Foreign currency receivables and payables are translated into Euros at the year-end exchange rates. The resulting translation differences are recorded in the balance sheet under “Unrealised foreign exchange gains” and “Unrealised foreign exchange losses”. Provisions are recorded to cover all unrealised exchange losses on foreign currency borrowings not hedged for exchange risks. Unrealised gains are not recognised in the income statement.
Unrealised gains and losses on currency derivatives classified as hedging instruments are recorded in the balance sheet in the revaluation surplus accounts, and netted with the unrealised foreign exchange gains and losses booked in respect of the hedged items, in compliance with regulation 2015-05 of 2 July 2015 on forward financial instruments and hedging operations. Realised gains and losses on hedging derivatives are recognised in the income statement symmetrically to gains and losses on the hedged item.
Foreign exchange gains and losses on trade receivables and payables are recorded in operating income and expenses.
This item mainly includes excess depreciation recorded for tax purposes and relates to:
Perpetual subordinated bonds issued by EDF in euros and other currencies are recorded in compliance with the French Chartered accountants’ body Ordre des experts comptables opinion 28 of July 1994, taking their specific characteristics into consideration.
As a result, they are classified as additional equity, since redemption is exclusively controlled by EDF.
Issuance expenses and premiums are amortised through the income statement, on a pro rata basis.
Interest paid on these bonds is recorded in the financial result.
These liabilities relate mostly to public electricity distribution concessions for the Island Energy Systems (SEI), and hydropower concessions.
These liabilities represent the contractual obligations specific to the concession rules for public electricity distribution concessions in France, and comprise the following:
When assets are replaced, amortisation recognised on the portion of assets considered to be financed by the concession-granting authority, and the provision for replacement established for the relevant asset, are cancelled and transferred to rights in existing assets. Any excess provision is taken to income.
During the concession, the concession-granting authority’s rights in assets to be replaced are thus transferred upon the asset’s replacement to become the concession-granting authority’s rights in existing assets, with no outflow of cash to the benefit of the concession-granting authority.
These liabilities comprise:
Following the changes made to the accounting treatment of hydropower concessions at 1 January 2009, the 1959 revaluation reserve is transferred to equity when the assets concerned are retired.
The net revaluation reserve generated by the 1976 revaluation is taken to income over the residual useful life of the assets concerned.
The value of assets remitted for nil consideration and contributions received are transferred to the income statement over their useful lives.
EDF recognises provisions when it has a present obligation (legal or constructive) arising from a past event, an outflow of resources will probably be required to settle the obligation, and the obligation amount can be estimated reliably.
If it is anticipated that all or part of the expenses covered by a provision will be reimbursed, the reimbursement is recognised under receivables if and only if EDF is virtually certain of receiving it.
Provisions are determined based on the Company’s expectation of the cost necessary to settle the obligation. Estimates are based on management data from the information system, assumptions adopted by the Company, and if necessary experience of similar transactions, or in some cases based on independent expert reports or contractor quotes. The various assumptions are reviewed for each closing of the accounts.
The expected costs are estimated based on year-end economic conditions and spread over a forecast disbursement schedule. They are then adjusted to Euros of the year of payment through application of a forecast long-term inflation rate and discounted to present value using a nominal discount rate. The provisions are based on these discounted future cash flows.
The rate of inflation and the discount rate are based on the economic and regulatory parameters of France, considering the long operating cycle of EDF’s assets and the maturities of commitments.
The discount effect generated at each closing to reflect the passage of time is recorded in financial expenses.
In extremely rare situations, a provision cannot be booked due to lack of a reliable estimate. In such cases, the obligation is mentioned in the notes as a contingent liability, unless there is little likelihood of an outflow of resources.
