EDF / 2018 Reference document

FINANCIAL STATEMENTS Notes to the consolidated financial statements

technology related to activities as designer and supplier of nuclear steam supply ■ systems and manufacturer of control rod clusters and nuclear fuel (Framatome) including codes and methods, EPR technology, patents and manufacturing processes, all amortised over their useful life; purchased customer contracts and relations, amortised over their useful life. ■ Hydrocarbon prospecting, exploration 1.3.11.2.3 and generation The Group applies IFRS 6, “Exploration for and Evaluation of Mineral Resources”. Prospection and exploration costs and costs incurred in connection with geological surveys, exploration tests, geological and geophysical mapping and exploratory drilling are recognised as intangible assets and fully amortised in the year they are incurred. Development costs related to commercially viable mineral wells and investments in facilities to extract and store hydrocarbons are recognised as “Property, plant and equipment used in generation and other tangible assets owned by the Group” or “Property, plant and equipment operated under concessions for other activities” as appropriate. They are amortised under the Unit Of Production (UOP) method. The Group’s property, plant and equipment is reported under three balance sheet headings, as appropriate to the business and contractual circumstances of their use: property, plant and equipment operated under French public electricity ■ distribution concessions; property, plant and equipment operated under concessions for other activities; ■ property, plant and equipment used in generation and other tangible assets ■ owned by the Group. Initial measurement 1.3.12.1 Property, plant and equipment is recorded at acquisition or production cost. The cost of facilities developed in-house includes all labour and materials costs, ■ and all other production costs that can be included in the construction of the asset. Borrowing costs attributable to the financing of an asset incurred during the ■ construction period are included in the value of the asset provided it is a qualifying asset as defined by IAS 23 “Borrowing costs”. The cost of property, plant and equipment also includes the initial estimate of ■ decommissioning costs. These assets are associated with the provisions recorded to cover decommissioning obligations. At the date of commissioning, property, plant and equipment is measured and recorded in the same way as the corresponding provision (see note 1.3.21). Decommissioning costs for nuclear generation installations also include last core ■ costs (see note 1.3.21). When some of the decommissioning costs for a plant are to be borne by a partner, the expected reimbursement is recognised as accrued income in the assets. The difference between the provision and the accrued income is recorded in Property, plant and equipment, and subsequent payments by the partner are deducted from the accrued income. The Group capitalises safety expenses incurred as a result of legal and regulatory obligations sanctioning non-compliance by an administrative ban from operation. Strategic safety spare parts for generation facilities are treated as property, plant and equipment, and depreciated over the residual useful life of the installations. Concession assets, generation assets 1.3.12 and other property, plant and equipment

The costs of major inspections that are necessary for continued operation by generation assets are capitalised and amortised over a period corresponding to the time elapsing between two inspections. When a part of an asset has a different useful life from the overall asset’s useful life, it is identified as an asset component and depreciated over a specific period. Depreciation 1.3.12.2 Items of property, plant and equipment are depreciated on a straight-line basis over their useful life, defined as the period during which the Group expects to draw future economic benefits from their use. Depending on each country's specific regulations and contractual arrangements, the expected useful lives for the main facilities are as follows: hydroelectric dams 75 years ■ electromechanical equipment used in hydropower plants 50 years ■ fossil-fired power plants 25 to 45 years ■ nuclear generation facilities: ■ in France 40 to 50 years ■ outside France 35 to 60 years ■ transmission and distribution installations (lines, substations) 20 to 50 years ■ wind farm and photovoltaic facilities 20 to 25 years ■ other general plant and machinery 10 to 20 years. ■ Concession agreements 1.3.13 Accounting treatment 1.3.13.1 The accounting treatment of public and private agreements depends on the nature of the agreements and their specific contractual features. For most of its concessions, other than concessions for heat generation and distribution, the Group considers that in substance the grantors do not have the characteristic features of control over infrastructures as defined in IFRIC 12. French concessions 1.3.13.2 In France, the Group is the operator for four types of public service concessions: public electricity distribution concessions in which the grantors are local ■ the public transmission network operated under concession from the State; ■ concessions from public grantors for heat generation and distribution. ■ Public electricity distribution concessions 1.3.13.2.1 General background Since the enactment of the French Law of 8 April 1946, EDF, and then Enedis, has been the operator of most of the public distribution networks in France. In accordance with France’s Energy Code and Local Authorities Code, the public distribution of electricity is principally operated under a specific system of public service concessions. The authorities granting the concessions (local authorities or public establishments for cooperation between local authorities) organise the public electricity distribution service through concession agreements with specifications that define the respective rights and obligations of the grantor and the operator. Enedis thus distributes electricity to 95% of the population of mainland France. The other 5% are served by Local Distribution Companies. The accounting treatment of concessions is based on the concession agreements, with particular reference to their special clauses. It takes into consideration the possibility that the EDF group may one day lose its status as the sole authorised State concession operator. authorities (municipalities or syndicated municipalities); hydropower concessions with the State as grantor; ■

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EDF I Reference Document 2018