Registration document 2007 - Total.com

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15) Financial expenses and income
(in M€) 2006 2005
• Interest expenses and other (1,208) (658)
• Depreciation on investments and loans to subsidiaries and affiliates - (31)
Total financial expenses (1,208) (689)
Including, related to affiliates: 895 603
• Net gain on sales of marketable securities and interest on loans to
subsidiaries and affiliates 54 78
• Interest on short-term deposits and other 59 31
Total financial income 113 109
Including, related to affiliates: 109 90
Total financial expenses and income (1,095) (580)
16) Dividends
(in M€) 2006 2005
Upstream 1,953 729
Downstream 548 706
Chemicals 602 210
Financial activities 3,313 2,930
Total 6,416 4,575
17) Other financial expenses and income
The net income of 36 M€ is mainly composed of a net gain on sales of marketable securities for 33 M€, and currency exchange gain for
3M€
18) Basis of taxation
Pursuant to the provisions of the French Tax Code (Article 209 quinquies) and in accordance with a tax agreement from the French Tax
Authorities, the Parent Company files a worldwide tax return. This regime provides that the basis for income tax computation of the Parent
Company is not limited to French or foreign consolidated subsidiaries or equity affiliates, but also applies to direct or indirect shareholdings
over 10% in the Exploration and Production segment and over 50% for other activities. It allows the Parent Company to offset, within
certain limits and conditions, the taxable income of profitable companies against the losses of other entities.
The renewal of this agreement has been granted by the French Tax Authorities on January 18, 2006 for a three year period (from
January 1, 2005 to December 31, 2007).
Moreover, TOTAL S.A. has elected for the 95% - owned French subsidiaries tax regime provided for by Articles 223 A and following of the
French Tax Code (the so-called “régime de l’intégration fiscale”).
In accordance with the integration agreement signed between TOTAL S.A. and its consolidated subsidiaries, the deficits and long-term
depreciation realized by the consolidated company during the period of integration are definitively acquired by the Parent Company.
19) Risk management and financial instruments
TOTAL S.A. uses various financial instruments to manage its exposure to fluctuations in interest rates and foreign exchange levels.
Thereby, the commercial foreign exchange positions are systematically covered by the purchase or sale of the corresponding currencies,
mainly with cash transactions and sometimes on forward markets. Regarding long-term assets in foreign currencies, the Company tries to
reduce the corresponding exchange risk by associating them, as far as possible, with financing in the same currency.
In terms of interest rates, most of the long-term debt is brought back to a variable rate through the use of issue swaps (long-term interest
rate and foreign currency swaps). Day to day treasury management is operated on the basis of the daily rates, for instance by using shortterm
interest rate swaps.
An independent department continually monitors the status of the financial instruments, especially through marked-to-market valuations
and sensitivity estimations. A strict control process monitors the counterpart-risk evaluation.
More information on the risk management policy appear in Chapter 4 of the this Registration Document (pages 75 to 90).
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Appendix 3 - TOTAL S.A.
Parent company’s statutory financial statements
TOTAL - Registration Document 2006