Registration Document 2005 - Total.com

Adoption of IFRS rules
The principal modifications of the Group’s accounting principles
concern the following subjects:
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 in the United States.
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.
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.
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.
Profit and loss account presentation
The Group has chosen to follow the recommendation of
CNC (French accounting standard setter) # 2004-R02, dated
October 27, 2004, for the presentation of its consolidated financial
statements. This presentation allows the reconciliation of the
income statement items with performance indicators as presented
in note 4 to the consolidated financial statements (information by
business segment).
Management Report of the Board of Directors
Summary of results and financial position
TOTAL - Registration Document 2005
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Sales of products or goods
Henceforth, the indicator “sales” includes excise taxes collected by
the Group in the course of its oil distribution operations. Sales net
of excise taxes are shown as “Revenue from sales” according to
IAS 18 “Revenue from ordinary activities”.
Pursuant to IAS 1 “Presentation of Financial Statements”, certain
transactions within the Trading sector previously reported under
sales and purchases must now be shown at their net value in sales.
This restatement leads to a reduction of 22.2 billion euros in sales
as well as cost of goods sold.
Operating expenses
The breakdown of operating expenses, which is shown in note 6
to the consolidated financial statements, now appears directly
on income statement and includes the following headings:
purchases, net of inventory variation, other operating expenses and
unsuccessful exploration costs.
Financial income
Financial income is henceforth broken down as follows: one part,
the cost of the net debt, including financial expenses related to
indebtedness (financial interest on debt) are distinguished from
financial income (income from marketable securities and cash
equivalents) as an offset, and another part, income and expenses
unrelated to debt.
Other IFRS restatements
The other restatements at the transition date are as follows:
Amortization of goodwill
Pursuant to IFRS 3 “Business combinations”, goodwill is no longer
amortized. Instead, it is tested for impairment annually.
Share-based payments
The Group applies IFRS 2 “Share-based payments” as published
by the International Accounting Standards Board (IAS B). This
standard applies to employee stock-option and share purchase
plans and to capital increases reserved for employees retroactively
and not solely to the share transactions that were granted after
November 7, 2002.
These employee benefits are recognized as expenses with a
corresponding credit to shareholders’ equity.
The cost of options is valued according to the Black-Scholes
method and allocated on a straight-line basis between the grant
date and vesting date. For employee-reserved capital increases,
the cost is immediately recognized as an expense.
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