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Financial information on assets,the financial statements and results of the CompanyNotes to the consolidated financial statements1.3.22.3 Other long-term benefit obligationsThese benefits concern employees currently in service, and are earnedaccording to local regulations, particularly the statutory regulations for theelectricity and gas sector for EDF and French subsidiaries covered by the IEGregime. They include:• annuities following incapacity, invalidity, industrial accident or workrelatedillness; like their counterparts in the general national system,IEG employees are entitled to financial support in the event of industrialaccident or work-related illness, and invalidity and incapacity annuitiesand benefits. The obligation is measured as the probable present valueof future benefits payable to current beneficiaries, including any possiblereversions;• long-service awards;• specific benefits for employees who have been in contact with asbestos.1.3.23 Share-based paymentsUnder existing legislation in France, employees of a French group maybenefit from attribution of shares. When the State sells some of the capitalof a public company, article 11 of the French privatisation law of 1986 andarticle 26 of the law of 9 August 2004 require a share offer to be reservedfor current and retired employees of the company. The company beingprivatised may also set up free share plans.In the light of IFRS 2, these benefits granted to employees and formeremployees must be treated by the company as personnel expenses inthe same way as additional remuneration, and recognised as such with acorresponding adjustment in equity.Valuation of the benefit granted through a share offer reserved for currentand former employees is based on the difference between the sharesubscription price and the share price at the grant date, with actuarialvaluation of the impact, if any, of the payment terms, the minimum holdingperiod, and the fact that no dividends were received during the vestingperiod for the free shares.In the case of free shares, the value of the benefit is based on the shareprice at the grant date, depending on the number of shares granted andthe fact that no dividends were received during the vesting period. Theexpense is spread over the vesting period.1.3.24 Special concession liabilitiesThese liabilities represent the contractual obligations specific to theconcession rules for public electricity distribution concessions in France,recognised in the liabilities as:• rights in existing assets: these correspond to the grantor’s right to recoverall assets for nil consideration. This right comprises the value in kind of thefacilities – the net book value of assets operated under concession – lessany as yet unamortised financing provided by the operator;• rights in assets to be replaced: these correspond to the operator’sobligation to contribute to the financing of assets due for replacement.These non-financial liabilities comprise:• depreciation recorded on the portion of assets financed by the grantor;• the provision for renewal, exclusively for assets due for renewal beforethe end of the concession.When assets are replaced, the provision and amortisation of the grantor’sfinancing recorded in respect of the replaced item are eliminated andtransferred to the rights in existing assets, since they are considered asthe grantor’s financing for the new asset. Any excess provision is takento income.During the concession, the grantor’s rights in assets to be replaced arethus transferred upon the asset’s renewal to become the grantor’s rightsin existing assets, with no outflow of cash to the benefit of the grantor.In general, the value of special concession liabilities is determined as follows:• the grantor’s rights in existing assets, representing the share deemed tobe held by the grantor in the concession assets, are valued on the basisof the assets recorded in the balance sheet;• the obligations relating to assets to be replaced are valued on the basisof the estimated value of the relevant assets, measured at each yearendtaking into consideration wear and tear on the asset at that date:• based on the difference between the asset’s replacement value asassessed at year-end and the historical cost for calculation of theprovision for renewal. Annual allocations to the provision are basedon this difference, less any existing provisions, with the net amountspread over the residual useful life of the assets. Consequently, theexpenses recognised for a given item increase over time,• based on the share of the asset’s historical cost financed by the grantorfor amortisation of the grantor’s financing.The Group considers that the obligations related to assets to be replaced areto be valued on the basis of the special clauses contained in the concessionagreements. Under this approach, these obligations are stated at the valueof the contractual obligations as calculated and reported annually in thereports to the grantors.If no such clauses existed, an alternative approach would be to statecontractual obligations at the present value of future payments requiredfor replacement of assets operated under concession at the end of theirindustrial useful life.For information, the Group reports below the impacts of this alternativeapproach, i.e. the discounting of the future obligation to contribute tofinancing of assets to be replaced.The principal assumptions used in preparing this simulation are as follows:• the basis for calculation of the provision for renewal is the estimatedreplacement value at the end of the asset’s useful life, applying a forecastannual inflation rate of 2%, less the asset’s historical value. This amount isbased on the wear and tear on the asset and discounted at a rate of 5%;• amortisation of the grantor’s financing is also discounted at the rateof 5%.The following table shows the impacts of this discounting for EDF andERDF in 2012:• Impacts on the income statement:(in millions of Euros and before taxes) 2012Operating profit 455Financial result (575)Income before taxes of consolidated companies (120)• Impacts on the balance sheet - equity:(in millions of Euros and before taxes) 2012At opening date 2,440At closing date 2,320Valuation of concession liabilities under this method is subject to uncertaintyover costs and disbursements, and is also sensitive to inflation and discountrates.26 l EDF l Financial report 2012
Financial information on assets,the financial statements and results of the CompanyNotes to the consolidated financial statements1.3.25 Investment subsidiesInvestment subsidies received by Group companies are included in liabilitiesunder the heading “Other current liabilities” and transferred to income as andwhen the economic benefits of the corresponding assets are utilised.1.3.26 Assets classified as held for saleand associated liabilities,and discontinued operationsAssets that qualify as held for sale and associated liabilities are disclosedseparately from other assets and liabilities in the balance sheet.All income from discontinued operations is disclosed in a single net amountafter taxes in the income statement. In the cash flow statement, net changesin cash and cash equivalents of discontinued activities are also reportedseparately on a specific line.Impairment is booked when the realisable value is lower than the net bookvalue.1.3.27 Environment1.3.27.1 Greenhouse gas emission rightsSince no IFRS specifically addresses the question, the Group has opted forthe “net approach” accounting treatment: only purchases and sales ofemission rights are recognised in the accounts, and a provision is booked ifthe entity expects to have an annual shortfall in emission rights.The Group thus applies the following principles:• purchased emission rights are recorded as intangible assets at acquisitioncost; when they have been granted for nil consideration by the relevantState under the National Allocation Plan, they are not shown in thebalance sheet (considered to have nil value);• when a Group entity’s actual emissions for the year are higher than therights allocated by the State less completed transactions not subject toforward sale for rights still held in respect of that year, a provision isrecorded to cover the excess emissions. This provision is equivalent tothe acquisition cost up to the amount of rights acquired on the spotor forward markets, and based on market prices for the balance. Theprovision is cancelled when rights are surrendered to the State.If the number of purchased emission rights recorded as intangible assetsat the end of the year and not subject to forward sale is higher than thenumber of purchased rights that will be surrendered to the State for the year,an impairment test must be applied to the excess. If there is a significantnegative differential on the purchased rights held, impairment must bebooked, or partly or totally reversed where relevant.Forward purchases/sales of emission rights carried out as part of tradingactivities are recorded in compliance with IAS 39 and stated at fair valueat the balance sheet date. Changes in fair value are taken to the incomestatement.1.3.27.2 Renewable energy certificatesElectricity produced from renewable energy sources (green energy) ismeasured in two ways:• at the sale price, including costs associated with generation of thiselectricity;• at the value of renewable energy certificates obtained.The renewable energy certificate system thus applies to:• non-obligated producers (because the obligation concerns energy sales:Poland, EDF Énergies Nouvelles);• obligated producers (because the obligation concerns energy generation,or because they also sell energy and are subject to an energy saleobligation: Edison, Fenice, EDF Luminus, EDF Energy).The EDF Group applies the following accounting treatments:• for non-obligated electricity producers, certificates obtained based ongeneration output are recorded in “Other inventories” until they aresold on to suppliers;• for obligated producers and an entity that both produces and suppliesenergy and is under an obligation to sell a specified quantity ofrenewable energy, the Group uses the following accounting treatmentsfor certificates obtained based on generation output:• up to the level of the obligation, these certificates are not recognised,• certificates in excess of the obligation are recorded in “Otherinventories”,• in the specific situation when an entity is not in a position to meet itsobligation at the year-end, the Group applies the following accountingtreatment:– certificates acquired for a consideration in order to meet theobligation are recorded in intangible assets at acquisition cost; and– a provision is established equivalent to the shortfall in certificatescompared to the obligation at the year-end. The value of thisprovision is based on the acquisition price of certificates alreadypurchased on the spot or forward market, and market prices orpenalty prices for the balance. The provision is cancelled when thecertificates are surrendered to the State.Forward purchases/sales of certificates related to trading activities arerecorded in accordance with IAS 39, stated at fair value at the balancesheet date. The change in fair value is recorded in the income statement.1.3.27.3 Energy savings certificatesIn the general framework of an energy savings certificates system (of thekind introduced by the French law of 13 July 2005) EDF fulfils its obligationseither by taking measures regarding its assets or action with its final customersthat entitle it to energy savings certificates from the State, or by purchasingenergy savings certificates directly.Expenses incurred to meet a cumulative energy savings obligation aretreated as:• property, plant and equipment if the action taken by the entity concernsits own assets and the expenses qualify for recognition as an asset ;• expenses for the year incurred, if they do not meet the requirementsfor capitalisation or if the action taken is to encourage third parties tosave energy ;• expenses incurred in excess of the cumulative obligation at the year-endare included in inventories until they are utilised to cover EDF’s obligation.Energy savings certificates acquired for resale are recorded as intangibleassets.1.3.27.4 Environmental expensesEnvironmental expenses are identifiable expenses incurred to prevent, reduceor repair damage to the environment that has been or may be caused bythe Group as a result of its activities. These expenses are treated as follows:• they are capitalised if they are incurred to prevent or reduce futuredamage or protect resources;• they are booked as environmental liabilities and increases to provisionsfor environmental risks if they correspond to an obligation that existsat the year-end and it is probable or certain at the reporting date thatthey will lead to an outflow of resources representing economic benefits;• they are recognised as expenses if they are operating expenses for thebodies in charge of environmental concerns, environmental supervision,environmental duties and taxes, processing of liquid and gas effluentsand non-radioactive waste, or research unrelated to an investment.EDF l Financial report 2012 l 27
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LE GROUPE EDF EST CERTIFIÉ ISO 140
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