EDF / 2018 Reference document

FINANCIAL STATEMENTS Notes to the consolidated financial statements

GROUP ACCOUNTING POLICIES NOTE 1 DECLARATION 1.1 OF CONFORMITY AND GROUP ACCOUNTING POLICIES Pursuant to European regulation 1606/2002 of 19 July 2002 on the adoption of international accounting standards, the EDF group’s consolidated financial statements at 31 December 2018 are prepared under the presentation, recognition and measurement rules set out in the international accounting standards published by the IASB and approved by the European Union for application at 31 December 2018. These international standards are IAS (International Accounting Standards), IFRS (International Financial Reporting Standards), and SIC and IFRIC interpretations. The Group has not opted for early application of standards and interpretations that were not yet mandatory in 2018. 1.2.4

Standards and amendments adopted by the European Union but only applicable after 31 December 2018 IFRS 16 – Leases 1.2.4.1 IFRS 16 “Leases” was adopted by the European Union on 31 October 2017 and will be mandatory for financial years beginning on or after 1 January 2019. IFRS 16 requires all leases other than short-term leases and leases of low-value assets to be recognised in the lessee’s balance sheet in the form of a “right-of-use” asset, with a corresponding financial liability. Existing contracts classified as “operating leases” are currently reported as off-balance sheet items (see note 46.1.1.3). The EDF group’s lease contracts essentially concern real estate assets (office and residential properties), industrial installations (land, wind farms) and to a lesser extent vehicles and IT equipment. The Group identified the potential impacts of the application of IFRS 16 via questionnaires sent to all its subsidiaries to collect information about the features of operating leases in existence at 31 December 2017. Based on the results, it was decided to apply the “modified” retrospective approach. In compliance with the standard, the incremental borrowing rate is used to discount the lease liability to present value at the transition date. This rate is EDF’s incremental indebtedness rate, based on zero-coupon EDF bond rates, adjusted for the currency risk, a country risk premium, the term of the contracts and the subsidiary’s credit risk. The Group also decided to apply the two exemptions allowed by IFRS 16, and therefore does not recognise: leases with a duration of 12 months or less (and for the transition, leases ■ terminating within 12 months of the first application of the standard); leases of assets with individual value when new of less than USD5,000. ■ Based on the work done at 30 June 2018, application of IFRS 16 in the Group’s financial statements at 31 December 2017 under the modified retrospective approach would have resulted in an increase of €4.3 billion in net indebtedness (including Framatome) and would have had a positive impact of approximately €0.5 billion on the operating income before depreciation and amortisation (excluding Framatome and including a partial cancellation of realised gains on sale amounting to €0.2 billion), and the consolidated net income would not have been significantly different. At 31 December 2018, the impacts of IFRS 16 were reviewed. Under the modified retrospective approach, application of the standard results in an increase of approximately €4.5 billion in net indebtedness at 31 December 2018; also, according to the Group’s calculations, application of IFRS 16 under the modified retrospective approach would have had a positive impact of approximately €0.5 billion on the operating income before depreciation and amortisation for 2018 (including a partial cancellation of realised gains on sale amounting to €0.2 billion), and the consolidated net income would not have been significantly different. The above effects on operating income before depreciation and amortisation and on the consolidated net income are reported for information purposes in compliance with IAS 8.30, due to use of the modified retrospective approach.

1.2

CHANGES

IN ACCOUNTING STANDARDS AT 31 DECEMBER 2018

6.

The accounting and valuation methods applied by the Group in the consolidated financial statements at 31 December 2018 are identical to those used in the consolidated financial statements at 31 December 2017, with the exception of the following changes:

1.2.1

IFRS 15 “Revenue from contracts with customers” and IFRS 9 “Financial instruments”

These two new standards adopted by the European Union are applicable for financial years beginning on or after 1 January 2018. The information required by IAS 8 concerning the effects of their application by the Group is given in note 2.

1.2.2

IFRIC 22 “Foreign Currency Transactions

and Advance Consideration” IFRIC 22, applicable for financial years beginning on or after 1 January 2018, was adopted by the European Union on 28 March 2018. This interpretation requires payment or receipt of a non-monetary advance in a foreign currency to be translated at the exchange rate of the transaction date, with no subsequent adjustment. Prospective application of IFRIC 22 does not have a significant impact on the EDF group’s consolidated financial statements. to standards applicable from 1 January 2018 The following IASB publications have no impact on the Group’s consolidated financial statements: amendments to IAS 40 “Investment property” entitled “Transfers of investment ■ property”, adopted on 14 March 2018; amendments to IFRS 2 “Share-based Payment” entitled “Classification and ■ measurement of share-based payment transactions”, adopted on 26 February 2018; amendments to IFRS 4 “Insurance Contracts” entitled “Applying IFRS 9 ‘Financial ■ Instruments’ with IFRS 4 'Insurance Contracts'”, adopted on 3 November 2017; annual improvements to IFRS, 2014-2016 cycle, adopted on 7 February 2018. ■ Other amendments and improvements 1.2.3

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EDF I Reference Document 2018