AREVA Consolidated financial statements

Transcription

1 This is a free translation into English of the statutory auditors report on the consolidated financial statements issued in French and it is provided solely for the convenience of English-speaking users. The statutory auditors report includes information specifically required by French law in such reports, whether modified or not. This information is presented below the audit opinion on the consolidated financial statements and includes an explanatory paragraph discussing the auditors assessments of certain significant accounting and auditing matters. These assessments were considered for the purpose of issuing an audit opinion on the consolidated financial statements taken as a whole and not to provide separate assurance on individual account balances, transactions or disclosures. This report also includes information relating to the specific verification of information given in the group s management report. This report should be read in conjunction with and construed in accordance with French law and professional auditing standards applicable in France. AREVA Consolidated financial statements

2 MAZARS 61, rue Henri Regnault Courbevoie - Paris-La Défense Cedex S.A. au capital de Commissaire aux Comptes Membre de la compagnie régionale de Versailles ERNST & YOUNG Audit 1/2, place des Saisons Courbevoie - Paris-La Défense 1 S.A.S. à capital variable Commissaire aux Comptes Membre de la compagnie régionale de Versailles Statutory auditors report on the consolidated financial statements Areva Year ended 31 December 2013 To the Shareholders, In compliance with the assignment entrusted to us by your annual general meeting, we hereby report to you, for the year ended 31 December 2013, on: the audit of the accompanying consolidated financial statements of Areva; the justification of our assessments; the specific verification required by law. These consolidated financial statements have been approved by the Executive Board. Our role is to express an opinion on these consolidated financial statements based on our audit. I. Opinion on the consolidated financial statements We conducted our audit in accordance with professional standards applicable in France; those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit involves performing procedures, using sampling techniques or other methods of selection, to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made, as well as the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. AREVA Consolidated financial statements

3 In our opinion, the consolidated financial statements give a true and fair view of the assets and liabilities and of the financial position of the Group as at 31 December 2013 and of the results of its operations for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union. Without qualifying our opinion, we draw your attention to the following matters set out in the notes to the consolidated financial statements: Note 24 describes the difficulties in the performance of the contract for the study and building of components for an experimental reactor prototype, and the additional costs amounting to between 120 and 200 million euros resulting from the time lag in the project schedule not taken into account in the loss at completion of this contract. This note also describes the discussions in progress with the client in order to continue the project without having to bear these additional costs. The failure of these negotiations could lead to a significant increase in the provisions recognized; Note 24 describes the reasons that led Areva to apply paragraph 32 of IAS 11 as from the second half of 2013 and the methods of recognition applicable to the OL3 contract. In addition, this note specifies the conditions of completion of this contract and the sensitivity of the income at completion to legal risks, as well as to the operational conditions for the end of construction and testing until the reactor is put into service; Notes and 9 describe the treatment and impact on the consolidated financial statements of the discontinued operations (wind power and solar energy activities, as well as a subsidiary specialized in IT services); Notes 1.18 and 13 describe the procedures for measuring the provisions for end-of-lifecycle operations, and their sensitivity to the assumptions used in terms of technical processes, costs, disbursement schedules and inflation and discount rates. II. Justification of our assessments In accordance with the requirements of article L of the French Commercial Code (Code de commerce) relating to the justification of our assessments, we bring to your attention the following matters: Areva recognizes the profit or loss on long-term contracts according to the methods described in Notes 1.8 and 24 to the consolidated financial statements. We assessed the data and assumptions on which the estimated income at completion and changes therein are based. We examined the procedures for management s approval of these estimates and reviewed the calculations made. AREVA Consolidated financial statements

4 Provisions for end-of-lifecycle operations have been measured according to the methods described in Note 1.18 to the consolidated financial statements. We reviewed the implementation of these methods, the assumptions used and the cost estimates obtained. Offsetting these provisions, Areva recognizes financial assets to cover the end-of-lifecycle operations, which include a dedicated portfolio composed of directly held shares and units of equity and bond mutual funds. The portfolio management objectives and measurement principles are described in Notes 13, , and to the consolidated financial statements. We assessed the appropriateness of the methods used and the measurement of the provisions for impairment of the financial assets. Goodwill, intangible assets, and property, plant and equipment have been tested for impairment according to the principles and assumptions described in Notes 1.10, 10, 11 and 12 to the consolidated financial statements. We examined the methods used to perform these tests, and assessed the consistency of the assumptions adopted with the forecast data from Areva s strategic action plan, and the approach used to estimate the fair value of certain mining assets. We also verified that Notes 1.10, 10, 11 and 12 of the notes to the consolidated financial statements provide appropriate disclosures. The principles for the recognition of deferred tax assets are described in Notes 1.23 and 8 to the consolidated financial statements. We examined the methods used to make these estimates, verified the consistency of the forecast taxable income with the strategic action plan and assessed the timeframes taken into consideration against the tax loss carryforward time limitations and the specific position of each tax consolidation group. The accounting principles relating to employee benefits are described in Notes 1, 1.1, 1.16 and 23 to the consolidated financial statements. We assessed the appropriateness of the methods used and reviewed the measurement of the hedging assets at market value. We examined the existing procedures for the identification, evaluation and presentation in the accounts of Areva s risks, litigation and contingent liabilities. We also verified that the main disputes identified during the implementation of these procedures are described appropriately in the financial statements, and in Notes 24 and 34 to the consolidated financial statements in particular. These assessments were made as part of our audit of the consolidated financial statements taken as a whole, and therefore contributed to the opinion we formed which is expressed in the first part of this report. III. Specific verification As required by law we have also verified in accordance with professional standards applicable in France the information presented in the Group s management report. With the exception of the matters described in the first part of this report, we have no matters to report as to its fair presentation and its consistency with the consolidated financial statements. Paris-La Défense, 26 February 2014 The Statutory Auditors AREVA Consolidated financial statements

5 French original signed by: MAZARS ERNST & YOUNG Audit Juliette Decoux Jean-Louis Simon Aymeric de La Morandière Jean Bouquot AREVA Consolidated financial statements

6 Financial information concerning assets, financial positions and financial performance Consolidated financial statements 1.2. CONSOLIDATED STATEMENT OF INCOME Note * REVENUE 3 9,240 8,886 Other income from operations Cost of sales (7,990) (7,955) Gross margin 1, Research and Development expenses (293) (311) Marketing and sales expenses (215) (221) General and administrative expenses (390) (406) Other operating expenses 6 (481) (432) Other operating income OPERATING INCOME Income from cash and cash equivalents Gross borrowing costs (258) (232) Net borrowing costs (214) (181) Other financial expenses (459) (535) Other financial income Other financial income and expenses (34) (137) NET FINANCIAL INCOME 7 (248) (318) Income tax NET INCOME OF CONSOLIDATED BUSINESSES (175) 140 Share in net income of associates NET INCOME FROM CONTINUING OPERATIONS (175) 151 Net income from discontinued operations 9 (248) (226) NET INCOME FOR THE PERIOD (423) (74) Including: Group: Net income from continuing operations (255) 115 Net income from discontinued operations (238) (214) NET INCOME ATTRIBUTABLE TO EQUITY OWNERS OF THE PARENT Minority interests: (494) (99) Net income from continuing operations Net income from discontinued operations (9) (12) NET INCOME ATTRIBUTABLE TO MINORITY INTERESTS Number of shares outstanding 383,204, ,204,852 Average number of shares outstanding 383,204, ,204,852 Average number of treasury shares 2,614,543 2,182,826 Average number of shares outstanding, excluding treasury shares 380,590, ,022,026 Earnings per share from continuing operations Basic earnings per share Consolidated net income per diluted share (1) (1) AREVA has not issued any instruments with a dilutive impact on share capital. *: In application of IFRS 5, the 2012 financial statements were restated in relation to the data published the previous year. The impacts of these restatements are detailed in Note 37. AREVA Consolidated financial statements

7 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME * Net income Other comprehensive income items (423) (74) Items not recyclable to the income statement 71 (299) Actuarial gains and losses on employee benefits 91 (324) Income tax related to non-recyclable items (20) 26 Items recyclable to the income statement (152) 178 Currency translation adjustments on consolidated companies and other (181) (33) Change in value of available-for-sale financial assets Change in value of cash flow hedges (15) 1 Income tax related to recyclable items (56) (68) Other comprehensive income items from discontinued operations 21 5 Share in other net comprehensive income items from associates (29) (18) Non-current assets held for sale - (3) Total other comprehensive income items (net of income tax) (81) (121) COMPREHENSIVE INCOME (504) (195) Group share (562) (217) Minority interests *: In application of IFRS 5, the 2012 financial statements were restated in relation to the data published the previous year. The impacts of these restatements are detailed in Note 37. AREVA Consolidated financial statements

8 1.3. CONSOLIDATED STATEMENT OF FINANCIAL POSITION ASSETS Note December 31, 2013 December 31, 2012 NON-CURRENT ASSETS Goodwill 10 3,864 3,998 Intangible assets 11 2,641 2,961 Property, plant and equipment 12 8,731 7,738 End-of-lifecycle assets (third party share) Assets earmarked for end-of-lifecycle operations 13 6,057 5,695 Investments in associates Other non-current financial assets Deferred tax assets 8 1,153 1,029 CURRENT ASSETS 9,038 9,148 Inventories and work-in-process 16 2,331 2,608 Trade accounts receivable and related accounts 17 2,067 2,130 Other operating receivables 18 1,962 2,079 Current tax assets Other non-operating receivables Cash and cash equivalents 19 1,761 1,543 Other current financial assets Non-current assets held for sale and assets from discontinued operations TOTAL ASSETS 32,090 31,255 AREVA Consolidated financial statements

9 LIABILITIES AND EQUITY Note December 31, 2013 December 31, 2012 EQUITY AND MINORITY INTERESTS 5,082 5,556 Share capital 21 1,456 1,456 Consolidated premiums and reserves 3,298 3,759 Actuarial gains and losses on employee benefits (317) (385) Deferred unrealized gains and losses on financial instruments Currency translation reserves (94) 57 Equity attributable to owners of the parent 4,673 5,174 Minority interests NON-CURRENT LIABILITIES 14,284 14,107 Employee benefits 23 1,958 2,026 Provisions for end-of-lifecycle operations 13 6,437 6,331 Other non-current provisions Long-term borrowings 25 5,659 5,564 Deferred tax liabilities CURRENT LIABILITIES 12,725 11,593 Current provisions 24 2,724 2,562 Short-term borrowings Advances and prepayments received 26 4,545 4,004 Trade accounts payable and related accounts 1,817 1,928 Other operating liabilities 27 2,582 2,581 Current tax liabilities Other non-operating liabilities Liabilities of discontinued operations TOTAL LIABILITIES AND EQUITY 32,090 31,255 AREVA Consolidated financial statements

10 1.4. CONSOLIDATED STATEMENT OF CASH FLOWS Note * Net income for the period (423) (74) Minus: income from discontinued operations Net income from continuing operations (175) 151 Share in net income of associates - (11) Net amortization, depreciation and impairment of PP&E and intangible assets and marketable securities maturing in more than 3 months Goodwill impairment losses 4 - Net increase in (reversal of) provisions 81 (179) Net effect of reverse discounting of assets and provisions Income tax expense (current and deferred) (62) (153) Net interest included in borrowing costs Loss (gain) on disposals of fixed assets and marketable securities maturing in more than 3 months; change in fair value (227) (388) Other non-cash items (54) (152) Cash flow from operations before interest and taxes Net interest received (paid) (201) (181) Income tax paid (143) (219) Cash flow from operations after interest and tax Change in working capital requirement NET CASH FLOW FROM OPERATING ACTIVITIES 1, Investment in PP&E and intangible assets (1,422) (2,021) Loans granted and acquisitions of non-current financial assets (1,934) (3,425) Acquisitions of shares of consolidated companies, net of acquired cash 4 (5) Disposals of PP&E and intangible assets Loan repayments and disposals of non-current financial assets 1,976 3,510 Disposals of shares of consolidated companies, net of disposed cash Dividends from equity associates 1 2 NET CASH FLOW FROM INVESTING ACTIVITIES (1,364) (1,056) Share issues in the parent company and share issues subscribed by minority shareholders in consolidated subsidiaries - 4 Treasury shares acquired 44 (46) Transactions with minority interests 37 0 Dividends paid to shareholders of the parent company - - Dividends paid to minority shareholders of consolidated companies (33) (112) Increase in borrowings 224 (254) NET CASH FLOW FROM FINANCING ACTIVITIES 272 (406) Increase (decrease) in securities recognized at fair value through profit and loss 211 (179) Impact of foreign exchange movements (17) (13) NET CASH FROM DISCONTINUED OPERATIONS INCREASE (DECREASE) IN NET CASH 181 (784) NET CASH AT THE BEGINNING OF THE YEAR 1,489 2,273 Cash at the end of the year 19 1,761 1,543 Minus: short-term bank facilities and non-trade current accounts (credit balances) 25 (87) (60) Net cash from discontinued operations (4) 5 NET CASH AT THE END OF THE YEAR 1,670 1,489 *: In application of IFRS 5, the 2012 financial statements were restated in relation to the data published the previous year. The impacts of these restatements are detailed in Note 37. AREVA Consolidated financial statements

11 Net Cash taken into account in establishing the Statement of Cash Flows consists of: cash and cash equivalents (see Note 19), which includes: o cash balances and non-trade current accounts, and o risk-free marketable securities initially maturing in less than three months, and money market funds; after deduction of short-term bank facilities and non-trade current accounts included in short-term borrowings (see Note 25); the two preceding items from operations held for sale CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (in millions of euros) Number of shares and investment certificates Share capital Consolidated premiums and reserves Actuarial gains and losses on employee benefits Deferred unrealized gains and losses on financial instrumen ts Currency translation reserves Equity attributable to equity holders of the parent Minority interests Total shareholders equity and minority interests JANUARY 1, ,999,602 1,456 3,916 (99) , ,963 Net income for 2012 Other comprehensive income items Comprehensive income (99) (99) 24 (74) (286) 214 (46) (118) (3) (121) (99) (286) 214 (46) (217) 22 (195) Dividends paid** (112) (112) Treasury shares acquired Share issue Other transactions with shareholders DECEMBER 31, 2012 Net income for 2013 Other comprehensive income items (see Note 21) Comprehensive income (3,398,240) (46) (46) (46) (13) (13) (42) (55) 378,601,362 1,456 3,759 (385) , ,556 (494) (494) 71 (423) (181) (68) (13) (81) (494) (181) (562) 58 (504) Dividends paid** (33) (33) Treasury shares sold/(acquired) Other transactions with shareholders DECEMBER 31, 2013 ** Dividend paid per share (in euros): in 2012 from 2011 net income in 2013 from 2012 net income 3,831, (12) ,432,527 1,456 3,298 (317) 330 (94) 4, , AREVA Consolidated financial statements

12 1.6. OPERATING SEGMENTS For all reporting periods, income items from discontinued operations are presented in the statement of income on a separate line, net income from discontinued operations. Accordingly, data from discontinued operations do not appear in the business segment information below. Definition of EBITA EBITDA is equal to operating income plus net amortization, depreciation and operating provisions (except for provisions for impairment of working capital items) included in operating income. EBITDA excludes the cost of end-of-lifecycle operations performed in nuclear facilities during the year (facility dismantling, waste retrieval and packaging). BY BUSINESS SEGMENT 2013 Results Mining Front End Reactors & Services Back End Renewable Energies Corporate, Shared Services and Engineering and Eliminations Group total Gross revenue 1,839 2,344 3,391 2, (566) 9,240 Inter-segment sales (83) (155) (67) (427) Contribution to consolidated revenue 1,756 2,188 3,324 1, ,240 Contribution to operating income (535) 308 (39) (254) 11 % of gross revenue 27.7% 0.9% (15.8)% 14.3% (56.8)% n.a. 0.1% EBITDA (264) 531 (33) (174) Depreciation and amortization of PP&E and intangible assets Impairment of property, plant and equipment, intangible assets and goodwill (136) (160) (110) (92) (2) (63) (563) (3) (149) (4) - - (21) (178) Reversal (increase) in provisions (7) 22 (157) 62 (4) 3 (80) Gain (loss) on asset disposals recognized in operating income (see Note 6) Balance sheet (in millions of euros, except workforce data) PP&E and intangible assets (including goodwill) Assets earmarked for end-oflifecycle operations Mining 12 (1) 19 - (1) (22) 7 Front End Reactors & Services Back End Renewable Energies Corporate, Shared Services and Engineering and Eliminations Group total 4,018 6,033 2,840 2, ,236-1, , ,257 Other non-current assets 1,560 1,560 Subtotal: Non-current assets 4,018 7,536 2,901 6, ,638 23,052 Inventories and receivables (excluding tax receivables) 634 2,178 1,896 1, ,465 Other current assets 1,929 1,929 Subtotal: Current assets 634 2,178 1,896 1, ,040 8,394 Discontinued operations TOTAL ASSETS 4,652 9,713 4,797 8, ,746 32,090 Workforce 4,463 8,555 15,592 11, ,697 45,340 About 30% of the group s consolidated revenue is with EDF. AREVA Consolidated financial statements

13 2012 Results Mining Front End Reactors & Services Back End Renewable Energies* Corporate, Shared Services and Engineering and Eliminations Group total* Gross revenue 1,452 2,176 3,527 2, (441) 8,886 Inter-segment sales (92) (127) (75) (322) (1) Contribution to consolidated revenue 1,360 2,049 3,452 1, ,886 Contribution to operating income (410) 438 (20) (200) 306 % of gross revenue 24.2% 6.7% (11.6)% 21.3% (16.8)% n.a. 3.4% EBITDA (14) (169) Depreciation and amortization of PP&E and intangible assets Impairment of property, plant and equipment and intangible assets (129) (132) (118) (178) (2) (62) (621) (167) (143) (6) (3) - - (319) Reversal (increase) in provisions (384) 390 (4) Gain (loss) on asset disposals recognized in operating income (see Note 6) (145) 290 *: In application of IFRS 5, the 2012 financial statements were restated in relation to the data published the previous year. Balance sheet except workforce data) PP&E and intangible assets (including goodwill) Assets earmarked for end-oflifecycle operations Mining Front End Reactors & Services Back End Renewable Energies* Corporate, Shared Services and Engineering and Eliminations Group total* 3,789 5,496 2,719 2, ,698 1, ,534 5,912 Other non-current assets 1,498 1,498 Subtotal: Non-current assets 3,789 6,817 2,776 6, ,595 22,107 Inventories and receivables (excluding tax receivables) 831 2,104 2,132 1, ,929 Other current assets 1,993 1,993 Subtotal: Current assets 831 2,104 2,132 1, ,166 8,923 Discontinued operations TOTAL ASSETS 4,620 8,921 5,132 7, ,761 31,255 Workforce 4,601 8,727 16,113 11, ,484 45,542 *: In application of IFRS 5, the 2012 financial statements were restated in relation to the data published the previous year. Nearly 30% of the group s consolidated revenue is with EDF. AREVA Consolidated financial statements

14 BY GEOGRAPHICAL AREA 2013 Contribution to consolidated revenue by business segment and customer location Mining Front End Reactors & Services Back End Renewable Energies Corporate, Shared Services and Engineering Group total France , ,748 Europe (excluding France) ,020 North & South America ,490 Asia-Pacific ,863 Africa and Middle East TOTAL 1,756 2,188 3,324 1, ,240 Closing balances of net property, plant and equipment and intangible assets (excluding goodwill) at December 31, 2013 by business segment and by the geographic area of the units Mining Front End Reactors & Services Back End Renewable Energies Corporate, Shared Services and Engineering Group total France 50 4, , ,639 Europe (excluding France) North & South America 1, ,874 Asia-Pacific Africa and Middle East 1, ,285 TOTAL 3,121 4,775 1,305 1, ,373 Acquisitions of property, plant and equipment and intangible assets (excluding goodwill) at December 31, 2013 by business segment and by the geographical area of the units Mining Front End Reactors & Services Back End Renewable Energies Corporate, Shared Services and Engineering Group total France Europe (excluding France) North & South America Asia-Pacific Africa and Middle East Total ,661 Additional information on Germany and Japan at December 31, 2013 Revenue by customer location Closing balance of net property, plant and equipment and intangible assets (excluding goodwill) Germany Japan AREVA Consolidated financial statements

15 2012 Contribution to consolidated revenue by business segment and customer location Mining Front End Reactors & Services Back End Renewable Energies* Corporate, Shared Services and Engineering Group total* France , ,286 Europe (excluding France) ,997 North & South America ,812 Asia-Pacific ,616 Africa and Middle East TOTAL 1,360 2,049 3,452 1, ,886 *: In application of IFRS 5, the 2012 financial statements were restated in relation to the data published the previous year. Closing balances of net property, plant and equipment and intangible assets (excluding goodwill) at December 31, 2012 by business segment and by the geographic area of the units Mining Front End Reactors & Services Back End Renewable Energies Corporate, Shared Services and Engineering Group total France 37 3, , ,885 Europe (excluding France) North & South America 1, ,960 Asia-Pacific Africa and Middle East 1,059 1,060 TOTAL 2,847 4,206 1,231 1, ,699 Acquisitions of property, plant and equipment and intangible assets (excluding goodwill) at December 31, 2012 by business segment and by the geographical area of the units Mining Front End Reactors & Services Back End Renewable Energies* Corporate, Shared Services and Engineering Group total* France 14 1, ,356 Europe (excluding France) North & South America Asia-Pacific Africa and Middle East TOTAL 666 1, ,134 *: In application of IFRS 5, the 2012 financial statements were restated in relation to the data published the previous year. Additional information on Germany and Japan at December 31, 2012 Revenue by customer location Closing balance of net property, plant and equipment and intangible assets (excluding goodwill) Germany Japan AREVA Consolidated financial statements

16 2. Notes to the consolidated financial statements for the year ended December 31, 2013 All amounts are presented in millions of euros unless otherwise indicated. Certain totals may include rounding differences. INTRODUCTION AREVA s consolidated financial statements for the period January 1 through December 31, 2013 were approved by the Executive Board on February 25, 2014 and reviewed by the Supervisory Board on February 26, The financial statements will be presented to the Annual General Meeting of Shareholders for approval on May 20, The AREVA group is fully consolidated by the Commissariat à l énergie atomique et aux énergies alternatives (see Note 21). Information for 2011 reported in the 2012 Reference Document filed with the Autorité des marchés financiers (AMF) on March 28, 2013, are incorporated by reference. NOTE 1. ACCOUNTING PRINCIPLES Pursuant to European Regulation 1606/2002 of July 19, 2002, AREVA s consolidated financial statements were prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union as from December 31, They reflect International Accounting Standards (IAS) and IFRS standards and interpretations issued by the IFRS Interpretations Committee (IFRIC) and the former Standing Interpretation Committee (SIC). These financial statements are also consistent with IFRS standards established by the International Accounting Standards Board (IASB) to the extent that the mandatory date of adoption of the standards and amendments published by the IASB and not yet adopted by the European Union at December 31, 2013 is beyond that date, except for IFRS 10 - Consolidated Financial Statements, IFRS 11 - Joint Arrangements, IFRS 12 - Disclosure of Interests in Other Entities, and amended IAS 28 - Investments in Associates and Joint Ventures, for which the European Union has deferred mandatory adoption to financial years beginning on or after January 1, 2014, and which AREVA did not elect early adoption. IFRS 13 - Fair Value Measurement, amendments to IAS 1 - Presentation of Financial Statements, and IFRIC 20 interpretation - Stripping Costs, are applicable as from January 1, IFRS 13 - Fair Value Measurement defines the concept of fair value, establishes rules for measurement and prescribes information to be provided in the notes to the financial statements. The application of this standard does not have a significant impact on the valuation of items reported on AREVA s balance sheet, which are stated at fair value; these are principally financial assets classified under available-for-sale securities and securities held for trading, and derivative instruments. Information required under IFRS 13 should allow financial statement users to assess the methods and criteria used for fair value measurement of assets and liabilities after initial recognition, whether for recurring or non-recurring valuation, and the impact on income or other elements of comprehensive income of fair value measurements using mostly non-observable data. In application of that standard, the following information in particular is reported in Note 32 to the consolidated financial statements: o the fair value at the balance sheet date of all balance sheet items measured at fair value, except for retirement assets measured at fair value in application of IAS 19 - Employee Benefits, and assets whose recoverable value is the fair value less disposal costs, in accordance with IAS 36 - Impairment of Assets; o for all fair value measurements, the classification by level in the fair value hierarchy (level 1, 2, or 3) and the transfers between levels during the period, where: - level 1 corresponds to quoted prices for an organized market; - level 2 corresponds to data observed other than quoted prices for liquid, organized markets; AREVA Consolidated financial statements

17 - level 3 corresponds to valuations that do not rely on observed data but are based on valuation techniques. o specific information on level-3 items: - valuation techniques used; - reconciliation between opening and closing balances, showing the impacts on the income statement and in "Other comprehensive income items". The IAS 1 amendments concern the presentation of Other Comprehensive Income items. These items must be presented in two categories: first, items that may never be recycled through income and loss and, second, items that may eventually be recycled through income and loss. The tax impact must be presented separately for each of these two categories. At December 31, 2012 and December 31, 2013, actuarial differences recognized on retirement commitments and other long-term employee benefits are the only "Other comprehensive income items" that are not recyclable through income and loss in the AREVA group. IFRC interpretation 20, Stripping costs clarifies the accounting requirements for stripping expenses during the production phase of an open pit mine. It had no significant impact on the accounting treatment of the group's mining operations. IFRS 10 - Consolidated Financial Statements, IFRS 11 - Joint Arrangements, IFRS 12 - Disclosure of Interests in Other Entities, and amended IAS 28 - Investments in Associates and Joint Ventures, become effective on January 1, 2014: o IFRS 10, which replaces IAS 27, stipulates that exercise of control constitutes the sole criterion for consolidation of an entity, gives the definition of control and determines its constituent criteria; o IFRS 11, which replaces IAS 31, defines the concept of joint control and distinguishes between two categories of partnership agreements with joint control: - joint operations in which each partner holds rights in the assets and incurs obligations on the liabilities related to the business, and each partner recognizes the assets, liabilities, income and expenses relating to its interests in the joint operation; - joint ventures in which the parties exercise joint control of the operation and have rights in the net assets thereof, and each joint venture partner recognizes its interests in the joint venture according to the equity method. IFRS 11 therefore eliminates the option authorized by IAS 31 to consolidate joint ventures according to the proportionate consolidation method. o IFRS 12 combines all information to be provided by an entity concerning the equity interests it holds in other entities; o amended IAS 28 defines the equity method applicable to recognition of equity interests in associates and joint venture. AREVA analyzed the consequences of the adoption of these new rules on its consolidated financial statements. Based on these analyses, adoption of IFRS 10 should not have a significant impact on the group s consolidation scope. On the other hand, elimination of the proportionate consolidation method for joint ventures in application of IFRS 11 will have significant impacts on its consolidated financial statements. For purposes of information, entities currently consolidated using the proportionate method and which will be consolidated using the equity method as from January 1, 2014, contributed the following amounts to the AREVA group s consolidated data for the years ended December 31, 2012 and December 31, 2013: December 31, 2012 December 31, 2013 Revenue Operating income EBITDA Free operating cash flow before tax Borrowings AREVA Consolidated financial statements

18 To comply with recommendation of the French Accounting Standards Authority, AREVA will report the share in net income of associates and joint ventures in the statement of income under a heading immediately below operating income; a new subtotal will be presented for an amount equal to the total of operating income plus the share in net income of associates and joint ventures. IFRIC interpretation 21 Levies Charged by Public Authorities will also enter into force in 2014, subject to its adoption by the European Union. It concerns the taxes due by an entity to a public authority in application of the regulation, other than those entering into the scope of IAS 12 - Income Taxes. IFRIC 21 specifies that the obligating event for a tax consists of the last activity rendering it payable. Adoption of this interpretation will have the consequence of modifying the recognition method for certain taxes. In particular, taxes that become payable on a given date when certain conditions are met will be recognized in their full amount at that date and may not be spread out over time. However, AREVA does not think that the adoption of IFRIC 21 will have a significant impact on its annual financial statements. In addition, the IASB published the hedge accounting provisions of IFRS 9 - Financial Instruments in 2013, and postponed the mandatory date for adoption to accounting years beginning on or after January 1, 2017, at the earliest. AREVA will analyze this standard in 2014 in order to prepare their implementation and to assess their impact on its financial statements ESTIMATES AND JUDGMENTS To prepare its financial statements, AREVA must make estimates, assumptions and judgments impacting the net carrying amount of certain assets and liabilities, income and expense items, or information provided in some notes to the financial statements. AREVA updates its estimates and judgments on a regular basis to take into account past experience and other factors deemed relevant, based on business circumstances. Depending on changes in these assumptions or in circumstances, the group s future financial statements may or may not be consistent with current estimates, particularly as regards: operating margins on contracts recognized according to the percentage of completion method (see Notes 1.8 and 24), which are estimated by the project teams in accordance with the group s procedures; anticipated cash flows, discount rates and growth assumptions used in impairment tests for goodwill and other plant, property and equipment and intangible assets (see Notes 1.10, 10 and 11); all assumptions used to assess the value of pension commitments and other employee benefits, including future payroll escalation and discount rates, retirement age and employee turnover (see Notes 1.16 and 23); all assumptions used to calculate provisions for end-of-lifecycle operations and the assets corresponding to the third party share, including: o the estimated costs of these operations, o inflation and discount rates, o the schedule of future disbursements, o the operating life of the facilities (see Notes 1.18 and 13), o the procedures for final shut-down of the facilities; estimates and judgments regarding the outcome of ongoing litigation and, more generally, estimates regarding all provisions and contingent liabilities of the AREVA group (see Notes 1.17, 24 and 34); estimates and judgments regarding the recoverable amount of trade accounts receivable and other accounts receivable (see Notes 1.12 and ); estimates and judgments regarding the material or durable nature of the impairment of availablefor-sale financial assets (see Notes 1.13, 13 and 15); estimates of future taxable income used to calculate deferred tax assets (see Notes 1.23 and 8); the share in equity and net income of equity associates that had not yet published their year-end financial statements at the date of year-end closing of AREVA s financial statements. AREVA Consolidated financial statements

19 the highly probability of loss of control of assets and operations classified as discontinued operations no later than 12 months from the date of closing, in accordance with IFRS 5 (see Notes and 9) PRESENTATION OF THE FINANCIAL STATEMENTS AREVA s financial statements are presented in accordance with IAS Presentation of the statement of financial position The statement of financial position makes a distinction between current and non-current assets, and current and non-current liabilities, in accordance with IAS 1. Current assets and liabilities include assets held for sale or for use in connection with the operating cycle, or that are expected to be sold or settled within 12 months of the statement of financial position date. Financial liabilities are reported as current or non-current liabilities based on their residual maturity at year-end. To simplify the presentation of the statement of financial position, AREVA presents all headings relating to end-of-lifecycle operations, as defined in Note 13, on separate lines under non-current assets or liabilities, for their full amount. Thus, provisions for end-of-lifecycle operations are presented as non-current liabilities; the end-of-lifecycle asset corresponding to the share of third parties in the financing of these operations is presented under non-current assets. Financial assets earmarked to cover these operations are presented in a separate heading under non-current assets, including all equities and shares of equity funds and bond funds held in the portfolio, together with cash held on a short-term basis. Similarly, provisions for employee benefits are presented under non-current liabilities in their full amount. Deferred tax assets and liabilities are reported as non-current Presentation of the statement of income In the absence of detailed guidance in IAS 1, the statement of income is presented in accordance with recommendation of the Conseil national de la comptabilité (French national accounting board). Operating expenses are presented by function, split among the following categories: o the cost of sales; o Research and Development expenses; o marketing and sales expenses; o general and administrative expenses; o the costs of restructuring and early employee retirement plans; o other operating income, mainly comprising: - gains/losses on disposals of property, plant and equipment and intangible assets; - income from the deconsolidation of subsidiaries (except when qualified as discontinued operations in accordance with IFRS 5, in which case they are presented on a separate line in the statement of income); - reversals of impairment of property, plant and equipment and intangible assets; o other operating expenses, mainly comprising the following items: - goodwill impairment; - impairment of and losses on disposals of property, plant and equipment and intangible assets; - losses from the deconsolidation of subsidiaries (except when they are qualified as discontinued operations in accordance with IFRS 5). AREVA Consolidated financial statements

20 AREVA presents the income from the Research Tax Credit program in France as a reduction in Research and Development expenses and presents the income from the Competitiveness and Employment Tax Credit as a reduction in payroll expenses in each expense category by function. Net financial income comprises: o gross borrowing costs; o income from cash and cash equivalents; o other financial expenses, most notably: - lasting impairment and gains or losses on sales of available-for-sale securities; - negative changes in value of securities held for trading; - reverse discounting of provisions for end-of-lifecycle operations and employee benefits; o other financial income, most notably: - dividends received and other income from financial assets other than cash and cash equivalents; - gains on disposals of available-for-sale securities; - positive changes in value of securities held for trading; - reverse discounting of end-of-lifecycle assets (third party share); - returns on retirement plan assets and other employee benefits Presentation of the statement of comprehensive income The statement of comprehensive income explains the transition from net income to comprehensive income on a statement separate from the statement of income, in accordance with the election made by AREVA to apply amended IAS 1. It presents other comprehensive income items as either recyclable or not recyclable to the income statement. Items recyclable to the income statement include: o currency translation adjustments on consolidated entities, o changes in the value of available-for-sale financial assets, and o changes in the value of cash flow hedging instruments. Items not recyclable to the income statement include actuarial gains and losses arising subsequent to January 1, 2011, the date of retroactive application of amended IAS 19 (see Note 1.16). These items are presented before tax. The total tax impact of these items is presented on a separate line under recyclable items and non-recyclable items. The share of Other Comprehensive Income items relating to discontinued operations is presented on separate lines of that statement in their total amount after tax, separating items that are recyclable through profit and loss from items that are not recyclable. The share of Other Comprehensive Income items relating to associates is presented on a separate line in the total amount after tax. However, items that are recyclable are not separated from items that are not recyclable, as the amounts are immaterial Presentation of the statement of cash flows The statement of cash flows is presented in accordance with IAS 7. AREVA has adopted the indirect method of presentation, which starts with consolidated net income for the period. Cash flows from operating activities include income taxes paid, interest paid or received, and dividends received, except for dividends received from equity associates, which are reported in cash flows from investing activities. Cash flow from operations is presented before income tax, dividends and interest. AREVA Consolidated financial statements

21 Non-current assets held for sale, discontinued operations Non-current assets held for sale and discontinued operations are presented in the financial statements in accordance with IFRS 5: Non-current assets or groups of assets are considered held for sale if they are available for immediate sale in their current condition and their sale is highly probable during the 12-month period following the end of the accounting year. They are presented in their total amount under a specific heading of the balance sheet. Discontinued operations correspond to separate, leading business segments within the group for which management has initiated a plan to sell and an active search for buyers, and whose sale is highly probable within a maximum of 12 months from the end of the accounting year. Discontinued operations are presented as follows in the financial statements: o o o The assets and liabilities of discontinued operations are presented in their full amount under specific headings of the balance sheet. Net income from discontinued operations, i.e. net income after tax from these operations until the date of their disposal and the net gain after tax on the disposal itself, is reported under a specific heading of the statement of income. The statement of income for the previous year is presented for comparison purposes, restated in identical manner. Net cash flows from discontinued operations, which include cash flows generated by these operations until the date of their disposal and the net cash flow after tax generated on the disposal itself, are also reported on a separate line in the statement of cash flows. The statement of cash flows for the previous year presented for comparison is restated in identical manner CONSOLIDATION AND EQUITY METHODS The consolidated financial statements combine the financial statements for the year ended December 31, 2013 of AREVA and of the subsidiaries that it controls or over which its exercises joint control. The companies controlled by AREVA are fully consolidated (including special-purpose entities). Control is defined as the direct or indirect power to govern a company s financial and operating policies in order to benefit from its activities. Control is assumed when more than 50% of the voting rights are held, directly or indirectly. Determination of control takes into account the existence and effect of potential voting rights that may be exercised or converted immediately. The companies over which AREVA exercises joint control are consolidated using the proportionate consolidation method. The companies over which AREVA exercises a significant influence on management and financial policy ( equity associates ) are accounted for using the equity method. Significant influence is deemed to exist if the group s investment is 20% or higher. In accordance with IAS 28, accounting for an associate under the equity method is discontinued when the investment in the associate is recognized under non-current assets held for sale (see Section above). The associate is then valued at the lowest of its carrying value or the probable net realizable value. Intercompany transactions are eliminated TRANSLATION OF FINANCIAL STATEMENTS OF FOREIGN COMPANIES The AREVA group s financial statements are presented in euros. The functional currency of an entity is the currency of the economic environment in which that entity primarily operates. The functional currency of foreign subsidiaries and associates is generally the local currency. However, another currency may be designated for this purpose when most of a company s transactions are in another currency. The financial statements of foreign companies belonging to the AREVA group are prepared in the local functional currency and translated into euros for consolidation purposes in accordance with the following principles: balance sheet items (including goodwill) are translated at the rates applicable at the end of the period, with the exception of equity components, which are kept at their historic rates; AREVA Consolidated financial statements

22 income statement transactions and cash flow statements are translated at average annual rates; currency translation differences in respect of the net income and equity of these companies are recognized in other comprehensive income items and presented on the balance sheet under the equity heading currency translation reserves. When a foreign company is sold, currency translation differences in respect of the company recorded after January 1, 2004 (date of first-time adoption of IFRS) are recognized in income OPERATING SEGMENTS AREVA presents its business segment information by operating Business Group, which corresponds to the level at which performance is examined by the group s steering bodies, in accordance with the requirements of IFRS 8. The five operating segments presented are: Mining, Front End, Reactors & Services, Back End and Renewable Energies. Information by business segment relates only to operating data included in the statement of income and the statement of financial position (revenue, operating income, EBITDA, goodwill, non-current property, plant and equipment and intangible assets, and other operating assets) and to the workforce. Financial assets and liabilities and the group s tax position are managed at the corporate level; the corresponding items in the statement of income and statement of financial position are not allocated to the operating segments. In addition, AREVA reports data by geographical area: AREVA s consolidated revenue is allocated among five geographical areas based on the destination of goods and services, as follows: France, Europe excluding France, North and South America, Asia-Pacific, Africa and the Middle East BUSINESS COMBINATIONS GOODWILL Acquisitions of companies and operations are recognized at cost based on the acquisition cost method, as provided in IFRS 3 for business combinations subsequent to January 1, 2004 and prior to December 31, 2009, and in IFRS 3 revised for operations subsequent to January 1, In accordance with the option provided under IFRS 1 for the first-time adoption of IFRS, business combinations prior to December 31, 2003 were not restated. Under the method required by this standard, the acquired company s assets, liabilities and contingent liabilities meeting the definition of identifiable assets and liabilities are recognized at fair value on the date of acquisition, except for discontinued business segments of the acquired entity, as provided in IFRS 5, which are recognized at the lower of fair value less costs to sell and the net carrying amount of the corresponding assets. For consolidation purposes, the date of consolidation of the acquired company is the date at which AREVA acquires effective control. Restructuring and other costs incurred by the acquired company as a result of the business combination are included in the liabilities acquired, as long as IAS 37 criteria for provisions are met at the date of acquisition. Costs incurred after the date of acquisition are recognized in operating income during the year in which such costs are incurred or when meeting IAS 37 criteria. The acquired company s contingent liabilities resulting from a current obligation on the date of acquisition are recognized as identifiable liabilities and recorded at fair value on that date. AREVA did not apply the total goodwill method authorized by amended IFRS 3 for acquisitions subsequent to January 1, 2010, and continues to apply the partial goodwill method. In accordance with that method: the goodwill reported in assets corresponds to the difference between the acquisition price of the operations or shares of the company acquires and the fair value share of the corresponding assets, liabilities and contingent liabilities on the date of the acquisition; minority interests are recognized initially based on the fair value of assets, liabilities and contingent liabilities on the date of acquisition, prorated for the percentage interest held by minority shareholders. The valuation of the acquired company s assets, liabilities and contingent liabilities on the acquisition date may be adjusted within twelve months of that date; this also applies to the valuation of the acquisition price if the contract contains conditional price adjustment clauses. The amount of goodwill may not be adjusted after the expiration of that period. AREVA Consolidated financial statements