Areva - Reference Document 2016

20

20.2 Notes to the consolidated financial statements for the year ended December 31, 2016 FINANCIAL INFORMATION CONCERNING ASSETS, FINANCIAL POSITION AND FINANCIAL PERFORMANCE

p customer advances and prepayments invested in non-current assets: this heading records the amounts received from customers and used to finance capital expenditures for the performance of long-term contracts to which they have subscribed; p advances and prepayments on orders: this heading records advances and prepayments fromcustomers that do not fall under the preceding two categories; they are reimbursed by charges to revenue earned from the contracts in question. Only advances and prepayments effectively collected are recognized. 1.3.20. Translation of foreign currency denominated transactions Foreign currency-denominated transactions are translated by group companies into their functional currency at the exchange rate prevailing at the transaction date. Monetary assets and liabilities denominated in foreign currencies are revalued at the exchange rate prevailing on the last day of the period. Foreign exchange gains and losses are then recognized: p in operating income when related to operating activities: trade accounts receivable, trade accounts payable, etc.; 1.3.21.1.Risks hedged and financial instruments The AREVA group uses derivative instruments to hedge foreign exchange risks, interest rate risks and the price of commodities. The derivatives used are mainly forward exchange contracts, currency and interest rate swaps, inflation swaps, currency options and commodity options. The risks hedged relate to receivables, borrowings and firm commitments in foreign currencies, planned transactions in foreign currencies, and planned sales and purchases of commodities. 1.3.21.2.Recognition of derivatives As provided in IAS 39, derivatives are initially recognized at fair value and subsequently revalued at the end of each accounting period until settled. Accounting methods for derivatives vary, depending on whether the derivatives are designated as fair value hedging items, cash flow hedging items, hedges of net investments in foreign operations, or do not qualify as hedging items. FAIR VALUE HEDGES This designation concerns hedges of firm commitments in foreign currencies: purchases, sales, receivables and debt. The hedged item and the derivative are revalued simultaneously and any changes in value are recorded in the income statement. CASH FLOW HEDGES This designation covers hedges of probable future cash flows: planned purchases and sales in foreign currencies, planned purchases of commodities, etc. The highly probable hedged items are not valued in the balance sheet. Only the derivative hedges are revalued at the end of each accounting period. The portion of the gain or loss that is considered effective is recognized under “other items of comprehensive income” and presented directly in equity under the balance sheet p in financial income when related to loans or borrowings. 1.3.21. Derivatives and hedge accounting

heading “deferred unrealized gains and losses on financial instruments”, on an after- tax basis. Only the ineffective portion of the hedge impacts income for the period. The amounts recognized under “deferred unrealized gains and losses on financial instruments” are released to income when the hedged item impacts the income statement, i.e. when the hedged transaction is recognized in the financial statements. HEDGES OF NET INVESTMENTS IN FOREIGN OPERATIONS This heading relates to borrowings in a foreign currency and to borrowings in euros when the euro has been swapped into a foreign currency to finance the acquisition of a subsidiary using the same functional currency. Currency translation adjustments on these borrowings are recognized under “other items of comprehensive income” and presented on the balance sheet under “currency translation reserves” in their net amount after tax; only the ineffective portion is recognized through profit and loss. The amount accumulated in currency translation reserves is released to profit and loss when the subsidiary in question is sold. DERIVATIVES NOT QUALIFYING AS HEDGES When derivatives do not qualify as hedging instruments, fair value gains and losses are recognized immediately in the income statement. 1.3.21.3.Presentation of derivatives in the statement of financial position and statement of income PRESENTATION IN THE STATEMENT OF FINANCIAL POSITION Derivatives used to hedge risks related to market transactions are reported under operating receivables and liabilities in the statement of financial position. Derivatives used to hedge risks related to loans, borrowings and current accounts are reported under financial assets or borrowings. PRESENTATION IN THE STATEMENT OF INCOME The revaluation of derivatives and hedged items relating to market transactions affecting the statement of income is recognized under “other operating income and expenses”, except for the component corresponding to the discount/premium, which is recognized in financial income. For loans and borrowings denominated in foreign currencies, fair value gains and losses on financial instruments and hedged items are recognized in financial income. 1.3.22. Income tax As provided in IAS 12, deferred taxes are determined according for all temporary differences between net carrying amounts and the tax basis of assets and liabilities, to which is applied the anticipated tax rate at the time of reversal of these temporary differences. They are not discounted. Temporary taxable differences generate a deferred tax liability. Temporary deductible differences, tax loss carry-forwards, and unused tax credits generate a deferred tax asset equal to the probable amounts recoverable in the future. Deferred tax assets are analyzed case by case for recoverability, taking into account the income projections of the group’s strategic action plan. Deferred tax assets and liabilities are netted for each taxable entity if the entity is allowed to offset its current tax receivables against its current tax liabilities.

197

2016 AREVA REFERENCE DOCUMENT