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Veolia Environnement Consolidated financial statements 12/31/2006 22/03/2007 1/130 Consolidated Financial Statements For the year ended December 31, 2006 Draft under audit process Contents CONSOLIDATED BALANCE SHEET...............................................................................................................................................5 CONSOLIDATED INCOME STATEMENT......................................................................................................................................6 CONSOLIDATED CASH FLOW STATEMENT ..............................................................................................................................7 STATEMENT OF RECOGNIZED INCOME AND EXPENSES .....................................................................................................8 1 ACCOUNTING PRINCIPLES AND METHODS.....................................................................................................................9 1.1 BASIS OF PREPARATION AS OF DECEMBER 31, 2006...............................................................................................................9 1.2 PRINCIPLES OF CONSOLIDATION ............................................................................................................................................9 1.3 TRANSLATION OF FOREIGN SUBSIDIARIES' FINANCIAL STATEMENTS (IAS 21)....................................................................10 1.4 FOREIGN ...

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Veolia Environnement Consolidated financial statements 12/31/2006 22/03/2007 1/130

Consolidated Financial Statements
For the year ended December 31, 2006
Draft under audit process
Contents
CONSOLIDATED BALANCE SHEET...............................................................................................................................................5
CONSOLIDATED INCOME STATEMENT......................................................................................................................................6
CONSOLIDATED CASH FLOW STATEMENT ..............................................................................................................................7
STATEMENT OF RECOGNIZED INCOME AND EXPENSES .....................................................................................................8
1 ACCOUNTING PRINCIPLES AND METHODS.....................................................................................................................9
1.1 BASIS OF PREPARATION AS OF DECEMBER 31, 2006...............................................................................................................9
1.2 PRINCIPLES OF CONSOLIDATION ............................................................................................................................................9
1.3 TRANSLATION OF FOREIGN SUBSIDIARIES' FINANCIAL STATEMENTS (IAS 21)....................................................................10
1.4 FOREIGN CURRENCY TRANSACTIONS (IAS 21 – IAS 39)......................................................................................................10
1.5 PROPERTY, PLANT AND EQUIPMENT (IAS 16 AND IAS 17)...................................................................................................11
1.6 GOVERNMENT GRANTS (IAS 20)..........................................................................................................................................11
1.6.1 Investment grants for property, plant and equipment.....................................................................................................11
1.6.2 Grants relating to concession contracts.........................................................................................................................11
1.6.3 Operating grants ............................................................................................................................................................11
1.7 INTANGIBLE ASSETS EXCLUDING GOODWILL (IAS 38).........................................................................................................12
1.8 BUSINESS COMBINATIONS AND GOODWILL (IFRS 3)...........................................................................................................12
1.9 ASSET IMPAIRMENT (IAS 36)...................12
1.10 INVENTORIES (IAS 2)...........................................................................................................................................................12
1.11 ASSETS AND LIABILITIES OF DISCONTINUED OPERATIONS (IFRS 5) .....................................................................................12
1.12 PROVISIONS (IAS 37)...............................12
1.13 FINANCIAL INSTRUMENTS (IAS 32 AND IAS 39)..................................................................................................................13
1.14 PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS (IAS 19)...................................................................................15
1.15 SHARE-BASED PAYMENTS (IFRS 2)........15
1.16 REVENUE (IAS 18)...............................................................................................................................................................16
1.16.1 Sales of goods ............................................................................................................................................................16
1.16.2 Sales of services..............................................................................................................16
1.16.3 Construction contracts (excluding concession contracts) .........................................................................................16
1.16.4 IFRIC 4 Contracts.......................................16
1.16.5 Concession contracts (IFRIC 12) ..............................................................................................................................17
1.17 FINANCIAL ITEMS IN THE INCOME STATEMENT....................................................................................................................17
1.18 INCOME TAXES (IAS 12)..........................17
1.19 CONCESSION CONTRACTS (IFRIC 12) ..................................................................................................................................17
1.19.1 “Financial asset model”............................................................................................................................................17
1.19.2 “Intangible asset model”.......................................................................................................18
1.19.3 “Mixed (or bifurcation) model” ................................................................................................................................18
1.20 CONTRACTS FALLING WITHIN THE SCOPE OF IFRIC 4...........................................................................................18
1.21 CONSTRUCTION CONTRACTS (IAS 11).....19
1.22 ELECTRICITY PURCHASE AND SALE CONTRACTS ..................................................................................................................19
1.23 CO EMISSION ALLOWANCES ...............................................................................................................................................20 2
1.24 SEGMENT REPORTING (IAS 14)............................................................................................................................20
1.25 STANDARDS AND INTERPRETATIONS NOT ADOPTED EARLY, OTHER THAN THOSE DETAILED IN NOTE 1.19 ..........................20
2 USE OF MANAGEMENT ESTIMATES IN THE APPLICATION OF GROUP ACCOUNTING STANDARDS..........21
3 SIGNIFICANT EVENTS...........................................................................................................................................................21 Veolia Environnement Consolidated financial statements 12/31/2006 22/03/2007 2/130
4 GOODWILL ...............................................................................................................................................................................22
5 CONCESSION INTANGIBLE ASSETS..................................................................................................................................24
6 OTHER INTANGIBLE ASSETS..............................................................................................................................................25
7 PROPERTY, PLANT AND EQUIPMENT..............................................................................................................................26
8 INVESTMENTS IN ASSOCIATES..........................................................................................................................................28
9 NON-CONSOLIDATED INVESTMENTS...........................30
10 NON-CURRENT AND CURRENT OPERATING FINANCIAL ASSETS..........................................................................32
11 OTHER NON-CURRENT FINANCIAL ASSETS..................................................................................................................33
12 DEFERRED TAX ASSETS AND LIABILITIES ....................................................................................................................35
13 WORKING CAPITAL...............................................................................................................................................................36
14 OTHER SHORT-TERM LOANS.............................................................................................................................................38
15 MARKETABLE SECURITIES ................................................................................................................................................39
16 CASH AND CASH EQUIVALENTS........................................................................................................................................39
17 EQUITY ......................................................................................................................................................................................41
17.1 EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT .............................................................................................43
17.1.1 Share capital: ............................................................................................................................................................43
17.1.2 Offset of treasury shares against equity: ...................................................................................................................43
17.1.3 Share options:43
17.1.4 Appropriation of net income and dividend distribution:............................................................................................43
17.1.5 Foreign exchange translation reserves: ....................................................................................................................43
17.1.6 Fair value reserves:...................................................................................................................................................45
17.1.7 Other changes:.........................................45
17.2 MINORITY INTERESTS ..........................................................................................................................................................45
18 NON-CURRENT AND CURRENT PROVISIONS ................................................................................................................46
19 LONG-TERM BORROWINGS.....................................49
20 OTHER NON-CURRENT LIABILITIES................................................................................................................................54
21 SHORT-TERM BORROWINGS..............................................................................................................................................54
22 BANK OVERDRAFTS AND OTHER CASH POSITION ITEMS .......................................................................................55
23 REVENUE...................................................................................................................................................................................56
24 OPERATING INCOME ............................................................................................................................................................56
25 NET FINANCE COSTS.............................................................................................................................................................59
26 OTHER FINANCIAL INCOME AND EXPENSES ...............................................................................................................59
27 INCOME TAX EXPENSE.........................................................................................................................................................60
28 SHARE OF NET INCOME OF ASSOCIATES ......................................................................................................................61
29 NET INCOME FROM DISCONTINUED OPERATIONS....................................................................................................61
30 NET INCOME FOR THE YEAR ATTRIBUTABLE TO MINORITY INTERESTS.........................................................63
31 EARNINGS PER SHARE..........................................................................................................................................................63
32 DERIVATIVE INSTRUMENTS ACCOUNTING POSITION AND MANAGEMENT OF MARKET RISKS...............64 Veolia Environnement Consolidated financial statements 12/31/2006 22/03/2007 3/130
33 FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES.............................................................................................75
34 EMPLOYEE COMMITMENTS...............................................................................................................................................76
35 MAIN ACQUISITIONS IN 2006 ..............................................................................................................................................83
36 CONSTRUCTION CONTRACTS............................................................................................................................................89
37 CONCESSION CONTRACTS (IFRIC 12) ..............................................................................................................................89
38 FINANCE LEASES AND OPERATING LEASES.................................................................................................................91
39 PROPORTIONATELY CONSOLIDATED COMPANIES ...................................................................................................92
40 TAX REVIEWS..........................................................................................................................................................................92
41 COMMITMENTS AND CONTINGENCIES ..........................................................................................................................93
42 COLLATERAL GIVEN SUPPORTING BORROWINGS...........96
43 RELATED PARTY TRANSACTIONS....................................................................................................................................97
44 CONSOLIDATED EMPLOYEES............................................................................................................................................99
45 GREENHOUSE GAS EMISSION RIGHTS............................................................................................................................99
46 SEGMENT REPORTING .......................................................................................................................................................100
47 2004 AND 2005 RESTATED INCOME STATEMENTS: RECONCILIATION ...............................................................106
48 2005 RESTATED CONSOLIDATED FINANCIAL STATEMENTS: RECONCILIATION...........................................107
48.1 SUMMARY OF THE IMPACT OF IFRIC 12 ON THE MAIN FINANCIAL STATEMENT HEADINGS ................................................107
48.2 RECONCILIATION OF EQUITY AS OF DECEMBER 31, 2005 AND EQUITY AS OF DECEMBER 31, 2005 RESTATED...................108
48.3 2005 RESTATED FINANCIAL STATEMENTS ..........................................................................................................................109
48.3.1 Consolidated Balance Sheet ....................................................................................................................................109
48.3.2 Consolidated Income Statement...............................................................................................................................110
48.3.3 Consolidated Cash Flow Statement.........................................................................................................................111
48.4 ANALYSIS OF THE MAIN BALANCE SHEET RESTATEMENTS .................................................................................................112
48.4.1 Goodwill ..................................................................................................................................................................112
48.4.2 Concession intangible assets ...................................................................................................................................112
48.4.3 Other intangible assets ............................................................................................................................................112
48.4.4 Property, plant and equipment..............................113
48.4.5 Non-current and current operating financial assets................................................................................................113
48.4.6 Operating receivables..........................................................................................................114
48.4.7 current provisions ........................................................................................................................114
48.4.8 Deferred tax liabilities.............................................................................................................................................114
48.5 ANALYSIS OF THE MAIN INCOME STATEMENT RESTATEMENTS ..........................................................................................115
48.5.1 Revenue....................................................................................................................................................................115
48.5.2 Operating income ....................................................................................................................................................115
48.6 ANALYSIS OF THE MAIN CASH FLOW STATEMENT RESTATEMENTS....................................................................................116
48.6.1 Operating cash flow before changes in working capital .........................................................................................116
48.6.2 Changes in working capital .....................................................................................................................................116
48.6.3 Purchases of property, plant and equipment ...........................................................................................................116
48.6.4 New operating financial assets................................................................................................................................116
48.6.5 Principal payments on operating financial assets ...................................................................................................116
49 2004 RESTATED CONSOLIDATED FINANCIAL STATEMENTS: RECONCILIATION...........................................118
49.1 SUMMARY OF THE IMPACT OF IFRIC 12 ON THE MAIN FINANCIAL STATEMENT HEADINGS ................................................118
49.2 RECONCILIATION OF EQUITY AS OF DECEMBER 31, 2004 AND EQUITY AS OF DECEMBER 31, 2004 RESTATED...................118
49.3 2004 RESTATED FINANCIAL STATEMENTS ..........................................................................................................................119
49.3.1 Consolidated Balance Sheet...............................119
49.3.2 Consolidated Income Statement...............................................................................................................................120
49.3.3 Consolidated Cash Flow Statement.........................................................................................................................121
49.4 ANALYSIS OF THE MAIN BALANCE SHEET RESTATEMENTS .................................................................................................122
49.4.1 Goodwill ..................................................................................................................................................................122
49.4.2 Concession intangible assets ...................................................................................................................................122
49.4.3 Other intangible assets ............................................................................................................................................122 Veolia Environnement Consolidated financial statements 12/31/2006 22/03/2007 4/130
49.4.4 Property, plant and equipment ................................................................................................................................122
49.4.5 Non-current and current operating financial assets................................................................................................123
49.4.6 Operating receivables..............................................................................................................................................123
49.4.7 current provisions ........................................................................................................................123
49.4.8 Deferred tax liabilities.............................................................................................................................................123
49.5 ANALYSIS OF THE MAIN INCOME STATEMENT RESTATEMENTS ..........................................................................................124
49.5.1 Revenue (work in progress) .....................................................................................................................................124
49.5.2 Operating income ....................................................................................................................................................124
49.6 ANALYSIS OF THE MAIN CASH FLOW STATEMENT RESTATEMENTS....................................................................................124
49.6.1 Operating cash flow before changes in working capital .........................................................................................124
49.6.2 Changes in working capital................................125
49.6.3 Purchases of property, plant and equipment ...........................................................................................................125
49.6.4 New operating financial assets................................................................................................................................125
49.6.5 Principal payments on operating financial assets ...................................................................................................125
50 MAIN COMPANIES INCLUDED IN THE 2006 CONSOLIDATED FINANCIAL STATEMENTS .............................126 Veolia Environnement Consolidated financial statements 12/31/2006 22/03/2007 5/130

CONSOLIDATED BALANCE SHEET

CONSOLIDATED BALANCE SHEET - As of December 31,
ASSETS Notes 2005 2004 2004
2006 2005
(€ million) restated restated
4 Goodwill 5,705.0 4,752.3 4,863.1 4,246.8 4,383.6
5 Concession intangible assets 2,345.6 2,091.8 - 1,610.0 -
6 Other intangible assets 1,379.8 1,281.4 1,171.5 1,192.5 1,059.0
Publicly-owned utility networks - - 5,629.5 - 4,820.8
7 Property, plant and equipment 7,918.7 6,885.7 6,722.0 6,173.4 6,137.3
8 Investments in associates 241.0 201.5 201.5 219.2 219.2
9 Non-consolidated investments 181.7 209.209.5 181.1 181.1
Long-term IFRIC4 loans - - 1,901.9 - 1,693.5
10 Non-current operating financial assets 5,133.4 5,337.4 - 4,947.0 -
32 Derivative instruments - Assets 201.6 249.0 249.0 424.8 424.8
11 Other non-current financial assets 637.5 691.6 692.5 606.7 614.7
12 Deferred tax assets 1,355.7 1,134.7 1,127.3 1,131.8 1,122.6
Non-current assets 25,100.0 22,834.9 22,767.8 20,733.3 20,656.6
13 Inventories and work-in-progress 731.8 635.2 646.2 560.3 562.0
13 Operating receivables 10,968.7 10,083.3 10,112.3 9,233.9 9,261.4
Short-term IFRIC4 loans - - 163.5 - 133.0
10 Current operating financial assets 326.2 208.0 158.9
14 Other short-term loans 205.3 221.2 221.2 333.0 333.0
15 Marketable securities 66.4 60.7 60.7 189.3 189.3
16 Cash and cash equivalents 2,658.0 2,336.1 2,336.1 4,660.3 4,660.3
Current assets 14,956.4 13,544.5 13,540.0 15,135.7 15,139.0
Non-current assets held for sale 67.3 1.6 1.6 30.3 30.3
Total assets 40,123.7 36,381.0 36,309.4 35,899.3 35,825.9

CONSOLIDATED BALANCE SHEET – As of December 31,
EQUITY AND LIABILITIES Notes 2005 2004 2004
2006 2005 (€ million) restated restated
Share capital 2,063.1 2,039.4 2,039.4 2,032.1 2,032.1
Additional paid-in capital 6,641.2 6,499.1 6,499.1 6,467.6 6,467.6
Reserves and retained earnings attributable (4,343.5) (4,748.3) (4,735.9) (5,288.5) (5,276.9)
to equity holders of the parent
Minority interests 2,192.6 1,888.0 1,890.9 1,728.7 1,725.5
17 Equity 6,553.4 5,678.2 5,693.5 4,939.9 4,948.3
18 Non-current provisions 2,196.6 1,648.0 1,613.6 1,308.6 1,283.5
19 Long-term borrowings 14,001.6 13,722.8 13,722.8 12,157.0 12,157.0
32 Derivative instruments - Liabilities 145.9 154.5 154.5 189.8 189.8
20 Other non-current liabilities 207.3 203.7 207.8 159.7 163.
12 Deferred tax liabilities 1,504.9 1,205.0 1,124.1 1,021.3 933.8
Non-current liabilities 18,056.3 16,934.0 16,822.8 14,836.4 14,727.9
13 Operating payables 11,268.6 10,369.8 10,374.3 9,572.2 9,576.0
18 Current provisions 825.9 754.0 773.8 700.1 723.0
21 Short-term borrowings 2,904.1 2,138.2 2,138.2 5,426.1 5,426.1
22 Bank overdrafts and other cash position 456.0 506.8 506.8 420.1 420.1
items
Current liabilities 15,454.6 13,768.8 13,793.1 16,118.5 16,145.2
Non-current liabilities held for sale 59.4 - - 4.5 4.5
Total equity and liabilities 40,123.7 36,381.0 36,309.4 35,899.3 35,825.9
The accompanying notes are an integral part of these consolidated financial statements. Veolia Environnement Consolidated financial statements 12/31/2006 22/03/2007 6/130

CONSOLIDATED INCOME STATEMENT

Notes (€ million) For the year ended December 31,
2005 2004
2006 2005 2004
restated restated
23 22,792.4Revenue 28,620.4 25,570.4 25,244.9 22,500.3
325.8 275.6o/w Revenue from operating financial assets 351.0 125.8 96.7
(18,604.8)Cost of sales (23,427.1) (20,869.9) (20,561.0) (18,346.3)
(439.7)Selling costs (515.2) (478.5) (478.5) (439.7)
(2,227.0)General and administrative expenses (2,611.2) (2,394.9) (2,403.0) (2,236.4)
(31.3)Other operating revenue and expenses 66.0 65.8 90.5 2.7
24 Operating income 2,132.9 1,892.9 1,892.9 1,489.6 1,480.6
25 (832.9)Finance costs (783.8) (774.0) (781.7) (829.1)
25 91.8Finance income 82.8 63.3 68.3 97.0
26 44.4Other financial income and expenses (34.0) 28.1 30.5 46.1
27 (174.9)Income tax expense (409.6) (422.4) (422.9) (184.1)
8 & 28 22.0Share of net income of associates 6.0 6.5 14.9 24.2
640.0Net income (expense) from continuing
994.3 794.4 802.0 634.7
operations
29 (116.9)Net income from discontinued operations 0.6 0.7 - (105.7)
523.1Net income (expense) for the year 994.9 795.1 802.0 529.0
30 133.3Minority interests 236.2 172.9 179.0 137.5
Attributable to equity holders of the
758.7 622.2 623.0 389.8 391.5
parent
(in euros)
Net income attributable to equity holders of
31
the parent per share
Diluted 1.91 1.59 1.59 0.98 0.99
Basic 1.93 1.59 1.60 0.98 0.99
Net income from continuing operations
31 attributable to equity holders of the parent
per share
Diluted 1.91 1.58 1.59 1.28 1.25
Basic 1.93 1.59 1.60 1.28 1.25

The accompanying notes are an integral part of these consolidated financial statements. Veolia Environnement Consolidated financial statements 12/31/2006 22/03/2007 7/130

CONSOLIDATED CASH FLOW STATEMENT

(€ million) For the year ended December 31,
Notes 2005 2004
2006 2005 2004
restated restated
Net income for the year attributable to equity holders
758.7 622.2 623.0 389.8 391.5
of the parent
30 Minority interests 236.2 172.9 179.0 212.3 216.4
Operating depreciation, amortization, provisions and
24 1,831.0 1,690.7 1,829.3 1,917.8 2,041.5
impairment losses
26 Financial amortization and impairment losses 9.4 (21.0) (21.0) (38.2) (38.2)
Gains (losses) on disposal and dilution (73.3) (70.0) (70.0) (161.3) (161.3)
Share of net income of associates 8 & 28 (6.0) (14.9) (14.9) (24.2) (24.2)
26 Dividends received (9.7) (6.5) (6.5) (6.0) (6.0)
25 Finance costs and finance income 701.0 712.4 713.4 742.8 732.1
Income tax expense 27 & 29 357.1 422.4 422.9 303.9 309.5
Other 40.0 33.7 32.1 (0.7) (0.7)
Operating cash flow before changes in working
3,844.4 3,541.9 3,687.3 3,336.2 3,460.6
capital
Changes in working capital 13 (111.8) (39.4) (52.2) 286.1 294.4
Income taxes paid (343.0) (338.8) (338.8) (238.0) (238.0)
Net cash flow from operating activities 3,389.6 3,163.7 3,296.3 3,384.3 3,517.0
Purchases of intangible, property, plant and
(2,017.6) (1,837.1) (2,081.9) (1,723.0) (1,964.0)
equipment
Proceeds on disposal of intangible, property, plant
141.3 168.8 173.5 321.8 316.2
and equipment
Purchases of investments (1,291.5) (944.1) (944.1) (332.5) (334.0)
Proceeds on disposal of investments 206.7 154.0 154.0 2,184.2 2,184.2
10 Operating financial assets:
New operating financial assets (360.6) (513.4) (269.3) (428.5) (177.0)
Principal payments on operating financial assets 438.1 320.6 184.0 275.7 130.0
8 & 26 Dividends received 13.8 16.8 16.8 23.5 23.5
11 New long-term loans granted (69.4) (62.1) (62.1) (132.5) (132.5)
11 Principal payments on long-term loans 29.2 55.7 55.7 131.4 129.4
14 Net decrease in short-term loans 2.6 115.0 115.0 41.1 41.1
15 Sales and purchases of marketable securities 3.4 118.2 118.2 (42.3) (42.3)
Net cash from (used in) investing activities (2,904.0)(2,407.6) (2,540.2) 318.9 174.6
21 Net increase/(decrease) in short-term borrowings (239.2)(2,936.2) (2,936.2) 1,789.2 1,789.2
19 & 20 New long-term borrowings and other debt 1,997.2 3,134.8 3,134.1 930.5 930.5
Principal payments on long-term borrowings and
19 & 20 (1,000.8) (2,319.6) (2,318.9) (3,468.7) (3,468.7)
other debt
Proceeds on issue of shares 246.5 81.0 81.0 167.2 167.2
Purchase of treasury shares 0.4 - - (183.2) (183.2)
Dividends paid (479.2) (374.0) (374.0) (389.6) (389.6)
Interest paid (596.4) (738.8) (738.8) (640.9) (640.9)
Net cash used in financing activities (71.5) (3,152.8) (3,152.8) (1,795.5) (1,795.5)
Net cash at the beginning of the year 1,829.3 4,240.2 4,240.2 2,320.6 2,320.6
Effect of foreign exchange rate changes (41.4) (14.2) (14.2) 11.9 23.5
Net cash at the end of the year 2,202.0 1,829.3 1,829.3 4,240.2 4,240.2
16 Cash and cash equivalents 2,658.0 2,336.1 2,336.1 4,660.3 4,660.3
22 - Bank overdrafts and other cash position item 456.0 506.8 506.8 420.1 420.1 2,202.0 1,829.3 1,829.3 4,240.2 4,240.2

Discontinued operations within the meaning of IFRS 5 contributed - €10.0 million, €8.9 million and €234.0 million to net
cash from operating activities, €12.2 million, €5.4 million and €2,159.0 million to net cash from investing activities and
€10.3 million, -€4.4 million and - €9.6 million to net cash from financing activities in 2006, 2005 restated and 2004
restated respectively.
The accompanying notes are an integral part of these consolidated financial statements. Veolia Environnement Consolidated financial statements 12/31/2006 22/03/2007 8/130

STATEMENT OF RECOGNIZED INCOME AND EXPENSES

(€ million) Year ended Year ended Year Year ended Year ended
December December December ended December
31, 2005 31, 2004December 31, 2005 31, 2004
31, 2006 restated restated
Net income for the year 994.9 795.1 802.0 523.1 529.0
Actuarial gains or losses on pension obligations 25.6 (144.7) (144.7) - -
Fair value adjustments on available-for-sale
(2.3) (2.4) (2.4) (25.7) (25.7)
assets adjustments on cash flow hedge
37.0 13.7 13.7 1.9 1.9
derivative instruments
Foreign exchange gains and losses:
on translation of the financial statements of
(92.3) 331.8 323.5 (40.0) (40.0)
subsidiaries drawn up in a foreign currency
on the net financing of foreign investments (7.8) (13.8) (13.8) (21.2) (21.2)
Income and expenses recognized directly in
(39.8) 184.7 176.3 (85.0) (85.0)
equity
Total income and expenses recognized 955.1 979.8 978.438.1 444.0
Attributable to equity holders of the parent 712.2 783.8 776.3 303.8 305.5
Attributable to minority interests 242.9 195.9 202.0 134.3 138.6


Effect of change in accounting policies on
(15.3) (8.4) - (4.6) -
retained earning as of January 1, (IAS1.96(d))

The accompanying notes are an integral part of these consolidated financial statements. Veolia Environnement Consolidated financial statements 12/31/2006 22/03/2007 9/130

1 ACCOUNTING PRINCIPLES AND METHODS

1.1 PREPARATION OF 2006 FINANCIAL STATEMENTS
In accordance with European Parliament and Council Regulation (EC) No.1606/2002 of July 19, 2002 and European
Commission Regulation (EC) No.1725/2003 of September 29, 2003, the Veolia Environnement consolidated financial
statements are, since the year ended December 31, 2005, presented in accordance with International Financial Reporting
Standards (IFRS), as published by the International Accounting Standards Board (IASB) and adopted by the European
Union.
Nonetheless, concession contracts are accounted for in the 2006 consolidated financial statements in accordance with
IFRIC 12, Concessions, published in November 2006. This interpretation, which is scheduled for adoption by the
European Union in June/July 2007, is applicable to accounting periods commencing on or after January 1, 2008. Veolia
Environnement has elected for early adoption of this interpretation and the change in accounting method has been
applied retrospectively in accordance with IAS 8 on Changes in accounting method.
As such, the Veolia Environnement consolidated financial statements for the year ended December 31, 2005 and 2004
financial information has been restated accordingly for the retrospective adoption of IFRIC 12 (financial statements of
2005 and 2004 restated). The provisional impact of the early adoption of IFRIC 12 on the 2005 consolidated financial
statements was communicated by Veolia Environnement in its update (filed September 26, 2006) to the Reference
Document filed with the Financial Markets Authority (Autorité des Marchés Financiers (AMF)) on April 6, 2006.
Following a decision by the appropriate level of management to sell the Transportation Division’s Danish activities in
2007, the net income components of this activity were classified in Net income from discontinued operations in
accordance with IFRS 5 on activities held for sale and the 2005 and 2004 consolidated financial statements were restated
accordingly. The divestment of Southern Water was also recognized in accordance with IFRS 5 and the 2005 and 2004
consolidated financial statements were restated accordingly (see Notes 29 and 47).
The accounting methods presented below have been applied consistently for all periods presented in the consolidated
financial statements.
The consolidated financial statements are presented using the historical cost convention, with the exception of assets and
liabilities recognized at fair value: derivative instruments, financial instruments held for trading and available-for-sale
financial instruments (in accordance with IAS 32 and IAS 39).
The Veolia Environnement consolidated financial statements for the year ended December 31, 2006 were closed by the
Board of Directors on March 7, 2007.

1.2 BASIS OF PRESENTATION AS OF DECEMBER 31, 2006
The consolidated financial statements are presented in millions of euro, unless stated otherwise.
The consolidated financial statements comprise the financial statements of Veolia Environnement SA and its subsidiaries
as of December 31 each year. The financial statements of subsidiaries are drawn up for the same reference period as
those of the parent company, in accordance with uniform accounting policies and methods.
All inter-company balances and transactions, together with all income and expense items and unrealized gains and losses
included in the net carrying amount of assets, resulting from internal transactions, are eliminated in full.
Subsidiaries are consolidated from the date of acquisition, which is the date on which the Group obtains control, up to the
date on which it ceases to exercise control.
Minority interests represent the share of net income or loss and of net assets not held by the Group. They are presented
separately in the Income Statement and separately from equity attributable to equity holders of the parent in Equity in the
Consolidated Balance Sheet.

1.3 PRINCIPLES OF CONSOLIDATION
Veolia Environnement fully consolidates all entities over which it exercises control. Control is defined as the ability to
govern, directly or indirectly, the financial and operating policies of an entity in order to obtain the benefit of its
activities.
Companies in which Veolia Environnement exercises significant influence over financial and operating policies are
accounted for using the equity method. Significant influence is presumed to exist where the Group holds at least 20% of
share capital or voting rights. Veolia Environnement Consolidated financial statements 12/31/2006 22/03/2007 10/130

Companies over which Veolia Environnement exercises joint control as a result of a contractual agreement between
partners are consolidated using the proportionate method in accordance with IAS 31.
Pursuant to SIC 12, Special Purpose Entities (SPEs) are consolidated when the substance of the relationship between the
SPE and Veolia Environnement or its subsidiaries indicates that the SPE is controlled by Veolia Environnement. Control
may arise through the predetermination of the activities of the SPE or through the fact that, in substance, the financial
and operating policies are defined by Veolia Environnement or Veolia Environnement benefits from most of the
economic advantages and/or assumes most of the economic risks related to the activity of the SPE.
Pursuant to IAS 27, potential voting rights available for exercise attached to financial instruments which, if exercised,
would confer voting rights on Veolia Environnement and its subsidiaries, are taken into account where necessary in
assessing the level of percentage control or significant influence exercised.


1.4 TRANSLATION OF FOREIGN SUBSIDIARIES' FINANCIAL STATEMENTS (IAS 21)
Balance sheets, income statements and cash flow statements of subsidiaries whose functional currency is different from
that of the Group are translated into the reporting currency at the applicable rate of exchange (i.e., the year-end rate for
balance sheet items and the average annual rate for income statement and cash flow items). Translation gains and losses
are recorded in equity. The exchange rates of the major currencies of non-euro countries used in the preparation of the
consolidated financial statements were as follows:

Year-end exchange rate As of December As of December As of December
(one foreign currency unit = €xx) 31, 2006 31, 2005 31, 2004
U.S. Dollar 0.7593 0.8477 0.7342
Pound Sterling 1.4892 1.4592 1.4183
Czech Crown 0.0364 0.0345 0.0328

Average rate Average rate Average rate Average annual exchange rate
(one foreign currency unit = €xx) 2006 2005 2004
U.S. Dollar 0.7918 0.8078 0.8025
Pound Sterling 1.4665 1.4640 1.4721
Czech Crown 0.0354 0.0336 0.0314


1.5 FOREIGN CURRENCY TRANSACTIONS (IAS 21 – IAS 39)
Foreign currency transactions are translated into euro at the exchange rate prevailing at the transaction date. At the year
end, foreign currency-denominated monetary assets and liabilities are remeasured in euro at year-end exchange rates.
The resulting foreign exchange gains and losses are recorded in net income for the period.
Loans to a subsidiary the settlement of which is neither planned nor probable in the foreseeable future represent, in
substance, a portion of the Group’s net investment in this foreign operation. Foreign exchange gains and losses on
monetary items forming part of a net investment are recognized directly in equity as foreign exchange translation
adjustments and are released to income on the disposal of the net investment.
Exchange gains and losses on foreign currency-denominated borrowings or on foreign currency derivatives that qualify
as hedges of net investments in foreign subsidiaries, are recognized directly in equity as fo
adjustments. Amounts recognized in equity are released to income on the sale of the relevant investment.
Foreign currency-denominated non-monetary assets and liabilities recognized at historical cost are translated using the
exchange rate prevailing as of the transaction date. Foreign currency-denominated non-monetary assets and liabilities
recognized at fair value are translated using the exchange rate prevailing as of the date the fair value is determined.
In May 2006, the European Union adopted IAS 21 revised, application of which is mandatory from January 1, 2006. The
revised text states that in the case of a net investment in a foreign operation, foreign exchange gains or losses on loans
denominated in a currency that is not the functional currency of the lending or borrowing company must be recognized in
foreign exchange translation reserves. The impact on the Veolia Environnement consolidated financial statements is not
material.