EDF / 2018 Reference document

6.

FINANCIAL STATEMENTS Notes to the consolidated financial statements

a provision is established equivalent to the shortfall in certificates ■ compared to the obligation at the year-end. The value of this provision is based on the acquisition price of certificates already purchased on the spot or forward market, and market prices or penalty prices for the balance. The provision is cancelled when the certificates are surrendered to the State. Forward purchases/sales of certificates related to trading activities are recorded in accordance with IFRS 9, stated at fair value in the balance sheet date. The change in fair value is recorded in the income statement. The EDF group fulfils its obligations either by taking measures regarding its assets or actions with its final customers in order to receive energy savings certificates from the State, or by purchasing energy savings certificates directly. Expenses incurred to meet the cumulative energy savings obligation are treated as: property, plant and equipment if the action taken by the entity concerns its own ■ assets and the expenses qualify for recognition as an asset; expenses for the year incurred, if they do not meet the requirements for ■ capitalisation or if the action taken is to encourage third parties to save energy. Expenses incurred in excess of the accumulated obligation at year-end are included in inventories until they are used to cover the obligation. A provision is recognised if the energy savings achieved are lower than the cumulative energy savings obligation. The amount of the provision is equal to the cost of actions still to be taken to meet the obligations related to the energy sales made. Environmental expenses 1.3.27.4 Environmental expenses are identifiable expenses incurred to prevent, reduce or repair damage to the environment that has been or may be caused by the Group as a result of its activities. These expenses are treated as follows: they are capitalised if they are incurred to prevent or reduce future damage or ■ protect resources; they are booked as environmental liabilities and increases to provisions for ■ environmental risks if they correspond to an obligation that exists at the year-end and it is probable or certain at the reporting date that they will lead to an outflow of resources; they are recognised as expenses if they are operating expenses for the bodies in ■ charge of environmental concerns, environmental supervision, environmental duties and taxes, processing of liquid and gas effluents and non-radioactive waste, or research unrelated to an investment. Energy savings certificates 1.3.27.3 The system currently in force is described in note 49.2.

Rights held to comply with regulatory requirements on greenhouse gas emissions (the “Generation” model) are recorded in intangible assets: at acquisition cost when purchased on the market; ■ at nil value when allocated free of charge (in countries that still have a free ■ allocation system). When the estimated emissions by a Group entity over a given period are higher than the rights allocated for no consideration for the period less any allocated rights sold on the spot or forward market, a provision is established to cover the excess emissions. This provision is equal to the shortfall in rights held (difference between actual emissions and allocated rights held at the closing date). If no emission rights are allocated free of charge, a provision is systematically recorded equivalent to the actual emissions at the closing date. In either case, the provision is measured on the basis of the acquisition cost up to the amount of rights acquired on the spot or forward markets, and on market prices for the balance. It is cancelled when the rights are surrendered to the State. At the closing date, the portfolio of emission rights and the obligation to surrender rights for the emissions of the year are presented gross, without netting. If the number of purchased emission rights recorded as intangible assets at the end of the year and not subject to forward sale is higher than the number of purchased rights that will be surrendered to the State for the year’s emissions, an impairment test must be applied to the excess. If the realisable value is lower than the net book value, impairment is booked. Renewable energy certificates 1.3.27.2 The system currently in force is described in note 49.3. The EDF group applies the following accounting treatments: for non-obligated electricity producers, certificates obtained based on generation ■ output are recorded in “Other inventories” until they are sold on to suppliers; for obligated producers and an entity that both produces and supplies energy ■ and is under an obligation to sell a specified quantity of renewable energy, the Group uses the following accounting treatments for certificates obtained based on generation output: up to the level of the obligation, these certificates are not recognised, ■ certificates in excess of the obligation are recorded in “Other inventories”, ■ in the specific situation when an entity is not in a position to meet its ■ obligation at the year-end, the Group applies the following accounting treatment: certificates acquired for a consideration in order to meet the obligation ■ are recorded in intangible assets at acquisition cost, and

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I Reference Document 2018