EDF_REGISTRATION_DOCUMENT_2017

FINANCIAL STATEMENTS Notes to the consolidated financial statements

Deferred taxes result from temporary differences between the book value of assets and liabilities and their tax basis. No deferred taxes are recognised for temporary differences generated by: goodwill which is not tax deductible; ■ the initial recognition of an asset or liability in a transaction which is not a ■ business combination and does not affect the accounting profit or taxable profit (tax loss) at the transaction date; investments in subsidiaries and associates, investments in branches and interests ■ in joint arrangements, when the Group controls the timing of reversal of the temporary differences, and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets and liabilities are valued at the expected tax rate for the period in which the asset will be realised or the liability extinguished, based on tax rates adopted at the year-end. If the tax rate changes, deferred taxes are adjusted to the new rate and the adjustment is recorded in the income statement, unless it relates to an underlying for which changes in value are recorded in equity, for example in accounting for actuarial gains and losses or fair value on hedging instruments and available-for-sale financial assets. Deferred taxes are reviewed at each closing date, to take into account changes in tax legislation and the prospects for recovery of deductible temporary differences. Deferred tax assets are only recognised when it is probable that the Group will have sufficient taxable profit to utilise the benefit of the asset in the foreseeable future, or beyond that horizon, if there are deferred tax liabilities with the same maturity. Deferred tax assets and liabilities are reported on a net basis, determined at the level of a tax entity or tax group. per share Earnings per share is calculated by dividing the Group’s share of net income by the weighted average number of shares outstanding over the period. This weighted average number of shares outstanding is the number of ordinary shares at the beginning of the year, adjusted by the number of shares redeemed or issued during the year. This number, and the earnings per share, are adjusted whenever necessary to reflect the impact of translation or exercise of dilutive potential shares (stock options, stock warrants and convertible bonds issued, etc.). In compliance with IAS 33, earnings per share and diluted earnings per share are based on the net income for the year after deduction of payments to bearers of perpetual subordinated bonds. 1.3.10 In application of IFRS 3 business combinations arising since 1 January 2010 are measured and recognised under the following principles. At the date of acquisition, the identifiable assets acquired and liabilities assumed, measured at fair value, and any non-controlling interests in the company acquired (minority interests) are recorded separately from goodwill. Non-controlling interests may be valued either at fair value (full goodwill method) or their share in the fair value of the net assets of the acquired company (partial goodwill method). The decision is made individually for each transaction. Any acquisition or disposal of an investment in a subsidiary that does not affect control is considered as a transaction between shareholders and must be recorded directly in equity. If additional interests are acquired in a joint venture, joint operation or associate without resulting in acquisition of control, the value of the previously-acquired assets and liabilities remains unchanged in the consolidated financial statements. Earnings per share and diluted earnings 1.3.9 Business combinations

If control is acquired in stages, the cost of the business combination includes the fair value, at the date control is acquired, of the purchaser’s previously-held interest in the acquired company. Related costs directly attributable to an acquisition leading to control are treated as expenses for the periods in which they were incurred, except for issuance costs for debt securities or equity instruments, which must be recorded in compliance with IAS 32 and IAS 39. IFRS 3 does not apply to common control business combinations, which are examined on a case-by-case basis to determine the appropriate accounting treatment. Commitments given by the Group to purchase minority interests in Group-controlled companies are included in liabilities. For commitments of this kind given since 1 January 2010, the date of the Group’s first application of IAS 27 (amended) and IFRS 3 (revised), the differential between the value of the non-controlling interests and the liability corresponding to the commitment is recorded in equity. 1.3.11 Goodwill 1.3.11.1 Determination of goodwill 1.3.11.1.1 In application of IFRS 3, “Business combinations”, goodwill is the difference between: the sum of the following items: ■ the acquisition-date fair value of the price paid to acquire control, ■ the value of non-controlling interests in the entity acquired, and ■ for acquisitions achieved in stages, the acquisition-date fair value of the ■ Group’s share in the acquired entity before it acquired control, and; the net value of the assets acquired and liabilities assumed, measured at fair ■ value at the acquisition date. When this difference is negative it is immediately included in net income. The fair values of assets and liabilities and the resulting goodwill are finalised within twelve months of the acquisition. Measurement and presentation of goodwill 1.3.11.1.2 Goodwill on acquisition of subsidiaries is disclosed separately in the balance sheet. Impairment on this goodwill is reported under the heading “Impairment” in the income statement. After initial recognition, goodwill is carried at cost less any impairment recognised. Goodwill on acquisition of associates and joint ventures is included in the investment’s net book value. Impairment on this goodwill is included under the heading “Share in income of associates and joint ventures”. Goodwill is not amortised, but impairment tests are carried out as soon as there is an indication of possible loss of value, and at least annually, as described in note 1.3.15. Other intangible assets 1.3.11.2 Research and development expenses 1.3.11.2.1 Research expenses are recognised as expenses in the financial period incurred. Development costs that qualify for capitalisation under IAS 38 are included in intangible assets and amortised on a straight-line basis over their foreseeable useful life. Other self-produced or purchased intangible 1.3.11.2.2 assets Other intangible assets mainly comprise: software, which is amortised on a straight-line basis over its useful life; ■ Goodwill and other intangible assets

6.

311

EDF I Reference Document 2017