Registration document 2007 - Total.com

11
Notes to statutory financial statements
1) Accounting policies
The 2006 financial statements have been prepared in accordance with French Generally Accepted Accounting Principles (“French GAAP”)
Property, plant and equipment
Tangible assets are carried at cost with the exception of assets that have been acquired before 1976 which cost has been revalued under
French regulations. They are depreciated by the straight-line method over their estimated useful life, as follows:
• Buildings 20-30 years
• Furniture and fixtures 5-10 years
• Transportation equipment 2-5 years
• Office equipment and furniture 5-10 years
• Computer equipment 3-5 years
Investments and loans to subsidiaries and affiliated companies
Investments in subsidiaries and affiliated companies are stated at the acquisition cost, or the appraised value for investments affected by
the 1976 legal revaluation.
Loans to subsidiaries and affiliated companies are stated at their nominal value.
In the upstream segment, when no production decision is reached, allowances are recorded against investments and loans for an amount
corresponding to the exploration costs incurred. When the existence of proved reserves is established, the value of the investments and
loans is limited to the subsidiary expected pay-back evaluated at year-end.
For other subsidiaries, allowances for impairment in value are calculated by reference to the Company’s equity in the underlying net assets,
the fair value and usefulness of the investment.
Inventories
Inventories are valued at either the historical cost or the market value, whichever is lower. Cost is determined on a first-in, first-out basis
(FIFO) for crude oil and refined product inventories.
Receivables and payables
Receivables and payables are stated at nominal value. Allowances for doubtful debts are recorded when the actual value is inferior to the
book value.
Foreign currency transactions
Receivables and payables denominated in foreign currencies are translated into euros at the year-end exchange rate. Translation
differences upon non-hedged items are recorded under “Translation adjustment” on the assets or liabilities side of the balance sheet.
Unrealized exchange losses are accrued for.
Translation differences upon other foreign receivables and payables are recorded in the statement of income and compensated by
unrealized gains or losses from off-balance sheet hedging.
Financial instruments
The Company mainly uses financial instruments for hedging purposes, in order to manage its exposure to changes in interest rates and
foreign exchange rates.
The Company enters into interest rate and foreign currency swap agreements. The difference between interest to be paid and interest to
be received or premiums and discounts on these swaps is recognized as interest expense or interest income on a prorated basis, over the
life of the hedged item.
The Company may also use futures, caps, floors, and options. Under hedge accounting, changes in the market value of such contracts
are recognized as interest expense or interest income in the same period as the gains and losses on the item being hedged. For option
contracts, premiums paid are amortized over the duration of the option.
An accrual is recorded for any unrealized losses related to operations that do not comply with the criteria required for hedge accounting.
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Appendix 3 - TOTAL S.A.
Parent company’s statutory financial statements
TOTAL - Registration Document 2006