The changes observed in property, plant and equipment used in generation owned by the Group include a €(1,093) million impact of translation adjustments due to the rise of the euro against the pound sterling.
In view of France’s Energy and Climate law of 8 November 2019, the ends of the depreciation periods for the Le Havre and Cordemais coal-fired plants were changed at 1 June 2019, setting the closure of Le Havre at 1 April 2021 while Cordemais is to continue operating until 2026, considering a possible conversion to biomass as part of the Ecocombust project. The date for Cordemais could still change depending on the decisions made about the project, which is currently under review by the public authorities. As a result of this change of dates, accelerated depreciation compared to the previous depreciation period is now recognised, amounting to€250 million in 2020 (€141 million in 2019).
Under IFRS 16, applicable since 1 January 2019, a contract is, or contains, a lease if it confers the right to control the use of an identified asset for a period of time in exchange for a consideration.
Identified arrangements that do not have the legal form of a lease contract but nonetheless convey the right to control the use of an asset or group of specific assets to the purchaser are classified as leases by reference to IFRS 16.
The Group’s lease contracts as lessee essentially concern real estate assets(office and residential properties), industrial installations (land, wind farms) and to a lesser extent vehicles, IT and industrial equipment.
IFRS 16 requires leases to be recognised in the lessee’s balance sheet when the leased asset is made available, in the form of a “right-of-use” asset, presented in “Property, plant and equipment used in generation and other tangible assets owned by the Group, including right-of-use assets” with a corresponding financial liability associated with the lease commitment, presented in “Current and non-current financial liabilities”.
Upon initial recognition of a lease, the right of use and the lease liability are valued by discounting the future lease payments over the term of the lease, taking into consideration assumptions regarding the renewal or termination of leases if the relevant options are reasonably certain to be exercised.
As a rule, since the implicit interest rate in a lease is difficult to determine, the lessee’s incremental borrowing rate is used to discount the lease liability. This rate is based on zero-coupon EDF bond rates, adjusted for the currency risk, a country risk premium, the term of the lease contracts and the subsidiary’s credit risk at the date of initial recognition of the contract. In certain cases, it is based on a subsidiary’s specific incremental borrowing rate.
Subsequently, the right of use is amortised over the expected term of the lease, while the lease liability is stated at amortised cost, i.e. adding the interest recognised in the financial result, and deducting the amount of the lease payments made.
The Group applies the two exemptions allowed by IFRS 16, and as a result leases with a term of 12 months or less and leases of assets with individual value when new of less than USD 5,000 are not recognised in the balance sheet. Consequently, the payments on these leases are recognised on a straight-line basis over the lease term in the income statement.
If the Group performs a sale and leaseback operation – consisting of selling an asset to a third party and then renting it back as lessee – which is classified as a sale under IFRS 15, it measures the right-of-use asset resulting from the lease as the proportion of the asset’s previous book value that corresponds to the right of use retained by the Group. Also, the gain on the sale of the asset by the Group only corresponds to the proportion of the right of use actually transferred to the third party. The lease liability is not adjusted, unless the conditions of the sale or lease do not reflect market values.
Off-balance sheet commitments presented in note 21.1.1 concern:
The accounting treatment of a lease contract in which the Group is less or depends on the classification of the contract. For a finance lease which transfers substantially all risks and rewards inherent to ownership of the underlying asset to the lessee, the Group recognises a financial asset in its balance sheet instead of the initial fixed asset; in this case, the receivable is equal to the discounted value of future lease payments.
| (in millions of euros) | 31/12/2019 | Increases(1) | Decreases | Changes in the scope of consolidation | Other movements(2) | 31/12/2020 |
|---|---|---|---|---|---|---|
| Land and buildings | Land and buildings 31/12/2019 4,520 | Land and buildings Increases (1)283 | Land and buildings Decreases - | Land and buildings Changes in the scope of consolidation (31) | Land and buildings Other movements (2)(32) | Land and buildings 31/12/20204,740 |
| Other installations, plant, machinery, equipment & other | Other installations, plant, machinery, equipment & other 31/12/2019 835 | Other installations, plant, machinery, equipment & other Increases (1)196 | Other installations, plant, machinery, equipment & other Decreases - | Other installations, plant, machinery, equipment & other Changes in the scope of consolidation 10 | Other installations, plant, machinery, equipment & other Other movements (2)(48) | Other installations, plant, machinery, equipment & other 31/12/2020993 |
| Gross value | Gross value 31/12/2019 5,355 | Gross value Increases (1)479 | Gross value Decreases - | Gross value Changes in the scope of consolidation (21) | Gross value Other movements (2) (80) | Gross value31/12/20205,733 |
| Land and buildings | Land and buildings 31/12/2019 (541) | Land and buildings Increases (1)(555) | Land and buildings Decreases - | Land and buildings Changes in the scope of consolidation 2 | Land and buildings Other movements (2)39 | Land and buildings 31/12/2020(1,055) |
| Other installations, plant, machinery, equipment & other | Other installations, plant, machinery, equipment & other 31/12/2019 (481) | Other installations, plant, machinery, equipment & other Increases (1)(142) | Other installations, plant, machinery, equipment & other Decreases - | Other installations, plant, machinery, equipment & other Changes in the scope of consolidation - | Other installations, plant, machinery, equipment & other Other movements (2)61 | Other installations, plant, machinery, equipment & other 31/12/2020(562) |
| Depreciation and impairment | Depreciation and impairment 31/12/2019 (1,022) | Depreciation and impairment Increases (1)(697) | Depreciation and impairment Decreases - | Depreciation and impairment Changes in the scope of consolidation 2 | Depreciation and impairment Other movements (2) 100 | Depreciation and impairment31/12/2020(1,617) |
| NET VALUE | NET VALUE 31/12/2019 4,333 | NET VALUE Increases (1)(218) | NET VALUE Decreases - | NET VALUE Changes in the scope of consolidation (19) | NET VALUE Other movements (2) 20 | NET VALUE31/12/20204,116 |
(1) Increases concern right-of-use assets recognised in respect of new leases.
(2) Other movements include the effect of contract revisions on right-of-use assets and translation differences.
