EDF / 2018 Reference document

6.

FINANCIAL STATEMENTS Notes to the consolidated financial statements

1.3.5

Translation methods Reporting currency

Furthermore, through its subsidiary Edison, since 2014 the Group has held a 30% investment in Edens, with F2i. However, the governance arrangements and contractual agreements introduced for Edens in connection with this transaction give Edison exclusive control over the company. In application of IFRS 10, Edens is therefore fully consolidated (via Edison) in the Group’s consolidated financial statements. When there is no standard or interpretation applicable to a specific transaction, ■ the Group exercises judgment to define and apply accounting methods that supply relevant and reliable information for preparation of its financial statements. 1.3.3 A list of the main subsidiaries, associates and joint ventures is presented in note 51. Controlled entities 1.3.3.1 Subsidiaries are companies in which the Group exercises exclusive control and are fully consolidated. The Group controls an entity when the three following conditions are fulfilled: it holds power over the entity; ■ it is exposed, or has rights, to variable returns from its involvement with the ■ entity; it has the ability to use its power to affect the amount of the investor’s returns. ■ The Group considers all facts and circumstances when assessing control. All substantive potential voting rights exercisable, including by another party, are also taken into consideration. Investments in associates and joint 1.3.3.2 ventures An associate is an entity in which the Group exercises significant influence on financial and operational policies without having exclusive or joint control. Significant influence is presumed to exist when the Group’s investment is at least 20%. A joint venture is a partnership in which the parties (joint venturers) that exercise joint control over the entity have rights to the entity’s net assets. Joint control is the contractually agreed sharing of control of an entity operated jointly by a limited number of partners or shareholders, such that the financial and operational policies result from unanimous consent of the parties. Investments in associates and joint ventures are accounted for by the equity method. They are carried in the balance sheet at historical cost, adjusted for the share in net assets generated after the acquisition, less any impairment. The share in the net income for the period is reported in “Share in net income of associates and joint ventures” in the income statement. Investments in joint operations 1.3.3.3 A joint operation is a joint arrangement in which the parties (joint operators) that exercise joint control over the entity have direct rights to its assets, and obligations for its liabilities. The Group, as an operator in a joint operation, reports the assets and liabilities and income and expenses related to its investment line by line. 1.3.4 Assets and liabilities contributing to working capital used in the entity’s normal operating cycle are classified as current in the consolidated balance sheet. Other assets and liabilities are classified as current if they mature within one year of the closing date, and non-current if they mature more than one year after the closing date. The income statement presents items by nature. The heading “Other income and expenses” presented below the operating profit before depreciation and amortisation comprises items of an unusual nature or amount. Consolidation methods Financial statement presentation rules

1.3.5.1 The parent company’s functional currency is the Euro. The Group’s financial statements are presented in millions of euros. Functional currency 1.3.5.2 An entity’s functional currency is the currency of the economic environment in which it primarily operates. In most cases, the local currency is the functional currency. But for some entities, a functional currency other than the local currency may be used when it reflects the currency used in the principal transactions. Translation of the financial statements 1.3.5.3 of foreign companies whose functional currency is not the Euro The financial statements of foreign companies whose functional currency is not the Euro are translated as follows: balance sheets are translated into Euros at the closing rate; ■ income statements and cash flows are translated at the average rate for the ■ period; resulting differences are recognised in equity under the heading “Translation ■ adjustments”. Translation adjustments affecting a monetary item that is an integral part of the Group’s net investment in a consolidated foreign company are included in consolidated equity until the disposal or liquidation of the net investment, at which date they are recognised as income or expenses in the income statement, in the same way as other exchange differences concerning the company. Translation of transactions in foreign 1.3.5.4 currencies In application of IAS 21, transactions expressed in foreign currencies are initially translated and recorded in the functional currency of the entity concerned, using the rate in force at the transaction date. At each reporting date, monetary assets and liabilities expressed in foreign currencies are translated at the closing rate. The resulting foreign exchange differences are taken to the income statement. In application of IFRIC 22, any payment or receipt of a non-monetary advance in a foreign currency must be translated at the exchange rate of the transaction date, with no subsequent adjustment. 1.3.6 Related parties include the French State, companies in which the State holds majority ownership and certain of their subsidiaries, and companies in which the EDF group exercises joint control or significant influence. They also include members of the Group’s management and governance bodies. 1.3.7 Sales essentially comprise income from energy sales (to final customers and as part of trading activities), delivery services related to use of the transmission and distribution network, and connection services. They also comprise income from other services and deliveries of goods, mainly engineering, operating and maintenance services, services related to energy sales, design, delivery and commissioning services for power plants or their major components. Income on energy sales is recognised as deliveries are made to customers. The quantities of energy supplied but not yet measured and billed are calculated using consumption statistics and selling price estimates, and are recognised in sales on that basis. Related parties Sales

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I Reference Document 2018