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Provisions and other non-current liabilities
12 Months Ended
Dec. 31, 2019
Provisions and other non-current liabilities  
Provisions and other non-current liabilities

12) Provisions and other non-current liabilities

12.1) Provisions and other non-current liabilities

 

 

 

Accounting policies

A provision is recognized when the Group has a present obligation (legal or constructive) as a result of a past event for which it is probable that an outflow of resources will be required and when a reliable estimate can be made regarding the amount of the obligation. The amount of the liability corresponds to the best possible estimate.

Provisions and non-current liabilities are comprised of liabilities for which the amount and the timing are uncertain. They arise from environmental risks, legal and tax risks, litigation and other risks.

 

 

 

 

 

 

 

 

 

As of December 31,

    

 

    

 

    

 

(M$)

 

2019

 

2018

 

2017

Litigations and accrued penalty claims

 

386

 

736

 

706

Provisions for environmental contingencies

 

742

 

862

 

964

Asset retirement obligations

 

14,492

 

14,286

 

12,240

Other non-current provisions

 

2,927

 

3,144

 

1,370

of which restructuring activities

 

135

 

134

 

160

of which financial risks related to non-consolidated and equity consolidated affiliates

 

130

 

100

 

59

of which contingency reserve on solar panels warranties (SunPower)

 

140

 

173

 

177

Other non-current liabilities

 

2,066

 

2,404

 

706

Total

 

20,613

 

21,432

 

15,986

 

In 2019, litigation reserves amount to $386 million of which $286 million in the Exploration & Production.

In 2018, litigation reserves amounted to $736 million of which $510 million in the Exploration & Production, notably in Angola, Nigeria and Brazil.

In 2017, litigation reserves amounted to $706 million of which $458 million was in the Exploration & Production, notably in Angola and Nigeria.

Other non-current liabilities mainly include debts whose maturity is more than one year related to fixed assets acquisitions.

Changes in provisions and other non-current liabilities

Changes in provisions and other non-current liabilities are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

    

 

    

Currency

    

 

    

 

 

 

As of

 

 

 

 

 

translation

 

 

 

As of

(M$)

 

January, 1st

 

Allowances

 

Reversals

 

adjustment

 

Other

 

December, 31

2019

 

21,432

 

1,248

 

(2,414)

 

(33)

 

380

 

20,613

of which asset retirement obligations

 

  

 

639

 

(460)

 

 

 

 

 

 

of which provisions for environmental contingencies

 

  

 

30

 

(92)

 

 

 

 

 

 

of which provisions for restructuring of activities

 

  

 

60

 

(122)

 

 

 

 

 

 

2018

 

15,986

 

2,416

 

(1,378)

 

(519)

 

4,927

 

21,432

of which asset retirement obligations

 

  

 

530

 

(320)

 

 

 

 

 

 

of which provisions for environmental contingencies

 

  

 

33

 

(111)

 

 

 

 

 

 

of which provisions for restructuring of activities

 

  

 

149

 

(106)

 

 

 

 

 

 

2017

 

16,846

 

1,172

 

(1,612)

 

681

 

(1,101)

 

15,986

of which asset retirement obligations

 

  

 

544

 

(330)

 

 

 

 

 

 

of which provisions for environmental contingencies

 

  

 

37

 

(120)

 

 

 

 

 

 

of which provisions for restructuring of activities

 

  

 

48

 

(84)

 

 

 

 

 

 

 

Changes in the asset retirement obligation

 

Accounting policies

Asset retirement obligations, which result from a legal or constructive obligation, are recognized based on a reasonable estimate in the period in which the obligation arises.

The associated asset retirement costs are capitalized as part of the carrying amount of the underlying asset and depreciated over the useful life of this asset.

An entity is required to measure changes in the liability for an asset retirement obligation due to the passage of time (accretion) by applying a risk-free discount rate to the amount of the liability. Given the long term nature of expenditures related to our asset retirement obligations, the rate is determined on the USD area for a long-term horizon. The increase of the provision due to the passage of time is recognized as “Other financial expense”.

 

The discount rate used in 2019 for the valuation of asset retirement obligation is 4.5% as in 2018 and 2017 (the expenses are estimated at current currency values with an inflation rate of 2%). A decrease of 0.5% of this rate would increase the asset retirement obligation by $1,250 million, with a corresponding impact in tangible assets, and with a negative impact of approximately $74 million on the following years net income. Conversely, an increase of 0.5% would have a nearly symmetrical impact compared to the effect of the decrease of 0.5%.

Changes in the asset retirement obligation are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

    

 

    

 

    

Spending on

    

Currency

    

 

    

 

 

 

As of

 

 

 

Revision in

 

New

 

existing

 

translation

 

 

 

As of

(M$)

 

January 1,

 

Accretion

 

estimates

 

obligations

 

obligations

 

adjustment

 

Other

 

December 31,

2019

 

14,286

 

639

 

(601)

 

567

 

(460)

 

47

 

14

 

14,492

2018

 

12,240

 

530

 

(458)

 

811

 

(320)

 

(364)

 

1,847

 

14,286

2017

 

12,665

 

544

 

(1,107)

 

334

 

(330)

 

448

 

(314)

 

12,240

 

12.2) Other risks and contingent liabilities

TOTAL is not currently aware of any exceptional event, dispute, risks or contingent liabilities that could have a material impact on the assets and liabilities, results, financial position or operations of the Group.