EDF_REGISTRATION_DOCUMENT_2017

6.

FINANCIAL STATEMENTS Notes to the consolidated financial statements

French system : French law 2010-1488 of 7 December 2010 on the new ■ organisation of the electricity market introduced an obligation in France to contribute to power supply security from January 2017. Operators of electricity generation facilities and load-shedding operators must have their capacities certified by RTE, and commit to a forecast level of availability for a given year of delivery. In return, they are awarded capacity certificates. Meanwhile, electricity suppliers and purchasers of power to compensate for networks losses (obligated actors) must have capacity certificates equivalent to consumption by their customers in peak periods. The system is completed by registers for trading of capacities between actors. Capacity auctions are held several times a year. The Group is concerned by both aspects of this system, both as an operator of electricity installations (EDF SA, Dalkia, EDF Énergies Nouvelles) and as an electricity supplier (EDF SA, Électricité de Strasbourg) and a purchaser of power to compensate for networks losses (Enedis and Électricité de Strasbourg). The operations are recorded as follows: sales of certificates are recognised in income when the auctions or ■ over-the-counter sales take place; stocks of certificates are stated either at their certification value (i.e. cost of ■ certification by RTE) or at their purchase value on the markets; decreases in the stock of certificates are valued at the weighted average ■ unit cost. The timing of recognition depends on the actor: operators of installations: when the auction sales take place, ■ obligated actors: spread on a straight-line basis over the 5-month peak ■ period; for obligated actors, if there is a shortfall in the stocks of capacity ■ certificates, a provision is recorded equivalent to the best estimate of the expense necessary to extinguish the obligation; at the closing date, if the realisable value of the stock of capacity ■ certificates is lower than its net book value, impairment is recognised. British system : the British capacity mechanism is based on a system of auctions ■ for operators, organised by the network operator 4 years prior to delivery. Capacity operators which have acquired certificates are remunerated in the year of delivery out of a fund consisting of contributions from electricity suppliers. This remuneration is recorded in sales revenues the same year. The electricity suppliers’ contribution to this mechanism is proportional to their sales to customers in the peak period. This contribution is recognised in expenses over the peak period. 1.3.8 Income taxes include the current tax expense (income) and the deferred tax expense (income), calculated under the tax legislation in force in the countries where earnings are taxable. In compliance with IAS 12, current and deferred taxes are generally recorded in the income statement or in equity symmetrically to the underlying operation. Under IAS 32, income taxes on distributions to holders of equity instruments (notably dividends and the remuneration paid to holders of perpetual subordinated bonds) must be recognised in accordance with IAS 12. The Group considers that these distributions are paid out of previous years’ accumulated profits and as a result the associated tax effects are included in the net income for the period. The current tax expense (income) is the estimated amount of tax due on the taxable income for the period, calculated using the tax rates adopted at the year-end. Income taxes

1.3.5.3

Translation of the financial statements

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. 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), connections and other services, which mainly include energy transmission and distribution, and capacity and interconnection auctions. The Group accounts for sales when: there is a proven contractual relationship; ■ delivery has taken place (or the service has been completed); ■ a quantifiable price has been established or can be determined; ■ and the receivables are likely to be recovered. ■ Delivery takes place when the risks and benefits associated with ownership are transferred to the buyer. Energy supplied but not yet measured and billed is calculated based on consumption statistics and selling price estimates. Sales of goods and revenues on services not completed at the balance sheet date are valued by reference to the stage of completion at that date. Energy trading operations are recognised net of purchases. Capacity mechanism 1.3.7.1 Capacity mechanisms have been set up in France and the UK to ensure secure power supplies during peak periods. Related parties Sales

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EDF I Reference Document 2017