share purchase plan or
convertible bonds).
4
Acquisition of treasury shares may be
subject to country based legal or regulatory
constraints. Dividend and voting rights related
to treasury shares may be suspended.
Additional Paid-in Capital (“APIC”): Amounts
paid for stock in excess of its par value or
stated value. Also, other amounts paid by stoc-
kholders and charged to equity accounts other
than capital stock.
Retained Earnings: is the portion of net ear-
nings not paid out as dividends, but retained by
the company to be reinvested in its operations
or used to repay debt. Retained earnings are
obtained by adding net result to opening retai-
ned earnings and subtracting any dividends
paid to shareholders:
+ Retained earnings (beginning of the
period)
+ Net income of the period
- Dividends paid to shareholders
= Retained earnings (end of period):
Reserves:
Reserves have several origins:
- Foreign currency translation reserve: arising
from the consolidation of entities with dif-
ferent reporting currencies from consolidation
currency;
- Legal reserve as required by law in certain
countries;
- Reserve for treasury shares held as required
by law in certain countries
- Other distributable or non-distributable
reserves
Reserves are generally created through an
allocation of profit from the year.
N° 2000 - Shareholders Equity
3 - Guidance
Please find below 11 frequently asked
questions & answers on dividend declarations:
3.1 What are the different types of dividends?
There are two different types of dividends:
1) Final dividend: Dividend is recognized after
approval of result allocation by Annual
General Meeting of Shareholders. The
dividend is recognized as a dividend payable
as long as the cash outflow did not happen.
2) Interim dividend: Board of Directors may
decide the payment of an interim dividend
prior to the year-end closing. This dividend
is considered as an interim remuneration
before the approval of the result allocation
by the Annual Shareholders Meeting.
3.2 When are dividends booked in BPM?
The triggering event for dividend declaration in
BPM is the Board of Directors’ decision (interim
dividend) or the previous year result allocation
approved by the Annual General Meeting (final
dividend).
3.3 What are the recurring intercompany
differences on dividend declaration?
Intercompany differences are categorized as
follow:
1. Differences due to wrong partner
declaration. Correction is the responsibility of
the relevant entity;
2. Differences due to wrong period of
declaration (see paragraph 3.1). Correction is
the responsibility of the relevant entities;
3. Differences due to foreign exchange
differences between the reporting currency
and the currency in which the dividend is
declared/paid. Example: An entity declares a
dividend distribution in BRL when its reporting
currency is USD to a shareholder having EUR
as reporting currency. The amount distributed
is converted at the closing rate while dividends
received are converted at the spot rate in
EUR (and converted in USD at average rate
for consolidation purposes). This difference is
resolved centrally (automatically) and booked
directly in equity at the consolidated level
through flow F85 in the account “136500
Foreign Exchange Translation Reserve”.
3.4 How is intercompany dividend
reconciliation done?
The intercompany reconciliation is made
centrally with the “ES Analyzer” reconciliation
tool. The reconciliation is done by entity, by
nature of dividend (Interim/Final) and by family
of accounts (P&L, payable/receivable). The
reviewer sends to both payer and receiver
a request to properly declare intercompany
dividend. All differences have to be reconciled
and justified.
3.5 Why is it important to share with the
counterparty all documentation related to
dividend distribution?
The minutes of Shareholders’ Meeting have
to be shared between the counterparties
to enable proper booking of intercompany
dividend in the same reporting period.
3.6 Do we have to declare the gross or net
dividend?
The dividend is recorded gross.
If withholding tax is retained, the entity
that receives the dividend has to book the
gross amount in the account 750000 (final
dividend) or 750100 (interim dividend) and
the withholding tax in the income tax line in the
account 670000 current tax expense.
5
3.7 Where is withholding tax on dividends
booked?
Some entities pay withholding taxes on
dividend distributions.
According to IAS 12.65A, “When an entity
pays a dividend to its shareholders it may be
required to pay a portion of the dividends to
taxation authorities on behalf of shareholders.
In many jurisdictions, this amount is referred
to as a withholding tax”. For dividend recipient,
see the entries in paragraph 3.8 and flows in
paragraph 3.9.
3.8 Which accounts have to be used?
Assets
Dividends receivable 411000 Dividend
receivable
Paid interim-dividend 555000 Paid interim-
dividend
Liabilities
Dividends payable 470000 Dividend payable
Equity
- Usually the account 140000 “Result brought
forward” with the flow F06 “Distribution”
- Dividend paid XP 6940 “Dividend paid”
P&L
Dividend 750000 Dividend
Interim dividend 750100 Interim dividend
3.9 Which flows have to be used in BPM to
declare final dividends?
Dividend payer uses the following flows
140000 Result brought forward (F06) > Debit
470000 Dividend payable (F15) > Credit
450000 Income tax payable (F15)> Credit
Dividend recipient uses the following flows
670000 Current tax expense (F99) > Debit
411000 Dividend receivable (F15) > Debit
750000 Dividend (F99) > Credit
N° 2000 - Shareholders Equity 6

3.10 How to present interim dividend and cash paid?

Accounting treatment:

Company A pays $100 to B as an interim dividend related to the results of the current year with a 15% withholding tax rate (Year N):

Company A: (which distributes the dividend = the daughter)

Paid Interim Dividend Cash Income tax payable

555000 550000 450000
100 85 15

Company B (which receives the dividend = the parent)

Interim Dividend Cash Current Tax expense

750100 550000 670000
100 85 15

Company B (daughter) declares a complementary final dividend for the year of $200 with a 15% withholding tax rate (Year N+1):

Company A (which distributes the dividend):

Dividend Results brought Income tax Result brought Paid Interim

payable forward payable forward dividend
470000 140000 450000 140000 555000
170 200 30 100 100

(Interim dividend paid in Year N is reversed from account 555000 and becomes an equity movement in Year N+1)

Company B (which receives the dividend = the parent)

Final Dividend Dividend receivable Current Tax expense

750000 411000 670000
200 170 30

3.11 What are the IFRS requirements in terms of dividend recognition as a liability?

IAS 10 and IAS 37 provide that dividends may only be recorded as a liability upon its final approval, i.e. when its payment is no longer at the discretion
of the company (IAS 10.12). This is usually the case when shareholders declare the dividend to be distributed in their annual general meetings.
Accordingly, dividends paid and/or declared before such final approval should not be treated as a distribution (i.e. as a reduction of net equity).
N° 2000 - Shareholders Equity 7

4 - Examples

4.1 Appropriation of the result

Appropriation of the result: Flow F05

4.2 Distribution of dividends

For the distribution of dividends, the flow F06 must be used. The amount has to be detailed by partners (see link in the cells). For additional information,
please read also the Q&A in the section 3.

4.3 Capital increase or decrease

For capital increase (in cash), the flow F40 can be used. For a capital decrease (in cash), it is the flow F41. If share capital is increased or decreased as a
result of contributions in kind, flow F70 should be used.

4.3.1 For the subsidiary package

N° 2000 - Shareholders Equity
4.3.2 For the holding package
The shareholders companies have to indicate the
same information in the accounts Investments
(accounts 28xxxx Investments in affiliated
enterprises, in company with link, recorded at
fair value, etc.).
In case of capital increase/decrease: please share
the information between the subsidiary/ holding.
4.4 Other flows
- Flow F10 Result
Based on the Net result calculated in the
statement of operations, the net result of the
period in the equity section is automatically
indicated in the flow F10 of the account
145000 “Net result of the period”.
- Flow F15: Variations
In the non-current part of the liabilities, the
flow F15 has to be nil.
All variations must be explained with the
adequate flows.
- Flow F50 Reclassification
For any transfer between accounts in the
same section, the appropriate flow is F50
8
F50
134000 Other reserves +25
140000
Results brought forward -25
Total 0
- Flow F52 Fair value – Equity
Examples: cash flow hedge on commodity,
investments recorded at fair value
- Flow F70 Merger / Spin off
This flow can be used in case of internal
restructurings.
- Flow F80 Foreign exchange difference
This flow is only for sub-consolidation with
subsidiaries in foreign currency i.e. currency
different from the consolidation one.
- Flow F85 Unrealized foreign exchange
gains/ losses
Example: cash flow hedge on foreign currency,
net investment hedge
N° 2000 - Shareholders Equity
5 - Reporting
5.1 Number of shares
In the schedule 1A-LIAB100Q, the list of
shareholders for the entity and the number
of shares held by each shareholder must be
declared on monthly base.
5.2 Statement of financial position
- 100000 Issued capital
Nominal amount of subscribed capital (equal to
contribution and contribution commitment of
shareholders) according to company’s statutes
or articles of incorporation.
This caption consists of ordinary shares and
possibly preference shares issued in return of
contributions acquired for due consideration. It
does not include rights such as certificates of
entitlement attributed for example to company
founders. The part of issued capital still unpaid
has to be deducted from the issued capital on
the account 101000 “Uncalled capital”
- 101000 Uncalled capital
Part of subscribed capital for which no
payment request has been done yet by the
company’s legal representative institutions.
- 110000 Share premium account
Share premium represents the amount paid by
shareholders at incorporation of the company
or following a capital increase which exceeds
nominal value (or fraction value if shares are
without nominal value) of issued shares.
- 120000 Revaluation surpluses
The account includes unrealised gains reco-
gnized by means of revaluation granted by
tax authorities.
- 125000 Treasury stock
In accordance with IFRS standards, when the
company holds some of its own shares (trea-
sury stock), the book value of these shares is
deducted from net equity.
- 130000 Legal reserve
When net result is allocated to retained
earnings, it may be a legal requirement to
allocate a specific percentage to a reserve
(which is not distributable) as long as this
reserve doesn’t reach a given percentage of
retained earnings.
* These accounts may only be used by entities which are applying cash flow hedging in accordance with IFRS and as agreed with GAPM (com-
pliance team) and Treasury.
- 131000 Reserves not available for own
shares
When the company holds some own shares,
it may be sometimes required to build a
reserve (not distributable) in connection with
this investment
- 131100 Other reserves not available
This account includes:
- Reserves which – according to the statutes
– cannot be freely distributed by simple
majority at general meeting of shareholders,
- Reserves in respect of which the sharehol-
ders have no rights in the case of resignation
or exclusion.
- 132000 Untaxed reserves: gain on dis-
posal of fixed assets
This caption includes reserves based on rea-
lized gains on disposals of fixed assets whose
tax exemption or tax deferral depends on the
retention of these gains within the company.
It can include for example realized gains on
disposals of fixed assets which may benefit
from a tax deferral if they are reinvested
to acquire new fixed assets. As long as
investment is not finalized, those gains shall
be recorded in account 132000 and when
the new asset is acquired, they are deducted
from purchase price.
- 132100 Untaxed reserves: other
This caption includes nominal value of
reserves based on depreciation of tangible
and intangible fixed assets applied on a base
exceeding acquisition cost, provided that
depreciation on this increased base is tax
deductible.
- 133000 Reserves available for distribu-
tion
Reserves which can be freely distributed by
decision of the general meeting of share-
holders
- 134000 Other reserves
All reserves that could not be categorized in
one of the previous captions
- 134500 Fair value revaluation
Revaluation at fair value of identifiable assets
and liabilities in the framework of a business
combination is recorded in this account.
9
- 134550 Revaluation of foreign exchange
instruments*
Revaluation through equity of derivatives not
linked to foreign exchange or price risk has to
be booked in this account. Revaluation has to
be done net of deferred taxes (immediately
recorded in account 169000 without any
income statement impact)
- 134555 Revaluation of commodity
instruments*
This account is to be used in the framework
of cash flow hedge accounting regarding to
commodity price risk.
The portion of the gain or loss on the
hedging instrument (derivative instrument
in most of the cases) that is determined to
be an effective hedge is to be recognized
directly in this account.
Amounts that had been recognized directly in
equity should be included in net profit or loss
in the same period during which the hedged
commitment of forecasted transaction
affects net profit or loss (for example, when
a forecasted sale actually occurs).
Revaluation has to be done net of deferred
taxes (immediately recorded in account
169000 without any income statement
impact).
-134560 Revaluation of other derivatives*
Revaluation through equity of derivatives not
linked to foreign exchange or price risk has to
be booked in this account.
Revaluation has to be done net of deferred
taxes (immediately recorded in account
169000 without any income statement
impact).
- 134565 Revaluation of invest recorded at
fair value
This account represents the revaluation
reserve related to AFS (available-for-sale
investments; accounts 283800) carried
at fair value with changes recorded in net
equity.
Revaluation has to be done net of deferred
taxes (immediately recorded in account
169000 or 291400 without any income
statement impact).
N° 2000 - Shareholders Equity
- 134600 Revaluation of emission rights*
The result of the mark-to-market revalua-
tion of CO2 emission rights has to be booked
in this account, net of deferred tax impact.
- 134650 Recognized actuarial gains /
losses
Recognized actuarial gains and losses related
to employee benefits are recorded in this
account.
- 134700 Stock options
For stock option plan granted after
November 7th 2002, IFRS2 requires the
grantor to record the fair value of the
benefit granted against an increase in
equity. Account 134700 should be used to
book this increase. The corresponding P&L
account is 60112G “Employee benefits” in
the statement of operations by functions
and EMPLB634000 “Stock options” in the
statement of operations by nature (the
P&L by nature is only completed for internal
analysis).
- 136300 Consolidated reserves
Consolidated reserves represent the diffe-
rence between the group share in net equity
and the book value in the investment after
identification of any goodwill. This account
should only be used by group accounting
department and companies performing a
sub-consolidation.
- 136500 Foreign exchange translation
reserve (sub-consolidation)
This account represents a specific compo-
nent of consolidated reserves (group shares)
of companies performing a sub-consolida-
tion and is only to be used by such compa-
nies.
- 136600 Foreign exchange translation
reserve non-controlling interests (sub-
consolidation)
This account represents a specific compo-
nent of consolidated reserves of companies
performing a sub-consolidation and is only
to be used by such companies. This caption
represents the non-controlling part of the
above mentioned translation differences.
* These accounts may only be used by entities which are applying cash flow hedging in accordance with IFRS and as agreed with GAPM (com-
pliance team) and Treasury.
10
- 136900 Non-controlling interests (sub-
consolidation)
This account represents consolidated
reserves of companies performing a sub-
consolidation and is only to be used by such
companies. Interests of shareholders other
than the parent company in net equity of a
consolidated company are disclosed in this
account.
- 140000 Results brought forward
Earnings or losses from preceding years are
carried forward in this account in accordance
with decision of the annual general meeting
of shareholders.
- 145000 Net result for the period
Net result of the current financial year as
stated in the income statement (flow F10)
- 145900 Result of the non-controlling
interests (sub-consolidation)
This account is only to be used by companies
performing a sub-consolidation. Interests of
shareholders other than the parent company
in net result of the current financial year of
a consolidated company are disclosed in this
account.
This caption includes exchange differences on
foreign entities resulting from:
- translation of income and expense items at
the exchange rates at the date of transaction
(average rate) and assets and liabilities at the
closing rate,
- translation of the opening net investment
in the foreign entity at an exchange rate
different from that at which it was previously
reported, and
- other changes to equity in the foreign entity.