EDF_REGISTRATION_DOCUMENT_2017

FINANCIAL STATEMENTS Notes to the consolidated financial statements

1.3.2.4

Impairment of goodwill and long-term

Consolidation methods 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. Financial statement presentation rules Reporting currency 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 methods 1.3.5

assets Impairment tests on goodwill and long-term assets are sensitive to the macro-economic and segment assumptions used – particularly concerning energy price movements – and medium-term financial forecasts. The Group therefore revises the underlying estimates and assumptions based on regularly updated information. These assumptions, which are specific to Group companies, are presented in note 13. Financial instruments 1.3.2.5 In measuring the fair value of unlisted financial instruments (essentially energy contracts), the Group uses valuation models based on a certain number of assumptions subject to unforeseeable developments. Energy supplied but not yet measured 1.3.2.6 and billed As explained in note 1.3.7, the quantities of energy supplied but not yet measured and billed are calculated at the reporting date based on consumption statistic models and selling price estimates. Determination of the unbilled portion of sales revenues at the year-end is sensitive to the assumptions used to prepare these statistics and estimates. Obligations concerning French public 1.3.2.7 distribution concession assets to be replaced In view of the specific nature of French public electricity distribution concessions, the Group has opted to present its obligation to replace concession assets in the balance sheet at a value based on the amount of contractual commitments as calculated and disclosed to the grantors in the annual business reports (see note 1.3.13.2.1). An alternative approach would be to value the obligations based on the present value of future payments necessary to replace these assets at the end of their industrial useful life. The impacts this alternative approach would have had on the accounts are shown in note 1.3.23 for information. Whatever valuation method is used, measurement of the concession liability concerning assets to be replaced is notably subject to unforeseeable developments in terms of costs, useful life and disbursement dates. Deferred tax assets 1.3.2.8 The use of estimates and assumptions over recovery horizons is particularly important in the recognition of deferred tax assets. Other judgements 1.3.2.9 For the application of IFRS 10 and IFRS 11, the Group uses judgement to assess ■ control or classify the type of partnership arrangement represented by a jointly-controlled entity. In particular, EDF has set up “reserved” investment funds for some of its funds set aside for secure financing of nuclear plant decommissioning expenses and long-term storage expenses for radioactive waste (see note 47.3). In view of the funds’ characteristics, the prerogatives exercised by their managers and the procedures for defining the management strategies applicable to them, the Group considers that it does not have control, as defined by IFRS 10, over these funds. They are consequently treated as available-for-sale financial assets, in application of IAS 39. 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 judgement to define and apply accounting methods that supply relevant and reliable information for preparation of its financial statements.

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EDF I Reference Document 2017