Universal Registration Document 2022

Cash flow hedge

This is a hedge of exposure to variability in cash flows associated with an asset or liability or a highly probable future transaction for which variations in cash flows generated by the hedged item are offset by changes in the value of the hedging instrument.

The effective portion of accumulated changes in the hedging instrument’s fair value is recorded in equity, and the ineffective portion (i.e. changes in the fair value of the hedging instrument in excess of changes in the fair value of the hedged item) is recorded in profit and loss.

When the hedged cash flows materialise, the amounts previously recognised in equity are recycled to profit and loss in the same way as for the hedged item, or are treated as an adjustment to the value of the non-financial asset acquired.

Net foreign investment hedge

This is a hedge of exposure to the foreign exchange risk related to a net investment in an entity which does not have the same functional currency as the Group. The effective portion of accumulated changes in the hedging instrument’s fair value is recorded in equity until the disposal or liquidation of the net investment, when it is included in the gain or loss on disposal. The ineffective portion (defined in the same way as for cash flow hedges) is recorded directly in profit and loss.

This risk is hedged in the EDF group level either by matching it with debts in the same currency, or by using derivatives.

Hedging costs: foreign currency basis spread on cross-currency swaps

Hedging costs include the foreign currency basis spread on cross-currency swaps. Fair value variations are included in equity with recycling, and subsequently transferred to interest expenses on financing operations, which are included in the cost of gross financial indebtedness in the income statement.

Trading derivatives

Trading derivatives comprise:

• derivatives subscribed for economic hedging that do not qualify as hedges for accounting purposes; changes in the value of these instruments are reported in profit and loss. When the derivatives are used for economic hedging of negotiable debt instruments and purchased bonds, they are included in “Other financial income and expenses”. When the derivatives are used for economic hedging of generation and supply operations, they are included in “Net changes in fair value on Energy and Commodity derivatives, excluding trading activities” (see note 6);
• derivatives used in trading activities; changes in the fair value of these instruments are included in sales (see note 5.1).