Universal Registration Document 2022

Accounting principles and methods

At the year-end and at each interim reporting date, in application of IAS 36, the Group assesses whether there is an indication that an asset could have been significantly impaired. An impairment test is also carried out at least once a year on cash-generating units (CGUs) or groups of CGUs including an intangible asset with an indefinite useful life, or to which goodwill has been partly or totally allocated.

Impairment tests are carried out as follows:

• the Group measures any long-term asset impairment by comparing the carrying value of these assets and goodwill, grouped into CGUs where necessary, and their recoverable amount;
• CGUs are groups of homogeneous assets that generate identifiable independent cash flows. They reflect the way activities are managed in the Group: they may be subgroups when the activity is optimised across the whole subgroup, or CGUs formed by parts of subgroups corresponding to different types of activity that are managed separately (thermal generation, renewable energy production, services), or single assets;
• the recoverable value of these CGUs is the higher of fair value net of disposal costs, and value in use. When this recoverable value is lower than the carrying amount in the balance sheet, an amount equal to the difference is booked under the heading “Impairment”. The loss is allocated first to goodwill, and any surplus to the other assets of the CGU concerned; impairment booked on goodwill is irreversible;
• fair value is the asset’s potential sale price in a normal transaction between economic actors;
• value in use is calculated based on projected future cash flows:
  • over a horizon that is coherent with the asset’s useful life and/or operating life
  • for certain intangible assets with an indefinite useful life (such as brands), beyond the horizon that can be observed or modelled, a terminal value is determined by discounting to infinity a normative cash flow,
  • excluding development projects other than those that have been decided at the valuation date, and
  • discounted at a rate that reflects the risk profile of the asset or CGU;
• the discount rates used are based on the weighted average cost of capital (WACC) for each asset or group of assets concerned, determined by geographical area and by business segment under the CAPM. WACC is calculated after taxes;
• future cash flows are calculated on the basis of the best available information at the closing date:
  • for the first few years, the flows correspond to the budget, then the Medium-Term Plan (MTP). Over this horizon, energy and commodity prices are determined based on available forward prices, taking hedges into consideration,
  • beyond the MTP horizon, cash flows are estimated based on long-term assumptions prepared for each country where the Group controls industrial assets, using a financial trajectory and scenario-building process that is updated annually. Long-term electricity prices are constructed analytically based on a set of assumptions concerning factors such as economic growth, commodity (oil, gas, coal) and CO₂ prices, demand for electricity, interconnections, changes in the energy mix (rise of renewable energies, installed nuclear capacity, etc.) and fundamental models of supply-demand balance. The Group compares each principal component of assumptions with analyses by external bodies (for example, for commodities and CO₂, which are primary influences on electricity prices, the Group compares its own scenarios with scenarios developed by organisations such as the IEA, IHS, Wood Mackenzie or Aurora, bearing in mind that each of these analysts itself proposes a cone of scenarios). Additionally, in constructing these long-term prices, the impact of climate contingencies is incorporated into