EDF_REGISTRATION_DOCUMENT_2017

FINANCIAL STATEMENTS Notes to the financial statements

Électricité de France SA (EDF), the parent company of the EDF group, is a French société anonyme operating in electricity generation and electricity and gas supply. EDF also covers all the business activities of Island Energy Systems (SEI) for Corsica and France’s overseas departments.

ACCOUNTING PRINCIPLES AND METHODS NOTE 1 ACCOUNTING STANDARDS 1.1 1.2.1

Depreciation period of nuclear power

plants In the specific case of the depreciation period of its nuclear power plants, EDF’s industrial strategy is to continue operation beyond 40 years, in optimum conditions as regards safety and efficiency. During 2016, all the technical, economic and governance conditions for extending the depreciation period of 900MW series power plants were fulfilled. EDF therefore extended this period as of 1 January 2016 for all 900MW power plants, with the exception of Fessenheim (see note 2.1 to the 2016 financial statements: Extension to 50 years of the depreciation period of the 900MW PWR series). The depreciation period of other series (1300MW and 1450MW), which are more recent, is currently unchanged at 40 years, as the conditions for extension are not yet fulfilled. These depreciation periods take into account the date of recoupling with the network after the most recent 10-year inspection. 1.2.2 The measurement of provisions for the back-end of the nuclear cycle, decommissioning and last cores is sensitive to assumptions concerning technical processes, costs, inflation rates, long-term discount rates, the depreciation period of plants currently in operation and disbursement schedules. These parameters are therefore re-estimated at each closing date to ensure that the amounts accrued correspond to the best estimate of the costs eventually to be borne by EDF. EDF considers that the assumptions used at 31 December 2017 are appropriate and justified. However, any future change in assumptions could have a significant impact on EDF’s balance sheet and income statement. The main assumptions and sensitivity analyses relating to nuclear provisions are presented in note 28.5. The calculation of provisions incorporates a level of risks and unknowns as appropriate to the operations concerned. The valuation of costs carries uncertainty factors such as: changes in the regulations, particularly on safety, security and environmental ■ protection, and financing of nuclear expenses; changes in the regulatory decommissioning process and the time necessary for ■ issuance of administrative authorisation; future methods for storing long-lived radioactive waste and provision of storage ■ facilities by the French agency for radioactive waste management ANDRA (Agence nationale pour la gestion des déchets radioactifs); changes in certain financial parameters such as discount rates, notably in relation ■ to the regulatory limit, inflation rates, or changes in the contractual terms of spent fuel management. post-employment benefit obligations The value of pensions and other long-term and post-employment benefit obligations is based on actuarial valuations that are sensitive to all the actuarial assumptions used, particularly concerning discount rates, inflation rates and wage increase rates. The principal actuarial assumptions used to calculate these post-employment and long-term benefits at 31 December 2017 are presented in note 30.4. These assumptions are updated annually. EDF considers the actuarial assumptions used at 31 December 2017 appropriate and well-founded, but future changes in these assumptions could have a significant effect on the amount of the obligations and EDF’s net income. Nuclear provisions Pensions and other long-term and 1.2.3

EDF’s financial statements are prepared in accordance with the accounting principles and methods defined by the French national chart of accounts (Plan Comptable Général), as presented by regulation 2014-03 of 5 June 2014 concerning the chart of accounts issued by the ANC (Autorité des normes comptables, France’s Accounting Standards Authority). Regulation 2015-05 of 2 July 2015 concerning forward financial instruments and hedging operations became mandatory from 1 January 2017. The first application of this regulation constitutes a change of accounting method. The after-tax effect, calculated retrospectively for operations existing at 1 January 2017 only, amounts to €84 million and has been charged to retained earnings (see footnote (1) to note 24). Implementation of this regulation has led to the following changes: discontinuation of recognition of unrealised gains on the foreign exchange ■ optimisaton portfolio, which were previously included in the financial result and are now recognised in the balance sheet in the revaluation surplus (while unrealised losses remain in the financial result). The impact on equity is not significant; application of hedge accounting to currency derivatives that were previously ■ treated as speculative derivatives but are now considered as management hedging instruments (and included in the financial result). In general, the unrealised gain or loss on currency derivatives classified as hedging instruments is recorded in the balance sheet in the revaluation surplus accounts created by the new regulation. These accounts are netted with the translation adjustment booked in respect of the hedged items. The after-tax impact on equity amounts to €87 million; the unrealised gain or loss on derivatives held to hedge commodity purchases is ■ recorded in a similar way to the hedged items. The after-tax impact on equity amounts to €(3) million; foreign exchange gains and losses on trade receivables and payables are ■ recorded in operating income and expenses and no longer in the financial result. At 31 December 2017, application of the new regulation to operations concerning the 2017 financial year resulted in: a €51 million decrease in the financial result due to mandatory application of ■ hedge accounting when a management operation is identified as a hedging relationship; reclassification of gains and losses on trade receivables and payables amounting ■ to €21 million from financial result to operating income. The other accounting and valuation methods are identical to those used in the financial statements for the year ended 31 December 2016. AND ESTIMATES The preparation of the financial statements requires the use of judgments, best estimates and assumptions in determining the value of assets and liabilities, income and expenses recorded for the period, considering positive and negative contingencies existing at year-end. The figures in EDF’s future financial statements could differ significantly from current estimates due to changes in these assumptions or economic conditions. In a context characterised by financial market volatility, the parameters used to prepare estimates are based on macro-economic assumptions appropriate to the very long-term cycle of EDF’s assets. The principal operations for which EDF uses estimates and judgments are the following: MANAGEMENT JUDGMENTS 1.2

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EDF I Reference Document 2017