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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
Lower scenario (10% decrease in the value of equity investments)
December 31, 2016
(in millions of euros)
Available-for-sale securities
Securities recognized at fair value
through profit or loss
Balance sheet position
2,401
Income statement impact
(2)
Impact on shareholders’ equity
(238)
COUNTERPARTY RISK
The group is exposed to the credit risk of counterparties linked to its use of financial
derivatives to cover its risks
The group uses different types of financial instruments to manage its exposure to
foreign exchange and interest rate risks, and its exposure to risks on commodities.
The group primarily uses forward buy/sell currency and commodity contracts and
rate derivative products such as swaps, futures or options to cover these types of
risk. These transactions expose the group to counterparty risk when the contracts
are concluded over the counter.
To minimize this risk, the group’s cash management department deals only with
diversified, top quality counterparties based on their ratings in the Standard & Poor’s
and Moody’s rating systems, with a minimum rating of Investment Grade. A legal
framework agreement is always signed with the counterparties.
The limits allowed for each counterparty are determined based on its rating
and the type and maturity of the instruments traded. The allocation of limits is
reviewed at least once a year and approved by the group’s Chief Financial Officer,
unless the counterparty’s rating has been downgraded. The limits are verified in a
specific report produced by the internal control team of the Treasury Management
Department. During periods of significant financial instability that may involve an
increased risk of bank default, which may be underestimated by ratings agencies,
the group monitors advanced indicators as necessary, such as the value of the
credit default swaps (CDS) of the eligible counterparties, to determine if limits should
be adjusted.
When conditions warrant (rising counterparty risk, longer term transactions,
etc.), market transactions are managed by margin calls that reduce the group’s
counterparty risk to a predetermined threshold: the Credit Support Annex for trades
documented under an ISDA master agreement, or the Collateral Annex for trades
documented under a French Banking Federation (FBF) master agreement.
Continuing operations
Balance sheet netting of the fair value of derivatives
December 31, 2016
Effect of clearing agreements
(in millions of euros)
Gross carrying
amount
Financial
instruments
Fair value of
financial collateral
Net exposure
Assets
8
(8)
0
Shareholders’ equity and liabilities
(129)
8
25
(96)
TOTAL
(121)
0
25
(96)
Operations held for sale
Balance sheet netting of the fair value of derivatives
December 31, 2016
Effect of clearing agreements
(in millions of euros)
Gross carrying
amount
Financial
instruments
Fair value of
financial collateral
Net exposure
Assets
81
(54)
27
Shareholders’ equity and liabilities
(258)
54
0
(205)
TOTAL
(178)
(1)
0
(178)
254
2016 AREVA
REFERENCE DOCUMENT