The Group does not currently anticipate any material impact to result from changes introduced by the “Annual improvements – 2018-2020 cycle” which are expected to be applicable from 1 January 2022.
The consolidated financial statements are prepared on a historical cost basis, with the exception of assets acquired and liabilities assumed through business combinations, and of certain financial instruments, which are stated at fair value.
An entity’s functional currency is the currency of the economic environment in which it primarily operates. In most cases, the local currency is the functional currency. But for some entities, a functional currency other than the local currency may be used when it reflects the currency used in the principal transactions.
The financial statements of foreign companies whose functional currency is not the Euro are translated as follows:
Translation adjustments affecting a monetary item that is an integral part of the Group’s net investment in a consolidated foreign company are included in consolidated equity until the disposal or liquidation of the net investment, at which date they are recognised as income or expenses in the income statement, in the same way as other exchange differences concerning the Company.
In application of IAS 21, transactions expressed in foreign currencies are initially translated and recorded in the functional currency of the entity concerned, using the rate in force at the transaction date.
At each reporting date, monetary assets and liabilities expressed in foreign currencies are translated at the closing rate. The resulting foreign exchange differences are taken to the income statement.
In application of IFRIC 22, any payment or receipt of a non-monetary advance in a foreign currency must be translated at the exchange rate of the transaction date, with no subsequent adjustment.
Assets and liabilities contributing to working capital used in the entity’s normal operating cycle are classified as current in the consolidated balance sheet. Other assets and liabilities are classified as current if they mature within one year of the closing date, and non-current if they mature more than one year after the closing date.
The income statement presents items by nature. The heading “Other income and expenses” presented below the operating profit before depreciation and amortisation comprises items of an unusual nature or amount.
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 the Group’s future financial statements could differ significantly from current estimates due to changes in these assumptions or economic conditions.
In a context characterised by volatility on the financial and energy markets, the parameters used to prepare estimates are based on macro-economic assumptions appropriate to the very long-term cycle of Group assets.
The principal operations for which the Group uses estimates and judgments are the following:
In the specific case of the depreciation period of its French nuclear power plants, the EDF group’s industrial strategy is to continue operation beyond 40 years, in optimum conditions as regards safety and efficiency.
The depreciation period of 900MW series power plants was extended from 40 years to 50 years in 2016 (except for Fessenheim where both reactors were permanently shut down in the first half of 2020) since all the technical, economic and governance conditions were fulfilled. The depreciation period of other series (1300MW and 1450MW), which are more recent, is currently unchanged at 40 years.
These depreciation periods take into account the date of recoupling with the network after the most recent 10-year inspection.
The Tricastin plant’s reactor 1 was reconnected to the grid on 23 December 2019 after the fourth 10-year inspection. This was the first 900MW series unit to pass the 40-year mark.
The fourth 10-year inspections of units 2 and 4 at Bugey began in 2020 (respectively early and late in the year), and the number of ten-year inspections to be conducted simultaneously in 2021 has increased to 5.
The ASN’s decision setting the technical prescriptions applicable to 900MW series reactors, in view of the conclusions of the “generic” phase of the fourth periodic review, is expected to be issued by the end of February 2021.
Following the final adoption of France’s multi-year energy programme (PPE)in April 2020 (see note 2), the Group’s financial statements at 31 December 2020 include the impact of the two early reactor shutdowns to take place in 2027 and 2028 before they reach fifty years of operation. Depreciation plans have been accelerated from 1 July 2020, based on the various possible shutdown scenarios, as the decision regarding which reactors should be shut down does not have to be made yet. Nuclear provisions were re-estimated accordingly at 30 June 2020 (see note 15.1.1.3).
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 the Group.
The Group considers that the assumptions used at 31 December 2020 are appropriate and justified. However, any future change in assumptions could have a significant impact on the Group’s balance sheet and income statement (see note 15).
For France, the main assumptions and sensitivity analyses relating to EDF’s nuclear provisions are presented in note 15.1.1.5.
