Areva - Reference Document 2016

20.2 Notes to the consolidated financial statements for the year ended December 31, 2016

FINANCIAL INFORMATION CONCERNING ASSETS,

FINANCIAL POSITION AND FINANCIAL PERFORMANCE

Depreciation periods are revised if the group’s backlog changes significantly.

Changes in the asset value of those facilities, recognized as an offset to changes

in the value of provisions for the corresponding end-of-lifecycle operations, as

explained above, are depreciated prospectively over their remaining useful life.

Assets financed under leasing arrangements, which transfer, in substance, nearly all

the risks and rewards inherent in ownership of the asset to AREVA, are recognized

in the statement of financial position as property, plant and equipment assets and

depreciated as indicated above. Assets financed by customers are depreciated

over the term of the corresponding contracts.

1.3.9. Impairment of property, plant and equipment,

intangible assets and goodwill

Goodwill and intangible assets with an indefinite useful life

Impairment tests on goodwill and intangible assets with indefinite useful lives are

systematically performed at least once a year. These tests are performed at the

level of the cash-generating units (CGU) to which such goodwill and intangible

assets belong.

A CGU is defined as the smallest group of assets whose use generates cash inflows

independently of the group’s other assets or groups of assets.

Impairment is recognized when the recoverable amount of a CGU is less than the

net carrying amount of the assets belonging to it. The recoverable amount of a

CGU is the higher of:

its fair value less disposal costs, corresponding to the net realizable value based

on observable data when available (recent transactions, offers received from

potential acquirers, reported ratios for comparable publicly traded companies)

or on analyses conducted by internal or external experts of the AREVA group;

its value in use, which is equal to the present value of the estimated future cash

flows it generates, plus its “residual value”, corresponding to the present value

of cash flows for the “base” year, discounted to infinity, estimated at the end of

the future cash flow period. However, some CGU have a defined lifecycle (by

ore resources in Mining or by the duration of operating permits in the nuclear

businesses); the cash flows taken into account to assess their value in use are

not discounted to infinity but within the limit of their expected operating life. To

determine the value in use, future cash flows are discounted based on a discount

rate which reflects current assessments of the time value of money and the

specific risk of the asset or the CGU in question.

Other property, plant and equipment and intangible assets

Impairment tests are performed when there is an indication of impairment of

property, plant and equipment or intangible assets with finite useful lives.

When no estimate of an individual asset’s recoverable amount may be established,

the group determines the recoverable amount of the cash-generating unit (CGU)

to which the asset belongs.

1.3.10. Inventories and work-in-process

Inventories and work-in-process are valued at their production cost in the case of

goods and at their acquisition cost in the case of goods acquired for consideration.

For valuation, either the “first-in first-out” method (FIFO) or the “weighted average”

method is used (weighted average cost per unit), depending on the category of

inventory.

When the probable net market value of inventory or work-in-process is less than

its net cost, it is written down.

Financial expenses and research and development costs funded by AREVA are not

taken into account in the valuation of inventories and work-in-process. However, the

cost of research and development programs funded by customers is recognized

in inventories and work-in-process, as is amortization of capitalized development

expenditures.

The costs incurred to get a contract from a customer (“proposal costs”) are

recognized in work-in-process when there is a high probability on the date of year-

end closing that the contract will be signed; in the opposite case, the proposal

costs are recognized in profit and loss under “Marketing and sales expenses” and

“General and administrative expenses”.

1.3.11. Trade accounts receivable

Trade accounts receivable, generally due in less than one year, are recognized

using the “amortized cost” method.

An impairment charge is recognized to reflect the probable recovery value when

collection is not assured.

1.3.12. Financial assets

Financial assets consist of:

assets earmarked for end-of-lifecycle operations;

other available-for-sale securities;

loans, advances and deposits;

securities held for trading;

put and call options on securities;

derivatives used for hedging (see note 1.3.21);

cash and cash equivalents.

They are valued in accordance with IAS 39.

Regular purchases and sales of financial assets are recognized at the date of

transaction.

1.3.12.1.Assets earmarked for end-of-lifecycle operations

This heading brings together all of the investments that AREVA has decided to

devote to the funding of its future end-of-lifecycle operations in the nuclear business,

including facility dismantling and waste retrieval and packaging. It includes directly-

held publicly traded shares and bonds, dedicated share investment funds, dedicated

bond and money-market investment funds, and cash. It also includes receivables

resulting from agreements with third parties liable for payment of a share of the

financing of end-of-lifecycle operations. These receivables are recognized using

the amortized cost method.

Publicly traded shares are classified as “available-for-sale securities” defined

in IAS 39. They are recognized at their fair value, corresponding to the last

traded price of the year. Changes in value are recorded under “Other items of

comprehensive income” and are presented on the balance sheet in their after-tax

amount under “Deferred unrealized gains and losses on financial instruments”,

except for lasting impairment, which is recorded in net financial income for the

year.

AREVA does not consolidate its earmarked investment fund assets on a line-by-

line basis insofar as the company does not control them according to IFRS 10

criteria:

2016 AREVA

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