Orano - Annual Activity Report 2024 333 STATEMENTS 6 Consolidated financial statements - financial year ended December 31, 2024 ● the costs of storage, retrieval, treatment, and packaging of certain legacy waste from older used fuel treatment contracts that could not be processed on site (WRP); ● costs related to the long-term management of radioactive waste (warehousing, transport, and storage); and ● costs relating to the monitoring of storage sites after their closure. At the reporting date, these costs are adjusted in view of the prevailing economic conditions, and are positioned by payment date so as to be discounted using the inflation rate and the discount rate corresponding to the schedule of forecast expenditure. Provisions for end-of-lifecycle operations performed by the group and relating to the dismantling of facilities are an integral part of the cost of facilities. They are therefore measured and recognized in full as of the date of active commissioning of the corresponding nuclear facility, against a dismantling asset set out in property, plant, and equipment (see Note 1.3.7.2). Treatment of amortization Dismantling assets are amortized on a straight-line basis over the same period as the relevant facilities. The corresponding amortization expense does not contribute to the progress of the contracts and is not taken into account in the cost of inventories. It is however included in the statement of income under “Cost of sales”, deducted from gross profit. Treatment of accretion expenses The discounting of the provision is reversed at the end of each financial year: the discounting reversal corresponds to the increase in the provision due to the passage of time. This increase is recorded as a financial expense. I nflation and discount rates used to discount end-of-lifecycle operations The inflation and discount rates used to measure present value of provisions for end-of-lifecycle operations are determined on the basis of the principles described below. The inflation rate is set in accordance with the long-term inflation projections for the Eurozone and taking into account the European Central Bank’s target rate. The discount rate is set pursuant to IAS 37, i.e., based on market conditions at the reporting date and the specific characteristics of the liability. The rate is thus determined on the basis of a riskfree rate curve for France at the closing date, extended for illiquid maturities by a long-term equilibrium rate (source: ultimate forward rate “UFR” published by the European Insurance and Occupational Pensions Authority for very long-term insurance liabilities, with disbursements beyond market horizons), to which is added an Investment-Grade corporate bond spread and an illiquidity premium. Based on expected disbursements, a single equivalent rate is deducted from the rate curve constructed in this manner. The revision of the discount rate is accordingly a function of market rates and structural changes in the economy resulting in sustainable medium- and long-term changes. According to Articles D. 594-1 et seq. of the French Environmental Code and the decree of March 21, 2007 on securing the financing of nuclear expenses, as amended on July 1, 2020, a deficit or surplus in coverage (ratio of earmarked assets at fair value to regulated end-of-lifecycle provisions) is calculated on the basis of the actual discount rate (i.e., net of inflation) thus determined, when: ● the gross discount rate remains lower than the projected rate of return on earmarked assets, prudently estimated taking into account the disbursement horizon; and ● the actual discount rate remains below the ceiling rate, set by order of the ministers responsible for the Economy and Energy, equal to the unrounded value representative of expectations regarding real long-term interest rates, used for the calculation published by the European Insurance and Occupational Pensions Authority of the ultimate forward rate applicable on the date in question, increased by 150 basis points. In the event that the actual discount rate used to calculate the discounting of end-of-life obligations is higher than the regulatory ceiling rate, the deficit or surplus in coverage would be determined on the basis of the latter. Treatment of changes in assumptions Changes in assumptions relate to changes in cost estimates, discount and inflation rates, and payment schedules. In application of the prospective method: ● if the facility is in operation, dismantling assets are adjusted in the same amount as the provision; dismantling assets are amortized over the remaining life of the facilities; ● if the facility is no longer in operation, or if the operations cover historical waste retrieval and packaging (WRP), the impact is expensed in the year of the change for the remaining share of the cost to the group. The impact of changes in cost estimates is recognized under operating income in “Other operating income and expenses”; the impact of changes in discount and inflation rates related to changes in market conditions and changes in the payment schedules is reflected in net financial income (expense); and ● In the context of a commercial contract involving the acquisition of ownership of waste creating an obligation to constitute an end-of-lifecycle liability, the business margin must be impacted by the cost of this obligation, through an offsetting entry in the provision account of the statement of financial position. End-of-lifecycle assets (third-party share) The group may be required to carry out dismantling operations, funded in part by third parties. Provisions for end-of-lifecycle operations cover all operations. They are recognized against “Dismantling assets – own share” for the group’s share, and, in return, against the non-current asset account “Dismantling assets – third party share” for the amount of the funding expected from the third party.
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