Note 5.18 provides fi nancial information on the companies in which RATP holds more than 20% interests or investments of more than €1.5 million.
3.8 Consolidation
RATP parent company’s fi nancial statements are included in the consoli- dated fi nancial statements of RATP group.
3.9 Economic interest groups
(see Note 5.19)
3.10 Off-balance sheet commitments
(see Note 5.20)
3.11 Asbestos
The plan to eliminate friable asbestos required by the decree n° 96-97 of February 7, 1996, has almost been completed. In fi nancial terms, only minor operations remain outstanding.
All non-friable asbestos (covered asbestos or material containing asbestos) is gradually being removed as maintenance work is carried out on plant and equipment. As precise information on the plant and equipment contain- ing asbestos is not available, it is not yet possible to determine the asbes- tos elimination schedule beyond a six-month timeframe. Consequently, no provision was recognized for 2013. In 2013, related expenses amounted to €9 million.
RATP also complies with the obligations set forth by the decree of July 13, 2001 and regularly takes measures to control dust accumulation.
An internal study has been conducted to investigate asbestos-related ill- nesses among employees and assess the fi nancial impact on the company. All risks arising from cases already declared or which have been brought to court have been provisioned. Although it is not possible to predict the fi nancial impact of future litigation, RATP believes that the provision of €1 million recorded in the balance sheet as at December 31, 2013 is adequate and refl ects the best estimate of the fi nancial risk borne by the company.
3.12 Leases and lease-purchase contracts
Details of the impact of lease transactions on the fi nancial statements are shown in Note 5.21a.
Leaseholds
RATP enters into a number of leaseholds, granting the rights to use its assets through arrangements that enable foreign investors, particularly in the United States, to assume the economic ownership of the assets and thus amortize the assets and benefi t from signifi cant tax breaks. A leasehold transaction is composed of the main lease granted by RATP and a sub-lease enabling RATP to retain the right of use of the asset. RATP also has an early buyout option (EBO), enabling it to unwind the arrange- ment before the term of the principal lease.
Under French generally accepted accounting principles, a lease arrange- ment is not recognized as a sale during the term of the EBO.
The gain obtained by the foreign investors is shared with RATP. The over- all profi t generated on each transaction is included in the down payment received when the contracts are signed. It is immediately used to reduce RATP’s liabilities, and is accounted for on a straight-line basis over the term of the lease as extraordinary income.
All associated costs, sub-leases payments, interest and principal are recorded in a single entry under extraordinary income and expense, in accordance with accounting principles on defeasance transactions. The various contracts that make up each leasehold arrangement consti- tute separate transactions and are accounted for as such. As the assets and liabilities related to these contracts generate cash fl ows that are fully off set in the balance sheet and income statement, the overall profi t generated by each transaction is reported in a single line as the net present value (NPV). The profi t is recorded as deferred income when the contracts are signed and then is recognized as fi nancial income on a straight-line basis over the duration of the contract.
As at December 31, 2013, there were six lease transactions outstanding (13 contracts with two investors - the Bank of America and State Street). The risks assumed by RATP are limited to equipment ownership risk, risks relating to French legislation and counterparty risk on the deposits. Coun- terparty risk is managed:
• By defeasance agreements, which enable deposits to be off set against the associated liabilities. The corresponding deposits totalled €257.1 million as at December 31, 2013;
• By collateral agreements, which require the deposits to be replaced by American treasury bonds if the credit rating of the deposits falls below a
certain threshold. The net amount of the corresponding deposits totalled €58.6 million as at December 31, 2013;
• By American treasury bonds. In July 2013, RATP replaced the remain- ing non-collateralized deposits and their associated letters of credit with American treasury bonds. The deposits totalled €150.3 million as at December 31, 2013.
Swedish lease
The Swedish lease agreement is used to fi nance equipment.
The investor pays the supplier the total value of the equipment. At the inception of the contract RATP sets up deposits to cover the lease pay- ments and the equipment buyback option. The diff erence between the deposits and the value of the material represents the profi t made by RATP. The lease payments are recognized as operating expenses and the inter- est and deposits in fi nancial income. The net present value is recorded as extraordinary income. Net income is impacted by the deferred profi t relating to the net present value and the theoretical asset depreciation in RATP’s balance sheet.
Finance leases in connection with tramway developments
The Île-de-France transport authority and RATP have set up a fi nance lease arrangement for rolling stock for the T3E, T5, T6, T7 and T8 tramway lines. In the arrangement RATP contracts a bank loan as lessee and the Île- de-France transport authority reimburses the associated lease payments. During the construction period, RATP pays the supplier. Once the tram- ways have been delivered, RATP transfers them to the bank. The fi nance lease is then set up. The Île-de-France transport authority will take over the fi nance lease in 2029.
3.13 Long-term employee benefi ts
RATP recognizes provisions for long-term employee obligations including those relating to:
• Work-related accidents and illnesses. RATP insures its current employ- ees for work-related illnesses and accidents. The benefi ts paid compen- sate employees for the permanent physical or psychological damage incurred due to an accident or illness and any other negative eff ects on the employee’s career. Only the benefi ts paid to current employees are classifi ed as long-term benefi ts: €18.7 million;
• Seniority benefi ts (médailles de travail): €19.6 million; • Phased retirement: €3.2 million;
• Unemployment benefi ts: €10 million; • Long-term sick leave: €4.6 million.
Employee benefi ts are measured using actuarial calculations based on assumptions regarding demographic variables (mortality, employee turn- over, etc.) and economic variables (discount rate, salary increase rate, etc.). Since the 2012 reporting date the Bloomberg 15-year rate has been used as the discount rate. As at December 31, 2013 it was 3.25%, compared with 3% as at December 31, 2012.
The main actuarial assumptions are as follows:
12/31/13 12/31/12 Discount rate 3.25% 3% Infl ation rate 2% 2% Salary increase rate 3.6% 3.6% Mortality table TGH05/TGF05 TGH05/TGF05 Turnover rate 0% 0% Retirement age See table below
Retirement age corresponds to the age at which employees leave the com- pany to retire. Assumptions regarding retirement age are defi ned on an individual basis. They take into account the age when employees are enti- tled to retire, the reform of the special pension scheme for RATP employ- ees and the average retirement age per rank, calculated on the basis of retirement experience over the last 12 months. The individual assump- tion corresponds to the maximum between the entitlement date and the average retirement age per rank calculated on the basis of retirements.