Registration Document 2005 - Total.com

The consolidated balance sheet and income statement showing the
reconciliation from French GAAP to IFRS is provided, respectively,
in exhibits 1 and 2 of the current note.
Modification of the Group’s accounting principles
The main modifications of the Group’s accounting principles
concern the following subjects:
Note 32.1: inventories
In accordance with IAS 2, the Group values inventories of
petroleum products in the financial statements according to the
FIFO (First-In, First-Out) method and other inventories using the
weighted-average cost method.
However, in the note setting forth information by business segment,
the Group will continue to present the results of its Downstream
segment according to the replacement cost method and those of
its Chemicals segment according to the LIFO (Last-In, First-Out)
method in order to ensure the comparability of the Group’s results
with those of its leading competitors, mainly North American.
Inventory valuation using the FIFO method, which implies the
cancellation of the reserve for crude oil price changes, is reflected
by an increase in the value of inventories and an increase in
shareholders’ equity as of January 1, 2004.
The effect on 2004 net income amounts to 478 million euros for
fully consolidated entities.
Note 32.2: Treasury shares
In application of IAS 32 relating to financial instruments, treasury
shares recorded under marketable securities in the financial
statements prepared according to French GAAP, have been
eliminated from shareholders’ equity.
Note 32.3: Employee benefits
The Group has decided to record unrecognized net actuarial losses
and gains as of December 31, 2003 through retained earnings in
accordance with IFRS 1.
As of the transition date, the negative impact on shareholders’ equity
results from a decrease in other non-current assets (pension assets)
and an increase of provisions for employee benefit obligations.
The effect on net income under IFRS results from the cancellation
of the amortization of actuarial gains and losses as well as
from immediate recognition of prior service costs vested (plan
amendments) which were previously spread out under French GAAP.
Appendix 1 – Consolidated financial statements
Notes to the consolidated financial statements 9
Note 32.4: Other IFRS restatements
The other restatements at the transition date are as follows:
Note 32.4a: Component-based approach
Pursuant to IAS 16 concerning tangible assets, the Group applies
the component-based approach. The cost of major turnarounds
of refineries and large petrochemical units are capitalized
and depreciated over the period of time between two major
turnarounds.
The effect on shareholders’ equity as of January 1, 2004 results
from the capitalization of turnaround and major inspection
components (valued on the basis of the costs of the last major
turnaround) net of the corresponding depreciation and the reversal
of provisions for turnaround costs accounted for under French
GAAP. This restatement concerns primarily the major refineries
within the Downstream segment and, to a lesser extent, the
petrochemical units within the Chemicals sector.
Note 32.4b: Impairment of assets
IAS 36 provides for the testing of assets for impairment purposes
by comparison of the assets’ carrying values with the associated
discounted future cash flows. The accounting policy previously
applied by the Group (FAS 144) provides that the calculation be
based on undiscounted cash flows.
As of the transition date, this difference in methodology results in
the impairment of some fixed assets mainly within the Upstream
segment.
Note 32.4c: Financial instruments (excluding treasury shares)
The Group’s application of IAS 32 and IAS 39 as of January 1, 2004
leads to the following restatements:
• publicly-traded equity securities
Publicly-traded equity securities are classified as “available for
sale” and are therefore valued at fair value. Changes in fair value
of these securities are recorded through shareholders’ equity.
•
derivatives
Derivatives are now recorded in the balance sheet whereas they were
treated as off-balance sheet commitments under French GAAP.
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