In either case, the provision is measured on the basis of the acquisition cost up to the amount of rights acquired on the spot or forward markets, and on market prices for the balance. It is cancelled when the rights are surrendered to the State.

At the closing date, the portfolio of emission rights and the obligation to surrender rights for the emissions of the year are presented gross, without netting.

If the number of purchased emission rights recorded as intangible assets at the end of the year and not subject to forward sale is higher than the number of purchased rights that will be surrendered to the State for the year’s emissions, an impairment test must be applied to the excess. If the realisable value is lower than the net book value, impairment is booked.

1.3.26.2 Renewable energy certificates

In application of EU Directive 2009/28/EC on the promotion of the use of energy from renewable sources, every EU member state has set national targets for consumption of electricity from renewable sources.

There are two ways for States to meet these targets:

• incorporating the costs of generating such electricity into the sale price for electricity (this is the approach taken in France);
• introducing a renewable energy certificate system (as is the case in the United Kingdom, Italy and Belgium).

The renewable energy certificate system may apply to:

• non-obligated electricity producers when the obligation applies to energy sales (EDF Renewables);
• obligated electricity producers when the obligation applies to generation;
• producers who are also sellers of electricity when the obligation applies to energy sales (EDF Energy, Edison and Luminus).

The EDF group applies the following accounting treatments:

• for non-obligated electricity producers, certificates obtained based on generation output are recorded in “Other inventories” until they are sold on to suppliers;
• for obligated producers and an entity that both produces and supplies energy and is under an obligation to sell a specified quantity of renewable energy, the Group uses the following accounting treatments for certificates obtained based on generation output:
  • up to the level of the obligation, these certificates are not recognised,
  • certificates in excess of the obligation are recorded in “Other inventories”,
  • in the specific situation when an entity is not in a position to meet its obligation at the year-end, the Group applies the following accounting treatment:
    • certificates acquired for a consideration in order to meet the obligation are recorded in intangible assets at acquisition cost, and
    • a provision is established equivalent to the shortfall in certificates compared to the obligation at the year-end. The value of this provision is based on the acquisition price of certificates already purchased on the spot or forward market, and market prices or penalty prices for the balance. The provision is cancelled when the certificates are surrendered to the State.

Forward purchases/sales of certificates related to trading activities are recorded in accordance with IFRS 9, stated at fair value in the balance sheet date. The change in fair value is recorded in the income statement.

1.3.26.3 Energy savings certificates

In all its subsidiaries, the Group is engaged in a process to control energy consumption through various measures developed by national legislation, in application of European Union Directives.

In France, the Law of 13 July 2005 introduced a system of energy savings certificates. Suppliers of energy (electricity, gas, heat, cold, domestic fuel oil and fuel for vehicles) with sales above a certain level became subject to energy savings obligations, initially for a three-year period.

To meet this obligation, three sources are available to the EDF group: supporting consumers in their energy efficiency operations, funding ministry-approved energy savings certificate schemes, and purchasing certificates from eligible actors.

Expenses incurred for this purpose are recorded in expenses of the year concerned, in “Other operating income and expenses”. Expenses in excess of the accumulated obligation at year-end are included in inventories and may be used to cover the obligation in later years.

A provision is recognised if the energy savings achieved are lower than the cumulative energy savings obligation at the year-end. The amount of the provision is equal to the cost of actions still to be taken to meet the obligations related to the energy sales made. If these actions cannot be taken, the provision is assessed using the cost of the applicable penalties.

1.3.26.4 Environmental expenses

Environmental expenses are identifiable expenses incurred to prevent, reduce or repair damage to the environment that has been or may be caused by the Group as a result of its activities. These expenses are treated as follows:

• they are capitalised if they are incurred to prevent or reduce future damage or protect resources (e.g. expenses for structures to facilitate the passage of migrating fish, effluent treatment installations, etc.);
• they are booked as environmental liabilities and increases to provisions for environmental risks if they correspond to an obligation that exists at the year-end and it is probable or certain at the reporting date that they will lead to an outflow of resources;
• they are recognised as expenses if they are operating expenses for the units in charge of environmental concerns, environmental supervision, environmental duties and taxes, processing of liquid and gas effluents and non-radioactive waste, or research unrelated to an investment.

Note 2 Comparability

2.1 IFRS 16 “Leases”

IFRS 16 “Leases” was adopted by the European Union on 31 October 2017 and is mandatory for financial years beginning on or after 1 January 2019.

The Group decided to apply the modified retrospective approach, in which the cumulative impact of first application of the standard is recognised as an adjustment to retained earnings at the date of first application, i.e. 1 January 2019. This approach involves recognition of a liability equal to the discounted value of residual lease payments and a corresponding right-of-use asset adjusted for the amount of prepaid or accrued payments on the lease. The Group has opted to value the right-of-use asset at an amount equal to the lease payment liability.

Restatement of comparative figures in the main financial statements and the accompanying notes for the impacts of application of IFRS 16 is not required.

The weighted average discount rate applied by the Group to calculate the lease liability at 1 January 2019 over the residual term of its lease contracts is 1.61% (see note 1.3.13).

The Group also decided to apply the exemptions allowed by IFRS 16 as indicated in note 1.3.13.1, and not to reassess agreements previously classified as leases or service contracts under IFRIC 4 at the date of first application.