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Main items related to operating activities
12 Months Ended
Dec. 31, 2017
Main items related to operating activities  
Main items related to operating activities

5) Main items related to operating activities

Items related to the statement of income

5.1) Net sales

 

Accounting policies

Sales of goods

Revenues from sales are recognized when the significant risks and rewards of ownership have been passed to the buyer and when the amount is recoverable and can be reasonably measured.

Revenues from sales of crude oil and natural gas are recorded upon transfer of title, according to the terms of the sales contracts.

Revenues from the production of crude oil and natural gas properties, in which the Group has an interest with other producers, are recognized based on actual volumes sold during the period. Any difference between volumes sold and entitlement volumes, based on the Group net working interest, is recognized as “Other current assets” or “Other creditors and accrued liabilities”, as appropriate.

Quantities delivered that represent production royalties and taxes, when paid in cash, are included in oil and gas sales, except for the United States and Canada.

Certain transactions within the trading activities (contracts involving quantities that are purchased from third parties then resold to third parties) are shown at their net value in sales.

Exchanges of crude oil and petroleum products within normal trading activities do not generate any income and therefore these flows are shown at their net value in both the statement of income and the balance sheet.

Sales of services

Revenues from services are recognized when the services have been rendered.

Revenues from gas transport are recognized when services are rendered. These revenues are based on the quantities transported and measured according to procedures defined in each service contract.

Shipping revenues and expenses from time-charter activities are recognized on a pro rata basis over a period that commences upon the unloading of the previous voyage and terminates upon the unloading of the current voyage. Shipping revenue recognition starts only when a charter has been agreed to by both the Group and the customer.

Solar Farm Development Projects

SunPower develops and sells solar farm projects. This activity generally contains a property component (land ownership or an interest in land rights). The revenue associated with the development of these projects is recognized when the project-entities and land rights are irrevocably sold.

Revenues under contracts for construction of solar systems are recognized based on the progress of construction works, measured according to the percentage of costs incurred relative to total forecast costs.

Excise taxes

Sales include excise taxes collected by the Group within the course of its oil distribution operations. Excise taxes are deducted from sales in order to obtain the “Revenues from sales” indicator.

Excise taxes are rights or taxes which amount is calculated based on the quantity of oil and gas products put on the market. Excise taxes are determined by the states. They are paid directly to the customs and tax authorities and then invoiced to final customers by being included in the sales price.

The analysis of the criteria set by IAS 18 led the Group to determine that it was acting as principal in these transactions. On this basis, the sales presented include the amount of excise taxes invoiced to the customers.

 

5.2) Operating expenses and research and development

Accounting policies

The Group applies IFRS 6 “Exploration for and Evaluation of Mineral Resources”. Oil and gas exploration and production properties and assets are accounted for in accordance with the Successful Efforts method.

Geological and geophysical costs, including seismic surveys for exploration purposes are expensed as incurred in exploration costs.

Costs of dry wells and wells that have not found proved reserves are charged to expense in exploration costs.

 

5.2.1) Operating expenses

 

 

 

 

 

 

 

For the year ended December 31,

    

    

    

    

    

    

(M$)

 

2017

 

2016

 

2015

Purchases, net of inventory variation (a) (b)

 

(99,411)

 

(83,377)

 

(96,671)

Exploration costs

 

(864)

 

(1,264)

 

(1,991)

Other operating expenses (c)

 

(24,966)

 

(24,302)

 

(24,345)

of which non-current operating liabilities (allowances) reversals

 

280

 

369

 

858

of which current operating liabilities (allowances) reversals

 

66

 

(58)

 

(86)

Operating expenses

 

(125,241)

 

(108,943)

 

(123,007)

 

(a)Includes taxes paid on oil and gas production in the Exploration & Production segment, amongst others royalties.

(b)The Group values under / over lifting at market value.

(c)Principally composed of production and administrative costs (see in particular the payroll costs as detailed in Note 10 to the Consolidated Financial Statements “Payroll, staff and employee benefits obligations”).

 

5.2.2) Research and development costs

Accounting policies

Research costs are charged to expense as incurred.

Development expenses are capitalized when the criteria of IAS38 are met.

 

Research and development costs incurred by the Group in 2017 and booked in operating expenses amount to $912 million ($1,050 million in 2016 and $980 million in 2015), corresponding to 0.53% of the sales.

The staff dedicated in 2017 to these research and development activities are estimated at 4,132 people (4,939 in 2016 and 4,248 in 2015).

 

5.3) Amortization, depreciation and impairment of tangible assets and mineral interests

The amortization, depreciation and impairment of tangible assets and mineral interests are detailed as follows:

 

 

 

 

 

 

 

 

 

 

For the year ended December 31,

    

    

    

    

    

    

(M$)

 

2017

 

2016

 

2015

Depreciation and impairment of tangible assets

 

(14,782)

 

(12,615)

 

(15,727)

Amortization and impairment of mineral assets

 

(1,321)

 

(908)

 

(1,993)

Total

 

(16,103)

 

(13,523)

 

(17,720)

 

Items related to balance sheet

5.4) Working capital

5.4.1) Inventories

 

Accounting policies

Inventories are measured in the Consolidated Financial Statements at the lower of historical cost or market value. Cost prices for petroleum and petrochemical products are determined according to the FIFO (First-In, First-Out) method or weighted-average cost method and other inventories are measured using the weighted-average cost method.

In addition stocks held for trading are measured at fair value less costs of sale.

Refining & Chemicals

Petroleum product inventories are mainly comprised of crude oil and refined products. Refined products principally consist of gasoline, distillate and fuel produced by the Group’s refineries. The turnover of petroleum products does not exceed more than two months on average.

Crude oil costs include raw material and receiving costs. Refining costs principally include crude oil costs, production costs (energy, labor, depreciation of producing assets) and an allocation of production overheads (taxes, maintenance, insurance, etc.).

Costs of chemical product inventories consist of raw material costs, direct labor costs and an allocation of production overheads. Start-up costs, general administrative costs and financing costs are excluded from the cost prices of refined and chemicals products.

Marketing & Services

The costs of refined products include mainly raw materials costs, production costs (energy, labor, depreciation of producing assets) and an allocation of production overheads (taxes, maintenance, insurance, etc.).

General administrative costs and financing costs are excluded from the cost price of refined products.

Product inventories purchased from entities external to the Group are valued at their purchase cost plus primary costs of transport.

Carbon dioxide emission rights

In the absence of a current IFRS standard or interpretation on accounting for emission rights of carbon dioxide, the following principles are applied:

– Emission rights are managed as a cost of production and as such are recognized in inventories:

    Emission rights allocated for free are booked in inventories with a nil carrying amount;

    Purchased emission rights are booked at acquisition cost;

    Sales or annual restorations of emission rights consist of decreases in inventories recognized based on a weighted average cost;

    If the carrying amount of inventories at closing date is higher than the market value, an impairment loss is recorded.

– At each closing, a provision is recorded in order to materialize the obligation to surrender emission rights related to the emissions of the period. This provision is calculated based on estimated emissions of the period, valued at weighted average cost of the inventories at the end of the period. It is reversed when the emission rights are surrendered;

– If emission rights to be surrendered at the end of the compliance period are higher than emission rights recorded in inventories, the shortage is accounted for as a liability at market value;

– Forward transactions are recognized at their fair market value in the balance sheet. Changes in the fair value of such forward transactions are recognized in the statement of income.

Energy savings certificates

In the absence of current IFRS standards or interpretations on accounting for energy savings certificates (ESC), the following principles are applied:

– If the obligations linked to the sales of energy are greater than the number of ESC’s held then a liability is recorded. These liabilities are valued based on the price of the last transactions;

– In the event that the number of ESC’s held exceeds the obligation at the balance sheet date this is accounted for as inventory;

– ESC inventories are valued at weighted average cost (acquisition cost for those ESC’s acquired or cost incurred for those ESC’s generated internally).

If the carrying value of the inventory of certificates at the balance sheet date is higher than the market value, an impairment loss is recorded.

 

 

 

 

 

 

 

 

As of December 31, 2017

    

    

    

Valuation 

    

    

(M$)

 

Gross value

 

allowance

 

Net  value

Crude oil and natural gas

 

2,658

 

 —

 

2,658

Refined products

 

5,828

 

(36)

 

5,792

Chemicals products

 

1,089

 

(58)

 

1,031

Trading inventories

 

4,320

 

 —

 

4,320

Other inventories

 

3,632

 

(913)

 

2,719

Total

 

17,527

 

(1,007)

 

16,520

 

 

 

 

 

 

 

 

As of December 31, 2016

    

    

    

Valuation 

    

    

(M$)

 

Gross value

 

allowance

 

Net value

Crude oil and natural gas

 

2,215

 

(7)

 

2,208

Refined products

 

4,577

 

(30)

 

4,547

Chemicals products

 

877

 

(58)

 

819

Trading inventories

 

4,613

 

 —

 

4,613

Other inventories

 

3,936

 

(876)

 

3,060

Total

 

16,218

 

(971)

 

15,247

 

 

 

 

 

 

 

 

As of December 31, 2015

    

    

    

Valuation 

    

    

(M$)

 

Gross value

 

allowance

 

Net value

Crude oil and natural gas

 

1,788

 

(59)

 

1,729

Refined products

 

4,177

 

(130)

 

4,047

Chemicals products

 

989

 

(72)

 

917

Trading inventories

 

3,168

 

 —

 

3,168

Other inventories

 

4,062

 

(807)

 

3,255

Total

 

14,184

 

(1,068)

 

13,116

 

Changes in the valuation allowance on inventories are as follows:

 

 

 

 

 

 

 

 

 

 

    

 

    

 

    

Currency

    

 

 

 

Valuation

 

 

 

translation

 

Valuation

For the year ended December 31,

 

allowance as of

 

 

 

adjustment and

 

allowance as of

(M$)

 

January 1,

 

Increase (net)

 

other variations

 

December 31,

2017

 

(971)

 

 9

 

(45)

 

(1,007)

2016

 

(1,068)

 

41

 

56

 

(971)

2015

 

(1,395)

 

256

 

71

 

(1,068)

 

5.4.2) Accounts receivable and other current assets

 

 

 

 

 

 

 

As of December 31, 2017

    

    

    

Valuation 

    

    

(M$)

 

Gross value

 

allowance

 

Net  value

Accounts receivable

 

15,469

 

(576)

 

14,893

Recoverable taxes

 

4,029

 

 —

 

4,029

Other operating receivables

 

9,797

 

(461)

 

9,336

Prepaid expenses

 

786

 

 —

 

786

Other current assets

 

59

 

 —

 

59

Other current assets

 

14,671

 

(461)

 

14,210

 

 

 

 

 

 

 

 

As of December 31, 2016

    

    

    

Valuation 

    

    

(M$)

 

Gross value

 

allowance

 

Net  value

Accounts receivable

 

12,809

 

(596)

 

12,213

Recoverable taxes

 

3,180

 

 —

 

3,180

Other operating receivables

 

10,618

 

(400)

 

10,218

Prepaid expenses

 

1,399

 

 —

 

1,399

Other current assets

 

38

 

 —

 

38

Other current assets

 

15,235

 

(400)

 

14,835

 

 

 

 

 

 

 

 

As of December 31, 2015

    

    

    

Valuation 

    

    

(M$)

 

Gross value

 

allowance

 

Net  value

Accounts receivable

 

11,173

 

(544)

 

10,629

Recoverable taxes

 

3,328

 

 —

 

3,328

Other operating receivables

 

11,335

 

(426)

 

10,909

Prepaid expenses

 

1,554

 

 —

 

1,554

Other current assets

 

52

 

 —

 

52

Other current assets

 

16,269

 

(426)

 

15,843

 

Changes in the valuation allowance on “Accounts receivable” and “Other current assets” are as follows:

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

    

Currency

    

 

 

 

Valuation

 

 

 

translation

 

Valuation

For the year ended December 31,

 

allowance as of

 

 

 

adjustment and

 

allowance as of

(M$)

 

January 1,

 

Increase (net)

 

other variations

 

December 31,

Accounts receivable

 

  

 

  

 

  

 

  

2017

 

(596)

 

53

 

(33)

 

(576)

2016

 

(544)

 

(17)

 

(35)

 

(596)

2015

 

(602)

 

 5

 

53

 

(544)

Other current assets

 

  

 

  

 

  

 

  

2017

 

(400)

 

(58)

 

(3)

 

(461)

2016

 

(426)

 

33

 

(7)

 

(400)

2015

 

(367)

 

(79)

 

20

 

(426)

 

As of December 31, 2017, the net portion of the overdue receivables included in “Accounts receivable” and “Other current assets” was $3,156 million, of which $1,682 million was due in less than 90 days, $235 million was due between 90 days and 6 months, $350 million was due between 6 and 12 months and $889 million was due after 12 months.

 

As of December 31, 2016, the net portion of the overdue receivables included in “Accounts receivable” and “Other current assets” was $3,525 million, of which $1,273 million was due in less than 90 days, $1,013 million was due between 90 days and 6 months, $538 million was due between 6 and 12 months and $701 million was due after 12 months.

 

As of December 31, 2015, the net portion of the overdue receivables included in “Accounts receivable” and “Other current assets” was $3,159 million, of which $1,313 million was due in less than 90 days, $460 million was due between 90 days and 6 months, $570 million was due between 6 and 12 months and $816 million was due after 12 months.

 

5.4.3) Other creditors and accrued liabilities

 

 

 

 

 

 

 

As of December 31,

    

    

    

    

    

    

(M$)

 

2017

 

2016

 

2015

Accruals and deferred income

 

419

 

424

 

342

Payable to States (including taxes and duties)

 

5,786

 

5,455

 

5,363

Payroll

 

1,439

 

1,225

 

1,265

Other operating liabilities

 

10,135

 

9,616

 

9,914

Total

 

17,779

 

16,720

 

16,884

 

As of December 31, 2017, the heading “Other operating liabilities” includes mainly the second quarterly interim dividend for the fiscal year 2017 for $1,883 million, which was paid in January 2018 and the third quarterly interim dividend for the fiscal year 2017 for $1,912 million, which will be paid in April 2018.

As of December 31, 2016, the heading “Other operating liabilities” included mainly the second quarterly interim dividend for the fiscal year 2016 for $1,592 million, which was paid in January 2017 and the third quarterly interim dividend for the fiscal year 2016 for $1,593 million, which was paid in April 2017.

As of December 31, 2015, the heading “Other operating liabilities” included mainly the second quarterly interim dividend for the fiscal year 2015 for $1,560 million, which was paid in January 2016 and the third quarterly interim dividend for the fiscal year 2015 for $1,584 million, which was paid in April 2016.

 

Items related to the cash flow statement

5.5) Cash flow from operating activities

 

 

Accounting policies

The Consolidated Statement of Cash Flows prepared in currencies other than dollar has been translated into dollars using the exchange rate on the transaction date or the average exchange rate for the period. Currency translation differences arising from the translation of monetary assets and liabilities denominated in foreign currency into dollars using the closing exchange rates are shown in the Consolidated Statement of Cash Flows under “Effect of exchange rates”. Therefore, the Consolidated Statement of Cash Flows will not agree with the figures derived from the Consolidated Balance Sheet.

 

The following table gives additional information on cash paid or received in the cash flow from operating activities:

 

Detail of interest, taxes and dividends

 

 

 

 

 

 

 

 

For the year ended December 31,

    

    

    

    

    

    

(M$)

 

2017

 

2016

 

2015

Interests paid

 

(1,305)

 

(1,028)

 

(862)

Interests received

 

82

 

90

 

113

Income tax paid(a)

 

(4,013)

 

(2,892)

 

(4,937)

Dividends received

 

2,219

 

1,702

 

2,309

 

(a)   These amounts include taxes paid in kind under production-sharing contracts in Exploration & Production.

 

Detail of changes in working capital:

 

 

 

 

 

 

 

For the year ended December 31,

    

    

    

    

    

    

(M$)

 

2017

 

2016

 

2015

Inventories

 

(476)

 

(2,475)

 

888

Accounts receivable

 

(1,897)

 

(1,916)

 

4,153

Other current assets

 

1,274

 

185

 

(726)

Accounts payable

 

2,339

 

2,546

 

(2,235)

Other creditors and accrued liabilities

 

(413)

 

541

 

(397)

Net amount, Decrease (Increase)

 

827

 

(1,119)

 

1,683

 

Detail of changes in provisions and deferred taxes

 

 

 

 

 

 

 

As of December 31,

    

    

    

    

    

    

(M$)

 

2017

 

2016

 

2015

Accruals

 

 3

 

382

 

336

Deferred taxes

 

(387)

 

(1,941)

 

(2,899)

Total

 

(384)

 

(1,559)

 

(2,563)