3.1 Compliance with Accounting Principles
and Legislation
.. FRENCH GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES GAAP
The fi nancial statements of RATP parent company and the major subsid- iaries are prepared in accordance with French generally accepted account- ing principles (GAAP). RATP implements a customized chart of accounts
7 As a public service company (Epic), RATP is subject to economic and fi nancial control by the State (Decree no. 2002-1502 of December 18, 2002).
(CoA) as approved by the inter-ministerial order of March 21, 1985. The customized CoA was prepared in accordance with the rules, principles and framework governing the French national chart of accounts.
Due to its legal status as a public service company (Epic), RATP applies the same accounting principles as those generally accepted by and legally binding for commercial companies. Consequently, it applies the account- ing policies set out by the French national accounting board in CRC regu- lation no. 99-03 of April 29, 1999. However, it is also required to meet the requirements specifi c to public service providers.
.. INTERNATIONAL FINANCIAL REPORTING
STANDARDS IFRS
RATP applies eff ective IFRS to prepare RATP group’s fi nancial statements.
.. STATUTORY AUDITORS
RATP appoints statutory auditors pursuant to the provisions of Article 30 of Law no. 84-148 of March 1, 1984 on the fi nancial information and audit of industrial and commercial public companies, and the provisions of Article 33 of decree no. 85-295 of March 1, 19859.
.. AUDIT COMMITTEE
The Audit Committee presents its opinion to the Board of Directors on accounting and fi nancial matters, particularly the accounting and estima- tion methods used by RATP to prepare its fi nancial statements, the Inter- nal Audit program, and risk management policy.
.. CHANGES IN THE REGULATORY FRAMEWORK
GOVERNING RATP
The European regulation on public passenger transport services by rail and road was adopted on October 23, 2007 and became eff ective on December 3, 2009. The regulation limits the duration of the rights granted to public transport operators.
In France, Article 5 of the law of December 8, 2009 on public passenger transport services by rail introduced changes to the regulations governing Île-de-France area passenger transport. The law has entrusted RATP with the role of managing the infrastructure of the metro and RER networks that it operates as of January 1, 2010.
Finally, the law of June 3, 2010 on Greater Paris transport states that infra- structure management activities and public passenger transport service operations should be accounted for separately and an audited annual bal- ance sheet and income statement should be prepared for each as of Jan- uary 1, 2012. The law also prohibits all direct or indirect cross-subsidies between the two activities.
Since 2012, RATP’s consolidated and individual fi nancial statements have incorporated these changes.
9 Implementing decree of law no. 84-148 of March 1, 1984 on the prevention and out-of-court settlement of corporate diffi culties.
3.2 RATP Financial Reporting
.. FINANCIAL REPORTING SYSTEM
RATP uses version R12 of the Oracle software application (new version rolled out in September 2010) for the parent company financial state- ments and Business Financial Consolidation for the consolidated fi nan- cial statements.
Preparation of the Parent Company Financial Statements
Monthly fi nancial data is available after eight working days. This leaves time for a preliminary review of the fi nancial information during which various controls are performed. The monthly data enable management controllers in the various departments to track their level of activity and budget con- sumption on an ongoing basis. At central corporate management control level, monthly fi nancial reporting makes it possible to manage the risk of budget overruns and make the appropriate adjustments.
Preparation of the Consolidated Financial Statements
The consolidated fi nancial statements are produced by a section of the company’s accounting unit for the whole Group. The section ensures that the source information provided by the subsidiaries is consistent, that the consolidated fi nancial statements are prepared in accordance with current standards and regulations and that the information provides a fair presen- tation of the Group’s business and fi nancial position.
The annual and half-yearly fi nancial reports are submitted to the French securities market regulator (AMF). In order to ensure that reporting dead- lines are met, hard-close fi nancial statements are prepared at the end of May and at the end of October, respectively. The hard-close statements are verifi ed by the statutory auditors.
A description of the procedures used to produce and control the fi nancial information prepared by RATP is presented in Appendix 3.
.. INTERNAL COMMUNICATION ON BEST PRACTICE
The finance department’s intranet provides employees with access to a documentation database on the company’s economic performance. A number of subjects are covered: operating performance, investment performance, personnel costs, customers, suppliers, fi xed assets, invento- ries, taxation and cash.
These documents provide both a reference guide to best practice and an informative presentation on matters covered, with forms and fact sheets. They are updated regularly.
.. INTERNAL ACCOUNTING AUDITS
Internal accounting audits are performed by the Corporate Accounting Unit annually. Reports and action plans are issued after each audit.
In 2013, the accounting audits concerned FLUPAT accounting access autho- rizations10 and the linking of SEDP subsidiary’s (property development)
invoicing system with RATP.
An audit on parking space rental processes, managed administratively by the “Real Estate, Procurement and Logistics” department, will be per- formed for the company at year end.
In addition, throughout the year, the audit unit monitors the implementa- tion of action plans and ensures that deadlines are met.
3.3 Control of Subsidiaries
Subsidiaries are subject to specifi c controls by RATP Epic, aimed at man- aging the risks inherent in development. In addition to RATP’s control, the subsidiary RATP Dev exercises management control over its own subsidiar- ies and equity investments.
.. UPSTREAM CONTROLS
Upstream controls include:
• Control of subsidiaries’ corporate strategy through medium-term busi- ness plans;
• Control of signifi cant decision-making issues such as those concerning budgets, the preparation of fi nancial statements, bids on calls for tender, major contracts, capital transactions, equity investments and the found- ing of subdivisions within subsidiaries.
This control is exercised by the commitments board of the subsidiary con- cerned. For major subsidiaries, if the issues are signifi cant, decision-mak- ing is also controlled by RATP’s oversight bodies (State Equity Investment Agency, Economic and Financial Control Board for Transport, Budget Department, and Maritime Transport Board).
The subsidiaries’ commitments boards convene prior to Board (or Supervi- sory Board) meetings, to prepare input and guidance for decision-making. For RATP Dev and Systra, these controls are performed by the commit- tees set up by supervisory boards in conjunction with RATP Epic’s fi nance department:
• The Investment Committee (RATP Dev) and Commitments Committee (Systra) for bids on calls for tender, contracts and acquisitions;
• The Finance Committee (RATP Dev) and Audit Committee (Systra) for budgets, half-year and annual reporting and medium-term business plans. These committees monitor general compliance with accounting policies, fi nancial reporting to the supervisory boards and risk assessments. For the other subsidiaries, control over corporate strategy is exercised by a Commitments Board, comprising, for each subsidiary, representatives of the subsidiary’s management, RATP’s fi nance department and RATP Epic’s executive management.
10 The Corporate Accounting Unit of the Management and Financial Control department delegates the responsibility for processing certain accounting documents to an external unit until the fl ows are included in the informa- tion system, creating accounting entries.
.. DOWNSTREAM CONTROLS
Downstream controls include:
• Monthly fi nancial reporting on the basis of the accounting information gathered in the consolidation software. The information is presented in the form of an operating report on the subsidiaries, which is sent to RATP parent company’s Executive Committee. The software is used for both monthly reporting and consolidation purposes, which guarantees consistent data;
• A complete audit of operations is performed on certain subsidiaries every year.
Upstream controls and monthly fi nancial reporting are performed by the unit of the Finance and Management Control department responsible for Subsidiaries, Financial Transactions and Tax, while audits are performed by Internal Audit staff (see 2.2.3 above).
.. OTHER CONTROLS
RATP’s Board of Directors reviews the fi nancial position of subsidiaries twice a year:
• In March it reviews the previous year’s performance and consolidated fi nancial statements;
• In June it reviews the outlook for the current year.
A quarterly report on the subsidiary RATP Dev has been sent to the Board of Directors since January 2011. The Board of Directors gives its opinion on the budget and medium-term business plan, on acquisitions and invest- ments exceeding certain thresholds and on certain bids on calls for tender. The consolidated budget for RATP group is presented to the Board of Directors at year end.