Under the modified retrospective approach, application of IFRS 16 at the transition date has an impact on net indebtedness, and results in recognition of a €4,492 million right-of-use asset.
The differences between the operating lease commitments under IAS 17 reported at 31 December 2018 and the estimated lease liability under IFRS 16 relating to the same contracts at 1 January 2019 are explained in the following table:
| (in millions of euros) | 01/01/2019 |
|---|---|
| Operating lease commitments as lessee at 31/12/2018 (note 49.1.1.3) | Operating lease commitments as lessee at 31/12/2018 (note 49.1.1.3) 01/01/2019 4,375 |
| Unrecognised contracts (IFRS 16 exemptions) and other | Unrecognised contracts (IFRS 16 exemptions) and other 01/01/2019 (105) |
| Differences in the durations applied for termination and extension options that are reasonably certain to be exercised | Differences in the durations applied for termination and extension options that are reasonably certain to be exercised 01/01/2019 1,125 |
| Leases signed in 2018 for an asset available after 1 January 2019 | Leases signed in 2018 for an asset available after 1 January 2019 01/01/2019 (329) |
| Non-discounted lease liability under IFRS 16 at 01/01/2019 | Non-discounted lease liability under IFRS 16 at 01/01/2019 01/01/2019 5,066 |
| Discount effect | Discount effect 01/01/2019 (574) |
| Discounted lease liability under IFRS 16 at 01/01/2019 | Discounted lease liability under IFRS 16 at 01/01/2019 01/01/2019 4,492 |
This amount for the right-of-use asset and the lease liability is recognised in addition to finance-leased assets at 31 December 2018, amounting to €96 million (see note 25), and the finance lease liability amounting to €324 million (see note 41.2.1).
At 31 December 2019, the net value of the right-of-use asset amounts to €4,333 million and the lease liability amounts to €4,510 million. In 2019, the amortisation expense for the right-of-use asset amounts to €(660) million and the interest on the lease liability amounts to €(85) million.
For information, based on the Group’s calculations, application of IFRS 16 under the modified retrospective approach would have had a positive impact of some €517 million on operating profit before depreciation and amortisation for 2018 (including a partial cancellation of realised gains on sale amounting to €(166) million). The consolidated net income would not have been significantly different.
In application of the modified retrospective method, implementation of IFRIC 23 at the transition date has a non-significant impact on tax liabilities (€10 million) that is recognised via equity, with no restatement of the comparative figures.
Following the IFRIC’s decision of September 2019 regarding presentation of uncertain tax positions, the Group has reclassified the amounts previously reported as provisions for tax liabilities as deferred tax liabilities.
EDF’s Board of Directors (on 28 June 2019) and Edison’s Board of Directors (on 3 July 2019) approved the purchase offer made for the Group’s investment in Edison’s Exploration and Production (E&P) operations. On 4 July 2019, Edison therefore announced the signature of the agreement with Energean Oil and Gas to sell 100% of Edison’s E&P operations and its subsidiaries specialising in the hydrocarbon exploration and production business (oil and natural gas).
The sale price stated in the agreement is based on an enterprise value of $750 million, with an additional consideration of $100 million contingent on commissioning of the Cassiopea gas project in Italy. Additionally, Edison will be entitled to royalties from further developments in Egypt that could bring the aggregate value close to $1 billion. All of Edison’s future decommissioning obligations will be transferred to the buyer under the sale agreement.
Edison Exploration and Production manages all of Edison’s activities, mining titles and corporate shareholdings in the hydrocarbons business in Italy and abroad. In particular, Edison E&P owns a portfolio of approximately 90 licences in 9 countries in the Mediterranean and Northern Europe, corresponding to a production quota of approximately 49,000 barrels per day at 31 December 2018.
On 23 December 2019, Edison disclosed that the sale to Energean Oil and Gas announced on 4 July 2019 was still awaiting government authorisations. Edison also stated that it had been invited by the Algerian authorities to discuss an agreement with Sonatrach regarding its E&P assets in Algeria.
Edison and Energean are collaborating and confirm the objective of completing the transaction as soon as possible in 2020.
As Edison is the only Group entity with E&P operations, which account for a large portion of the “Italy” operating segment, the sale of the E&P operations is classified as a discontinued operation as defined by IFRS 5 from 1 January 2019.
As a result, the net income of discontinued operations is reported on a specific line of the income statement for the periods published. Similarly, in the cash flow statement, the net change in cash from discontinued operations is reported on a specific line for the periods published.
Following application of IFRS 5, based on the terms of the purchase offer, the amounts of Edison’s E&P assets and liabilities at 31 December 2019 are reported in specific lines of the consolidated balance sheet. Details of the assets and liabilities of these discontinued operations are given in note 46. The impacts of application of IFRS 5 on the Group’s income statement and cash flow statement at 31 December 2018 are presented below.
Based on the consolidated net value of these E&P operations at 31 December 2019 and the sale price as stated in the indicative purchase offer, impairment of €(513) million was booked during the year (see note 19), included in the line “net income of discontinued operations”.
