Registration document 2007 - Total.com

On February 13, 2007, the Board of Directors established and
authorized the publication of the consolidated financial
statements of TOTAL S.A. for the year ended December 31,
2006.
INTRODUCTION
The consolidated financial statements of TOTAL S.A. and its
subsidiaries (the Group) have been prepared on the basis of
IFRS (International Financial Reporting Standards) as adopted by
the European Union, as of December 31, 2006.
The preparation of financial statements in accordance with IFRS
requires management to make estimates and apply assumptions
that affect the reported amounts of assets, liabilities and
contingent liabilities at the date of preparation of the financial
statements and reported income and expenses for the period.
Management reviews these estimates and assumptions on an
ongoing basis, by reference to past experience and various other
factors considered as reasonable which form the basis for
assessing the book value of assets and liabilities. Actual results
may differ significantly from these estimates, if different
assumptions or circumstances apply.
Lastly, where a specific transaction is not dealt with in any
standards or interpretation, management applies its judgment to
define and apply accounting policies that will lead to relevant and
reliable information, so that the financial statements:
• give a true and fair view of the Group’s financial position,
financial performance and cash flows;
• reflect the substance of transactions;
• are neutral;
• are prepared on a prudent basis; and
• are complete in all material aspects.
1) Accounting policies
The consolidated financial statements have been prepared on a
historical cost basis, except for certain financial assets and
liabilities that have been measured at fair value.
The accounting policies used by the Group are described below.
A. Principles of consolidation
The subsidiaries that are directly controlled by the parent
company or indirectly controlled by other consolidated
subsidiaries are fully consolidated.
Appendix 1 – Consolidated financial statements
Notes to the consolidated financial statement
Notes to the consolidated financial statements
Investments in jointly controlled entities are proportionately
consolidated.
Investments in associates, in which the Group has significant
influence, are accounted for by the equity method. Significant
influence is presumed when the Group holds, directly or indirectly
(e.g. through subsidiaries), 20% or more of the voting rights.
Companies in which ownership interest is less than 20%, but
over which the Company has the ability to exercise significant
influence, are also accounted for by the equity method.
All significant intercompany balances, transactions and income
have been eliminated.
B. Business combinations
Business combinations are accounted for using the purchase
method. This method implies the recognition of the assets,
liabilities and contingent liabilities of the companies acquired by
the Group at their fair value.
The difference between the acquisition cost of the shares and the
total valuation, at fair value, of the acquired share of the assets,
liabilities and contingent liabilities identified on the acquisition
date is recorded as goodwill.
If the cost of an acquisition is less than the fair value of the net
assets of the subsidiary acquired, an additional analysis is
performed on the identification and valuation of the identifiable
elements of the assets and liabilities. Any residual negative
goodwill is recorded as net operating income.
The analysis of goodwill is finalized within one year from the
acquisition date.
9
C. Foreign currency translation
The financial statements of subsidiaries are prepared in the
currency that most clearly reflects their business environment.
This is referred to as their functional currency.
(i) Monetary transactions
Transactions denominated in foreign currencies are translated at
the exchange rate prevailing at the transaction date. At each
balance sheet date, monetary assets and liabilities are translated
at the closing rate and the resulting exchange differences are
recognized in “Other income” or “Other expenses”.
(ii) Translation of financial statements denominated in
foreign currencies
Assets and liabilities of foreign entities are translated into euros
on the basis of the exchange rates at the end of the period. The
income and cash flow statements are translated using the
average exchange rates of the period. Foreign exchange
TOTAL – Registration Document 2006 173