Universal Registration Document 2021

2.1.3.5 Reliability of financial information – internal accounting and financial controls

The EDF group has organised its financial risk management around the following functions:

Performance Management, reporting, tasked with:

• contributing to the management of the performance of the Group’s entities by implementing the Group’s performance plans and by challenging the measures implemented by the entities and business lines. For this purpose, the Finance Department implements a set of management indicators adapted to the economic model of each of the Group’s activities;
• contributing to budget monitoring through general performance reviews in the departments and controlled subsidiaries;
• developing and disseminating financial management methods and processes, contributing to the adoption of a management culture within the Group;
• managing the management cycle processes, summarising them and suggesting decisions to management and subsidiaries;
• developing medium- and long-term financial trajectories.

Accounting:

• preparing EDF’s financial statements and the Group’s consolidated financial statements;
• ensuring accounting compliance by using Group reference frameworks based on accounting standards and the chart of accounts;
• coordinating the Group’s internal accounting and financial control system in accordance with the system presented below.

Taxation:

• ensuring the consistency of tax practices, the requirements of which are listed in the Group’s Tax policy. The precise provisions in this area are discussed in section 3.4.2.2 “Contribution to development through taxation” of this document;
• ensuring the proper execution of legal and declarative obligations, notably by monitoring the subject;
• ensuring the accounting follow-up of the deferred tax position and the periodic justification of the accounts;
• identifying and controlling the Group’s tax risks.

Finance and Investments:

• coordinating all the actions inherent in the Group’s balance sheet and financial result, with the aim in particular of controlling the exposure of the Group’s hedging assets, debt and the Group’s overall balance sheet to financial risks;
• managing the investments, acquisitions and disposals as well as the listed and unlisted dedicated assets, The Group Risk Department prepares an annual risk mandate and specific working frameworks which define the principles for managing risks and the risk limits that are acceptable for this portfolio;
• appraising the investment projects presented to the CECEG meetings to anticipate impacts and improve the reliability of the financial trajectories relative to the Group’s balance sheet and profit and loss accounts, as defined by the Commitments policy;
• contributing to portfolio reviews, and economic and financial optimisation analyses;
• ensuring that the Group is financed in accordance with the Financing, Treasury and Financial Risk Management policy; verifying the proper application of the policy’s principles (drafting of work management frameworks, methodology, monitoring of exposures, regular calculation of risk indicators, and controlling compliance with risk limits). The positions of the trading room in charge of cash management are monitored by the Group Risk Department.

The Financing, Treasury and Financial Risk Management policy requires all entities of the Group to continuously and systematically identify financial risks (in particular, liquidity, interest rates, foreign exchange and counterparty). The Group Risk Department exercises second-level control of these risks via:

• verification that the principles of the policy have been properly applied (preparing work management frameworks, methodology, monitoring of exposures, regular calculation of risk indicators and controlling compliance with risk limits);
• controlling the positions of the trading room in charge of cash For these activities, a system of indicators and risk limits checked on a daily and a weekly basis is in place. The Markets Committee (a body that brings together the Finance and Investment Department and the Group Risk Department) checks and reviews on a quarterly basis, where applicable, requests for exemptions from the work management framework and requests for investment in new financial products.

The policy on the constitution, management and control of the financial risks involving EDF’s Dedicated Assets applies to the portfolio of Dedicated Assets which are managed by the Financial Department. The Group Risk Department prepares an annual risk mandate and specific work management frameworks which define the principles for managing risks and the risk limits that are acceptable for this portfolio.

Reference frameworks

The accounting standards used by the EDF group (the scope of the Group’s consolidated financial statements is set out in the appendix to the consolidated financial statements; see section 6 “Financial statements”) comply with the international standards published by the International Accounting Standards Board (“IASB”) approved by the European Union and applicable as at 31 December 2020. These international standards include the IAS (International Accounting Standards), IFRS (International Financial Reporting Standards) and the SIC and IFRIC interpretations. The accounting rules and methods are specified in the Group’s accounting principles manual and summarised in the notes to the consolidated financial statements.

The principles applicable to the preparation and reporting to the Group’s Finance Department are defined in the Accounting and Financial Reporting policy. The specific internal control provisions are described in the Group guideline entitled “Internal Accounting and Financial Control”, and the control objectives to be implemented in the entities are specified and updated each year in the Group’s Internal Control Guide. The Financial Management Directors of the Departments of the Business Lines and Subsidiaries sit on the Management Committee of the entities to which they belong. With the exception of the operators of regulated infrastructure, they are appointed and evaluated jointly by operational management and the management of the Finance function. A network of correspondents from the Operational Departments and subsidiaries facilitates dissemination of the guidelines and harmonised implementation throughout the various Group entities.

Each operational and functional Director of EDF makes a commitment each year with regard to the quality of the Internal Control system in the Accounting and Financial area, the improvement goals for the coming period and the truthfulness and exhaustiveness of the accounting information for which they are responsible by preparing a commitment letter sent to the Group Accounting and Tax Director. In return, each Director receives a letter of evaluation of the accounting and tax quality from the Group’s Accounting and Tax Director based on the various elements of the assessment (results of internal controls, indicators of the accounting quality dashboard, letter certifying the compliance of the CSP2C accounts, specific actions) to highlight the progress made and determine the improvements to be made or continued. An indicator reference framework is used within EDF. It makes it possible to measure areas of conformity of the accounting information for each process. With regard to subsidiaries, each legal entity is responsible for the implementation of the Group’s Internal Accounting and Financial Control guideline.

Procedures for preparing and auditing the consolidated financial statements

The consolidated financial statements are prepared by the Consolidation Department of the Consolidation Accounting Division based on data entered locally by each entity (parent company entities and subsidiaries) in accordance with Group standards and closing instructions, following a single chart of accounts. The scope of consolidation is closed after identifying all the companies of significance that are controlled, jointly controlled or under significant influence. The non-significant nature of entities for which EDF holds an interest and which might fall within the scope of consolidation is examined regularly and submitted annually for the assessment of the Statutory Auditors.