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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
Treatment of income and expenses from discounting reversals
The discounting of the provision is partially reversed at the end of each period: the
discounting reversal corresponds to the increase in the provision due to the passage
of time. This increase is recorded as a financial expense.
Similarly, the discounting of the provision corresponding to the third-party share is
partially reversed rather than amortized.
The resulting increase in the third-party share is recognized as financial income.
The share financed by third parties is reduced for the value of work done on their
behalf, with recognition of a receivable from these third parties in the same amount.
Treatment of amortization
The group’s share of end-of-lifecycle assets is amortized over the same period as
the facilities concerned.
The corresponding amortization expense is not considered as part of the cost of
inventories or the cost of contracts, and is not taken into account in the calculation
of their percentage of completion. However, it is included in the income statement
under cost of sales and thus deducted from gross margin.
Inflation and discount rates used to discount end-of-lifecycle
operations
The inflation and discount rates used to discount end-of-lifecycle operations are
determined according to the following principles.
The inflation rate is set in accordance with the long-term inflation projections for
the Eurozone and taking into account the European Central Bank’s target rate.
The discount rate is set:
p
pursuant to IAS 37, i.e. based on market conditions at year-end closing and the
specific characteristics of the liability; and
p
to comply with the regulatory cap defined by the decree of February 23, 2007
and the order of March 23, 2015 amending the order of March 21, 2007.
The rate thus results from implementation of the following approach:
p
an estimate is made by reference to the moving average yield of 30-year French
OATs over a 10-year period, plus a spread applicable to prime corporate
borrowers, to ensure the compliance of the rate selected with the regulatory cap;
p
a rate curve is constructed based on the rate curve of the French State (OAT
rates) at the closing date, extended for non-liquid maturities using a long-term
break-even rate, plus a spread applicable to prime corporate borrowers and a
liquidity risk premium.
Based on expected disbursements, a single equivalent rate is deducted from the
rate curve constructed in this manner.
For example, the discount rate is revised based on changes in national economic
conditions with a lasting medium- and long-term impact, in addition to the potential
effects of regulatory caps.
For facilities located in France, AREVA chose a long-term inflation assumption of
1.65% and a discount rate of 4.1% at December 31, 2016, a reduction compared
with the rate of 4.5% in 2015.
Treatment of changes in assumptions
Changes in assumptions relate to changes in cost estimates, discount rates and
disbursement schedules.
As provided in IFRS, the group uses the prospective method:
p
if the facility is in operation, the shares of end-of-lifecycle assets of the group
and third parties are corrected in the same amount as the provision; the group’s
share of end-of-lifecycle assets is amortized over the remaining life of the facilities;
p
if the facility is no longer in operation, the impact is recognized during the
year of the change. The impact of changes in cost estimates is recognized
under operating income, while the impact of changes in discount rates and
disbursement schedules is recognized under net financial income.
Provisions for waste retrieval and packaging funded by the group have no
corresponding end-of-lifecycle asset. Consequently, changes in assumptions
concerning the group’s share of these provisions are recognized immediately in
the income statement. Impacts from changes in cost estimates are recognized
under operating income. Impacts fromchanges in discount rates and disbursement
schedules are recognized under financial income.
1.3.18. Borrowings
Borrowings include:
p
put options held by minority shareholders of AREVA group subsidiaries;
p
obligations under finance leases; and
p
other interest-bearing debt.
1.3.18.1. Obligations under finance leases
As provided in IAS 17, leasing arrangements are considered finance leases when
all of the risks and rewards inherent in ownership are, in substance, transferred
to the lessee. At inception, finance leases are recognized as a debt offsetting an
asset in the identical amount, corresponding to the lower of the fair value of the
property and the discounted net present value (NPV) of future minimum payments
due under the contract.
Lease payments made subsequently are treated as debt service and allocated to
repayment of the principal and interest, based on the rate stipulated in the contract
or the discount rate used to value the debt.
1.3.18.2.Other interest-bearing debt
This heading includes:
p
interest-bearing advances from customers: interest-bearing advances from
customers are accounted for as borrowings, while non-interest-bearing advances
are considered operating liabilities (see note 1.3.19);
p
loans from financial institutions;
p
bonds issued by AREVA;
p
short-term bank facilities.
Interest-bearing debt is recognized at amortized cost based on the effective interest
rate method.
Bond issues hedged with a rate swap (fixed rate/variable rate swap) qualified as fair
value hedges are revalued in the same amount as the hedging derivative.
1.3.19. Advances and prepayments received
There are three types of advances and prepayments from customers:
p
interest-bearing advances, which are presented as borrowings (see note 1.3.18.2);
196
2016 AREVA
REFERENCE DOCUMENT