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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
○
AREVA is not involved in the management of the dedicated investment funds,
which are managed by independent and reputable asset management
firms. These investment funds are benchmarked to the MSCI index of large
European capitalizations, with strict limits on risk. Furthermore, the funds are
regulated by the French stock market authority AMF (Autorité des marches
financiers) and therefore subject to regulations governing investment and
concentration of risk;
○
AREVA does not control the investment fund management firms;
○
AREVA does not hold voting rights in the investment funds;
○
The investment funds do not trade directly or indirectly in financial instruments
issued by AREVA;
○
None of the financial investments made by the funds are strategic to AREVA;
○
AREVA receives no benefit and bears no risk other than that normally
associated with investments in investment funds and in proportion to its
holding;
○
AREVA may terminate the management agreements only in specific cases
(gross negligence, fraud, etc.). Consequently, AREVA cannot replace a fund
management company at will.
Accordingly, the dedicated investment funds are recorded on a single line in the
balance sheet in an amount corresponding to AREVA’s share of their net asset
value as of the end of the year.
In view of the long-term investment objective, investment funds earmarked to
fund end-of-lifecycle operations are classified as “available-for-sale securities”.
Consequently, the accounting treatment of changes in value and the methods of
assessing and recognizing impairment are identical to those applicable to traded
shares held directly.
p
As an exception to the rules described above, bonds held directly as well as
certain dedicated investment funds consisting exclusively of bonds held to
maturity are classified in the “securities held to maturity” category and valued
using the amortized cost method.
1.3.12.2.Other available-for-sale securities
This heading combines the other shares held by AREVA in publicly traded
companies, except for shares in joint ventures and associates consolidated under
the equity method, and shares held for trading.
These shares are valued in the same manner as shares allocated to the dedicated
portfolio:
p
fair value equal to the last traded price of the year;
p
changes in fair value recorded under “Other items of comprehensive income”,
except for lasting impairment, which is recognized in net financial income.
This item also includes the group’s interests in the capital of unconsolidated
companies, either because AREVA does not have control and has no significant
influence over them, or because of they are insignificant. These shares are valued
at their acquisition cost when their fair value cannot be estimated reliably. This is
particularly the case for privately held companies.
1.3.12.3.Lasting impairment of assets earmarked for end-of-
lifecycle operations and other available-for-sale securities
Lasting impairment is recognized in the event of a significant or prolonged drop
in the price or net asset value of a line of securities below their initial value. This
impairment is calculated as the difference between the prices traded on the stock
market or the net asset value of the securities on the last day of the period and their
initial value, corresponding to their historical acquisition cost.
AREVA determines the significant or lasting nature of a drop in the price or net asset
value of a line of securities using several criteria, depending on:
p
the type of investments used, where the level of volatility and risk may vary
substantially: money-market, bond or equity investment funds; bonds or equities
held directly;
p
whether or not they are earmarked to fund end-of-lifecycle operations: assets
earmarked for end-of-lifecycle operations must legally be held for very long
periods of time, with expenses covered occurring after 2050.
AREVA has therefore established thresholds beyond which it considers that a drop
in the price or net asset value of a line of securities is significant or prolonged
and requires the recognition of lasting impairment. The impairment is measured
for significance by comparing the price or net asset value of the line of securities
with its historical acquisition cost. The prolonged nature of a drop is measured by
observing the length of time during which the price or net asset value of the line of
securities continued to be below its historical acquisition cost.
The drop is always considered significant or lasting if it exceeds the following
thresholds, which are objective indicators of impairment:
Significant
Lasting
Assets earmarked for end-of-lifecycle operations
1
Money-market investment funds
5% 1 year
1
Bond investment funds and bonds held
directly
25% 2 years
1
Equity investment funds
50% 3 years
1
Directly held shares
50% 3 years
Other available-for-sale securities
1
Directly held shares
50% 2 years
Securities that have dropped below these thresholds are not subject to lasting
impairment unless other available information on the issuer indicates that the drop
is probably irreversible. In that case, AREVA uses its own judgment to determine
whether lasting impairment should be recognized.
These thresholds are likely to be re-estimated over time as a function of changes
in the economic and financial environment.
Impairment of available-for-sale securities is irreversible in nature and may only be
released to profit and loss on sale of the securities. An increase in prices or in net
asset value subsequent to the recognition of impairment is recorded as a change
in fair value under “Other items of comprehensive income”. Any additional loss of
value affecting a line of previously impaired securities is recorded as additional
impairment in net financial income for the year.
1.3.12.4.Loans, advances and deposits
This heading mainly includes loans related to unconsolidated interests, advances
for acquisitions of interests, and security deposits.
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2016 AREVA
REFERENCE DOCUMENT