Orano - Annual Activity Report 2024 387 STATEMENTS 6 Statutory Auditors’ report on the consolidated financial statements for the financial year ended December 31, 2024 ● gained an understanding, with the help of our experts, of the IT general controls relating to the application used by the Group to calculate the provisions in relation to facilities in operation and assessed the arithmetical functioning of the computational model developed in this application based on the certification report issued by an independent expert; ● assessed the consistency over time of the models used for estimating provisions; ● assessed the type of costs and assumptions used in determining these provisions; ● assessed, for a selection of operations and on the basis of analytical documents and interviews with the managers concerned, the validity of the assumptions used in determining costs on completion and disbursement schedules, the percentage of completion of ongoing work, modifications of estimates and the level of risk used; ● assessed the processes for measuring and validating the quantities of waste and scrap resulting from operations; ● verified the consistency of the methodologies applied to determine the discount and inflation rates used, with the help of our experts, as well as compliance with accounting standards and applicable regulatory standards at the time they were applied; ● assessed the reasonableness of the assumptions regarding discount and inflation rates used at the reporting date; ● verified the compliance of the accounting treatment of the effects related to changes in estimates, inflation and discount rates and reverse discounting with the applicable accounting principles; ● assessed the consistency of the data provided by the systems for reporting provisions with the accounting data; ● performed a critical review of management’s sensitivity tests. Lastly, we assessed the appropriateness of the disclosures provided in the notes to the consolidated financial statements concerning the end-of-life-cycle provisions and the provisions for contract completion, particularly in terms of the uncertainties concerning certain assumptions and the sensitivity of the measurement of these provisions to certain financial inputs. Accounting treatment of Japanese nuclear waste return contracts Description of risk As indicated in Notes 1.1 and 3 to the consolidated financial statements, the Group signed a several contracts in November 2024 with Japanese electricity providers for the return of all nuclear waste to Japan still stored at the Orano la Hague site. These contracts represent the balance of commitments made in the past with respect to waste from Japanese electricity providers and provide for returning the equivalent in mass and radioactivity of the waste contained in the used fuel elements from Japanese reactors, in consideration of most of the radioactive waste having already been returned to Japan. The main terms of these contracts provide for the exchange of residue units, enabling remaining radioactive matter and mass to be returned in the form of vitrified waste and used packaging, taking effect when the contracts came into force. The contents of the agreement break down into (i) an exchange of residue units, (ii) the termination of previous performance obligations, (iii) new performance obligations in respect of (a) the storage of waste packages and (b) the cleaning and storage of transport packaging. Returning all waste to Japanese customers means that all historical contracts still active at the time of the exchange transaction in November 2024 will be unwound. Historical contracts were previously paid in full and have given rise to partial recognition of revenue based on the state of completion of services. The balance of advances received but not yet recognized is therefore part of income for the year, in addition to the amounts received in respect of the signing of contracts with electricity companies in November 2024. The accounting impact of these contracts depends on management’s ability to determine: the various components of the contract: ● the price allocation of each of the components identified based on the expected cost of the services plus an applicable margin for similar services, and taking into account the unwinding of past commitments; ● the rate at which each component’s contribution to income is recognized; and ● the estimated legal obligation attached to the waste of which Orano takes ownership. As the exchange transaction does not fall within the scope of IFRS 15, and represents a very significant amount, the exchange transaction and the unwinding of historical contracts have been recognized in “Other income” for 948 million euros in the consolidated income statement (under revenue on a separate line). We considered that the accounting treatment of contracts for returning waste to Japan was a key audit matter, given the exceptional nature of this transaction and its significant impact on the Group’s consolidated financial statements. How our audit addressed this risk We have carried out a critical review of the accounting treatment of all transactions relating to the signing of these contracts. We paid particular attention to reviewing the accounting impacts on both income and margin over the period. Our work notably included: ● reviewing contracts and management’s analysis of revenue recognition methods (combining contracts, identification of the various contract performance obligations, allocation of price per obligation and determination of the revenue recognition model);
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