Accounting principles and methods
The Group grants its employees post-employment benefits (pension plans, retirement indemnities, etc.) and other long-term benefits (e.g. long-service awards) in compliance with the specific laws and measures in force in each country where it does business.
Calculation and recognition of employee benefits
Obligations under defined-benefit plans are calculated by the projected unit credit method, which determines the present value of entitlements earned by employees at year-end under all types of plan, taking into consideration the prospects for wage increases and each country’s specific economic conditions.
Post-employment benefit obligations are valued mainly using the following methods and assumptions:
- retirement age, determined on the basis of the applicable rules for each plan, and the requirements to qualify for a full pension;
- career-end salary levels, with reference to employee seniority, projected salary levels at the time of retirement based on the expected effects of career advancement, and estimated trends in pension levels;
- forecast numbers of pensioners, determined based on employee turnover rates and mortality data available in each country;
- reversion pensions where relevant, taking into account both the life expectancy of the employee and his/her spouse and the marriage rate;
- a discount rate that depends on the geographical zone and the duration of the obligations, determined at the year-end date by reference to the market yield on high-quality corporate bonds or the rate on government bonds whose duration is coherent with EDF group’s commitments to employees.
The amount of the provision corresponds to the value of obligations less the fair value of the fund assets that cover those obligations.
The net expense booked during the year for employee benefit obligations includes:
Post-employment benefit obligations
When they retire, Group employees benefit from pensions determined under local rules. They may also be entitled to benefits directly paid by the companies, and additional benefits prescribed by the relevant regulations.
French entities covered by the IEG system
Entities belonging to the specific IEG (electricity and gas) sector system, namelyEDF, Enedis, Électricité de Strasbourg, EDF PEI and certain subsidiaries of the Dalkia subgroup, are Group companies where almost all employees benefit from the IEG statutes, including the special pension system and other statutory benefits.
After the financing reform for the IEG sector system took effect on1 January 2005 (law of 9 August 2004), pension provisions were recognised byIEG companies to cover entitlements not funded by France’s standard systems(CNAV, AGIRC and ARRCO), to which the IEG system is affiliated, or by theCTA (contribution tarifaire d’acheminement) levy on gas and electricity transmission and distribution services.
As a result of the system affiliation mechanism, any change (whether favourable or unfavourable to employees) in the standard French pension system that is not passed on to the IEG pension system is likely to cause a variation in the amount of the provisions recorded by the Group to cover its obligations.
The obligations concerned by the pensions and for which a provision is recorded thus include:
- specific benefits of employees in the deregulated or competitive activities;
- specific benefits earned by employees from 1 January 2005 for the regulated activities (transmission and distribution) (benefits earned prior to that date are financed by the CTA levy).
In addition to pensions, other benefits are granted to IEG status former employees (not currently in active service), as detailed below:
- benefits in kind: Article 28 of the IEG national statutes entitles such employees and current employees to benefits in kind in the form of supplies of electricity or gas at preferential prices. The obligation for supplies of energy to employees of the EDF and ENGIE (formerly GDF-Suez) groups corresponds to the probable present value of kWh to be supplied to beneficiaries or their dependants during their retirement, valued on the basis of the unit cost. It also includes the payment made under the energy exchange agreement with ENGIE;
- retirement gratuities: these are paid upon retirement to employees due to receive the statutory old-age pension, or to their dependants if the employee dies before reaching retirement. These obligations are almost totally covered by an insurance policy;
- bereavement benefit: this is paid out upon the death of an inactive or disabled employee, in order to provide financial assistance for the expenses incurred at such a time (Article 26 - § 5 of the National Statutes). It is paid to the deceased’s principal dependants (statutory indemnity equal to three months’ pension, subject to a ceiling) or to a third party that has paid funeral costs (discretionary indemnity equal to the costs incurred);
- bonus pre-retirement paid leave: all employees eligible to benefit immediately from the statutory old-age pension and aged at least 55 at their retirement date are entitled to 18 days of bonus paid leave during the last twelve months of their employment;
- other benefits include help with the cost of studies, time banking for pre-retirement leave, and pensions for personnel sent on secondment to subsidiaries not covered by the IEG system.
