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20.2 Notes to the consolidated financial statements for the year ended December 31, 2016
FINANCIAL INFORMATION CONCERNING ASSETS,
FINANCIAL POSITION AND FINANCIAL PERFORMANCE
20
The acquired company’s contingent liabilities resulting from a current obligation
on the date of acquisition are recognized as identifiable liabilities and recorded at
their fair value on that date.
AREVA did not apply the “total goodwill” method authorized by amended IFRS 3
for acquisitions subsequent to January 1, 2010, and continues to apply the “partial
goodwill” method. Under that method:
p
the goodwill recorded in assets corresponds to the difference between the
acquisition price of the operations or shares of the company acquired and the
share of the fair value of the corresponding assets, liabilities and contingent
liabilities on the date of the acquisition;
p
minority interests are valued initially at the fair value of assets, liabilities and
contingent liabilities recognized on the date of acquisition, prorated for the
percentage of interest held by the minority shareholders.
The valuation of the acquired company’s assets, liabilities and contingent liabilities
on the acquisition date may be adjusted within twelve months of that date; this
also applies to the valuation of the acquisition price when the contract contains
conditional price adjustment clauses. The amount of goodwill may not be adjusted
after the expiration of that period.
Goodwill is not amortized. It is subject to impairment tests that are systematically
performed at least once a year or more often if there are signs of impairment.
Impairment is recognized if the outcome of those tests indicates that it is necessary.
Significant loss of market share, loss of administrative permits or licenses required to
operate a business, or heavy financial losses are examples of signs of impairment.
To perform impairment tests, all goodwill is allocated to cash-generating units
(CGUs) reflecting the group’s structure (the definition of a CGU and themethodology
used for impairment tests are described in note 1.3.9).
If the recoverable amount of the cash-generating unit is less than the net carrying
amount of its assets, impairment is allocated first to goodwill and then to other non-
current assets of the CGU (property, plant and equipment and intangible assets),
prorated for their net carrying amount. The recoverable amount of a CGU is the
higher of (1) its value in use, measured according to the discounted cash flow
method, or (2) its fair value less disposal costs.
Impairment allocated to goodwill cannot be reversed.
Upon the sale of a business, the amount of goodwill allocated to it is included in
its net carrying amount of the business sold and is thus taken into consideration
to determine the gain or loss on disposal.
If an asset or group of assets is sold which constitutes part of a CGU to which
goodwill is allocated, a share of this goodwill is assigned based on objective criteria
to the asset or group of assets sold; the corresponding amount is used to determine
the income from the sale.
1.3.6. Recognition of revenue
Revenue is valued at the fair value of the consideration received or to be received,
net of rebates and sales taxes.
It includes:
p
revenue from construction contracts and certain services recognized according
to the percentage of completion method in accordance with IAS 11 (see
note 1.3.7 hereunder); and
p
revenue from other sales of goods and services recognized when most of the
risk and rewards are transferred to the customer in accordance with IAS 18.
Revenue related to transactions in which the Group only acts as an intermediary,
without bearing the risks and rewards attached to the goods involved, consists of
the profit obtained by the unit. The same is true for commodity trading activities,
which primarily concern the uranium trading business.
No income is recognized when materials or products are exchanged for materials
or products of a similar nature and value.
1.3.7. Revenue recognized according to the percentage of
completion method
Revenue andmargins on construction contracts and certain services are recognized
according to the percentage of completion method (PCM), as provided in IAS 11
for construction contracts and in IAS 18 for services.
In application of this method, revenue and income from contracts are recognized
over the period of performance of the contract. Depending on the type and
complexity of the contracts, the group applies the percentage of completionmethod
based on costs incurred or on the percentage of physical completion.
p
Under the cost-based PCM formula, the percentage of completion is the ratio
of costs incurred (the costs of work or services performed and confirmed at the
end of the accounting period) to the total anticipated cost of the contract. This
ratio may not exceed the percentage of physical or technical completion at the
end of the accounting period.
p
Under the physical PCM formula, a predetermined percentage of completion
is assigned to each stage of completion of the contract. The revenue and costs
recognized at the end of the accounting period are equal to the percentage of
anticipated revenue and anticipated costs for the stage of completion achieved
at that date.
When financial contract terms translate into significant cash surpluses during all
or part of the contract’s performance, the resulting financial income is included in
contract income and recognized in revenue based on the percentage of completion.
AREVA had elected not to include financial expenses in the cost of contracts
generating a cash loss, as previously allowed under IAS 11. This option is no
longer applicable to contracts for which costs were incurred for the first time after
January 1, 2009: the financial expenses generated by these contracts are included
in the determination of the estimated income on completion.
When estimated income at completion is negative, the loss at completion is
recorded immediately in income, after deduction of any already recognized partial
loss, and a provision is set up accordingly.
When the gain or loss at completion cannot be estimated reliably, the costs are
recorded as expenses for the period in which they are incurred and the revenue
recognized may not exceed the costs incurred and recoverable. In cases of losses
at completion, this approach does not exclude the recognition of all expected
losses in expenses. At December 31, 2014 and December 31, 2015, this provision
applied in particular to the EPR reactor construction project in Finland (see note 24).
2016 AREVA
REFERENCE DOCUMENT
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