EDF_REGISTRATION_DOCUMENT_2017

6.

FINANCIAL STATEMENTS Notes to the consolidated financial statements

The Group uses the following categories for hedges: (A) Fair value hedges

For available-for-sale financial assets (other than dedicated assets) held by controlled companies, the Group generally uses the following criteria to assess impairment: 3 years as the threshold for assessment of long-term loss of value; ■ a 50% decline from historical cost as indication of a significant loss of value. ■ For available-for-sale financial assets held as part of EDF’s dedicated asset portfolio, the Group uses the following criteria to assess impairment: a 5-year period as the threshold for assessment of a long-term loss of value; ■ a 40% decline from historical portfolio value as indication of a significant loss of ■ value. In assessing impairment of dedicated assets, the Group takes into consideration factors specific to their nature: legal and regulatory obligations associated with the funds concerned, the timing of the payments they are to finance, and long-term management of the funds. Derecognition of financial assets 1.3.16.3 and liabilities The Group derecognises a financial asset when: the contractual rights to the cash flows generated by the asset expire; or ■ the Group transfers the rights to receive contractual cash flows related to the ■ financial asset through the transfer of substantially all of the risks and benefits associated with ownership of the asset. Any interest created or retained by the Group in transferred financial assets is recorded as a separate asset or liability. The Group derecognises a financial liability when its contractual obligations are extinguished, cancelled or expire. When a debt is renegotiated with a lender on substantially different terms, a new liability is recognised. Assignment of receivables 1.3.16.4 When it can be demonstrated that the Group has transferred substantially all the risks and benefits related to assignment of receivables, particularly the credit risk, the items concerned are derecognised. Otherwise, the operation is considered as a financing operation, and the receivables remain in the balance sheet assets, with recognition of a corresponding financial liability. Offsetting financial assets and liabilities 1.3.16.5 The Group offsets financial assets and liabilities when: there is a legally enforceable right to set off the recognised amounts; and ■ the intent is either to settle on a net basis, or to realise the asset and settle the ■ liability simultaneously. In application of IFRS 7, disclosures are provided in the notes to the consolidated financial statements to indicate the actual or potential impact of the offsetting agreement. 1.3.17 Inventories are recognised at the lower of acquisition cost or net realisable value, except for inventories held for trading activities, which are carried at market value. Inventories consumed are generally valued by the weighted average unit cost method. Cost includes all direct material costs, labour costs, and a share of indirect production costs. Nuclear fuel and materials 1.3.17.1 Inventory accounts include: nuclear materials, whatever their form during the fuel production cycle; ■ and fuel components in the warehouse or in the reactor. ■ Inventories

These instruments hedge the exposure to changes in the fair value of an asset or liability recorded in the balance sheet, or a firm commitment to purchase or sell an asset. Changes in the fair value of the hedged item attributable to the hedged component of that item are recorded in the income statement and offset by corresponding variations in the fair value of the hedging instrument. Only the ineffective portion of the hedge has an impact on income. Loans and financial liabilities include bonds that are covered by a fair value hedge. In application of hedge accounting, their balance sheet value is adjusted for changes in fair value attributable to the hedged risks (foreign exchange and interest rate risks). (B) Cash flow hedges These instruments hedge highly probable future transactions: the variability in cash flows generated by the hedged transaction is offset by changes in the value of the hedging instrument. The effective portion of accumulated changes in the hedge’s fair value is recorded in equity, and the ineffective portion (i.e. changes in the fair value of the hedging instrument in excess of changes in the fair value of the hedged item) is recorded in the income statement. When the hedged cash flows materialise, the amounts previously recognised in equity are transferred to the income statement in the same way as for the hedged item. (C) Hedges of a net investment These instruments hedge exposure to the foreign exchange risk related to a net investment in an entity which does not have the same functional currency as the Group. The effective portion of accumulated changes in the hedge’s fair value is recorded in equity until the disposal or liquidation of the net investment, when it is included in the gain or loss on disposal. The ineffective portion (defined in the same way as for cash flow hedges) is recorded directly in the income statement. The change in fair value resulting from the foreign exchange effect and interest rate effect of derivatives hedging a net investment in a foreign operation is recorded in equity. Impairment of financial assets 1.3.16.2 At the year-end and at each interim reporting date, the Group assesses whether there is any objective evidence that an asset could have been significantly impaired. If so, the Group estimates the asset’s recoverable value and records any necessary impairment as appropriate for the category of asset concerned. Impairment of financial assets recorded 1.3.16.2.1 at amortised cost Impairment is equal to the difference between the asset’s net book value and the discounted value of expected future cash flows, using the original effective interest rate of the financial instrument. The impairment is included in the income statement under the heading “Other financial income and expenses”. If the impairment loss decreases in a subsequent period, the amount of the decrease is reversed and transferred to the income statement. Impairment of available-for-sale financial 1.3.16.2.2 assets If there is a substantial, long-term decline in the fair value of available-for-sale assets, the unrealised loss is reclassified from equity to income. For debt instruments, impairment is only recorded in income when there is an indication of impairment associated with the counterparty. If the fair value of an available-for-sale financial asset rises in a subsequent period, the increase in value is included in equity when it concerns equity instruments, and leads to a reversal from previously-recorded impairment when it concerns debt instruments. Different criteria for impairment apply to different types of available-for-sale financial assets.

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EDF I Reference Document 2017