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.
However, any payment or receipt of a non-monetary advance in a foreign currency is 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 Group has therefore been making preparations for several years to extend the operation period, and making the necessary investments under its Grand Carénage industrial refurbishment programme which was approved in principle by the Board of Directors in January 2015.
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.
On 23 February 2021, the Nuclear Safety Authority (Autorité de sûreté nucléaire – ASN) issued a resolution on the conditions for continued operation of EDF’s 900MW reactors beyond their fourth 10-year inspection. The ASN considered that “the measures planned by EDF combined with those prescribed by ASN open the prospect of continued operation of these reactors for a further ten years following their fourth 10-year inspection”. This resolution ends the “generic” phase of the review, which concerns the studies and modifications of facilities ordinary to all the 900MW reactors, which all have a similar design model.
After the pilot reactor Tricastin 1 in December 2019, and Bugey 2, Bugey 4 and Tricastin 2 in 2021, six more reactors reached the milestone of 40 years of operation in 2022, and were restarted after a successful fourth 10-year inspection: Dampierre 1, Gravelines 1, Bugey 5, Tricastin 3, Gravelines 3 and Dampierre 2. The fourth 10-year inspection of Blayais 1 began in August 2022 and was in progress at 31 December 2022.
In 2021, the technical, economic and governance conditions for extending the depreciation period of 1300MW-series plants were fulfilled, and their depreciation period was extended from 40 to 50 years.
The depreciation period of the 1450MW-series units (the four reactors at Chooz and Civaux), which are much more recent, currently remains at 40 years as the conditions for extension are not yet fulfilled.
These depreciation periods take into account the date of recoupling with the network after the most recent 10-year inspection.
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 2022 are appropriate and justified. However, any future change in assumptions could have a significant impact on the Group’s financial statements (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.
The calculation of provisions incorporates a level of risks and unknowns as appropriate to the operations concerned, together with uncertainty factors such as:
