EDF_REGISTRATION_DOCUMENT_2017

FINANCIAL STATEMENTS Notes to the consolidated financial statements

GROUP ACCOUNTING STANDARDS NOTE 1 DECLARATION 1.1 OF CONFORMITY AND GROUP ACCOUNTING POLICIES

it is classified as an agent, and can only include the amount of commission, if any, in its sales revenues. A review of contracts and the applicable regulatory framework has been conducted for each country where customers have single contracts covering the supply and delivery of gas and/or electricity (France, Belgium, the United Kingdom and Italy). In France and Belgium, the Group has concluded that delivery is a distinct ■ service from the supply of energy, and that the energy supplier is acting as an agent in providing this delivery service, as the supplier is not responsible for performance of this service, is not exposed to any risk related to stocks or capacity, and cannot pass on to the final customer any price other than the price charged by the distributor for the delivery. Also, in France the credit risk is borne by the distributor as of 1 January 2018, and energy suppliers will be remunerated by a commission paid by distributors for management of clients on a single contract (see note 4.2). In France, the vast majority of electricity delivery services are performed by Enedis, the Group’s regulated subsidiary that is the French distribution network operator. As a result the principal-agent analysis concerning electricity delivery in France will only have an impact on presentation of sales in the operating segment reporting. Currently, the Group’s operating segment reporting presents revenues on electricity delivery in the “France – Regulated activities” segment, as inter-segment sales. When IFRS 15 is applied, these revenues will be presented as external sales. This analysis will lead to a reduction in Group sales equivalent to the amount of gas and electricity delivery services in Belgium and gas delivery services in France. To give an illustration, the amounts for 2017 would have been €1,065 million for Belgium, in the “Other international” segment, €387 million for the “France – Generation and Supply” segment and €56 million for the “France – Regulated activities” segment. These figures are not necessarily representative of the amounts for 2018, since they are sensitive to delivery volumes, which notably depend on weather conditions and the level of demand, as well as delivery tariffs. In correlation, purchases of delivery (included in fuel and energy purchases) will be reduced by the same amount. Classification as an agent will therefore have no impact on the Group’s operating profit before depreciation and amortisation. In Italy and the UK, however, the energy supplier will continue to be ■ classified as a principal for delivery services. In the United Kingdom, the Group has concluded that supply and delivery formed a single performance obligation, for which the supplier is the principal. In Italy, the risk borne by the supplier on capacity reservations with network operators and the fact that the supplier can set its price for delivery to the final customer justify its classification as a principal. Recognition of market energy purchase and sale transactions that are ■ part of optimisation activities Some Group entities undertake operations on the wholesale electricity and gas markets, in application of the Group’s risk management policy. Depending on the net position to be hedged, an entity may make purchases and sales on the forward and spot markets. These hedges are executed progressively and give rise to optimisation activities (supply/demand adjustment at different timeframes, and decisions between using the Group’s own generation facilities or purchasing from the markets). The analysis of contracts for implementation of IFRS 15 has led the Group to consider that accounting on a net basis provides a more relevant reflection of the economic reality of optimisation transactions. Some Group entities (Edison – “Italy” segment, EDF Luminus – “Other international” segment, Dalkia – “Other activities” segment) have so far reported such sales on a gross basis, and booked a corresponding entry in energy purchases. Based on 2017 data, this change would reduce revenue and energy purchases by €2,793 million, with no impact on operating profit before depreciation and amortisation. These figures are not necessarily representative of the future amount for 2018, as the amount is by nature very variable from one year to the next.

Pursuant to European regulation 1606/2002 of 19 July 2002 on the adoption of international accounting standards, the EDF group’s consolidated financial statements for the year ended 31 December 2017 are prepared under the international accounting standards published by the IASB and approved by the European Union for application at 31 December 2017. 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 2017. METHODS AT 31 DECEMBER 2017 The accounting and valuation methods applied by the Group in the consolidated financial statements for the year ended 31 December 2017 are identical to those used in the consolidated financial statements for the year ended 31 December 2016, with the exception of the following changes: CHANGES IN ACCOUNTING 1.2

6.

1.2.1

Accounting standard amendments adopted by the European Union that became mandatory as of 1 January 2017

The following amendments to accounting standards have been adopted by the European Union and are mandatory for financial years beginning on or after 1 January 2017: amendments to IAS 12 “Income Taxes” entitled “Recognition of Deferred Tax ■ Assets for Unrealised Losses”: no impact for the Group; amendments to IAS 7 “Statement of cash flows” entitled “Disclosure Initiative”. ■ These amendments require companies to disclose information that can be used to reconcile the changes in balance sheet assets and liabilities reported in the “cash flows from operating activities” section of the cash flow statement, separating cash movements from non-cash movements (see note 38.2.1).

1.2.2

Standards and amendments adopted by the European Union for mandatory application after 31 December 2017 IFRS 15 – Revenue from Contracts with

1.2.2.1

Customers On 22 September 2016, the European Union (EU) adopted IFRS 15 “Revenue from Contracts with Customers”, which will be mandatory for financial years beginning on or after 1 January 2018. The associated amendments were adopted on 31 October 2017 and will be applicable at the same date as the standard itself. Preparatory work for application of IFRS 15 continued during 2017, and the operations for which the accounting treatment will be changed were identified. The two principal changes concern the following: Recognition of income from energy delivery (principal versus agent ■ considerations). In accordance with IAS 18, the delivery component of an energy supply contract is automatically included in sales revenues by all Group entities that supply electricity or gas. IFRS 15 requires analysis of whether or not this energy delivery is a distinct performance obligation within the energy supply contract. It also sets out the conditions in which an entity operates as principal or agent for the supply of a good or service with third party involvement. If the entity is classified as a principal, it can recognise the sales revenue from the delivery service. Otherwise,

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EDF I Reference Document 2017