By harmonizing accounting principles within the European Union, adoption of the new standards is intended to improve the comparability and transparency of these companies’ financial statements.

Veolia Environnement: well prepared for the new standards

Veolia Environnement has undertaken a long period of preparatory work for transition to IFRS.

The company launched its migration program as early as the beginning of 2003 and is today one of the 30 French companies that are the best prepared for the changeover:

• a steering committee has been set up comprising the company’s financial managers under the leadership of the Senior Executive Vice President;
• a 16-strong working group has been formed, devoting 100% of its time to the transition to IFRS;
• 1,200 employees have been trained at Campus Veolia Environnement (financial, accounting, legal and commercial staff);
• an IFRS accounting principles handbook has been published on the company’s intranet;
• the consolidation information system has been adapted to cater for the specific requirements of the new standards and configured for preparation of the 2005 and 2004 IFRS financial statements;
• a presentation to financial analysts was made on February 4, 2005 in a meeting and conference call.

IFRS migration timetable

In order to ensure comparability between periods, the 2004 financial statements prepared under French GAAP are presented using the IFRSs. The impact of adoption of IFRS has been calculated and shown for the opening balance sheet at January 1, 2004.

The 2005 financial statements are the first to be published under IFRS, with comparative figures for 2004.

In accordance with the recommendation of the AMF, France’s securities and exchange commission, Veolia Environnement’s 2005 financial statements will be published in March 2006.

The main restatements for Veolia Environnement

Revenue is replaced by revenue from ordinary activities, which will no longer include charges and taxes collected on behalf of local authorities or the repayment of financial receivables.

All exceptional items is included in operating income. Goodwill will no longer be amortized under IFRS, and thus have a favorable impact on recurring net income. The table shows the changes in presentation that is made to the income statement.

The main changes in the balance sheet are the reclassifications of asset and liability items. In particular, when, under its contracts, Veolia Environnement has financed investments on behalf of third parties, these investments will be restated as financial receivables.

Still to be determined: the treatment of concessions

The company manages a large number of concessions for municipal clients, under which it operates assets for a set period, managing all systems. It collects revenue directly from service users and makes the necessary capital investments. At the end of the concession term, all the fixed assets revert to the concession-granting authority.

Under French GAAP, these assets are treated as tangible assets. The IFRS interpretation to be issued could result in them being treated as intangible assets or as financial receivables. Although the final contribution to earnings would probably be almost identical, the effect of such a restatement could be significant in terms of presentation of the balance sheet and income statement. The presentation of the income statement would be altered, as the capital repayments of financial receivables would not be recognized there.

Changes in the presentation of the income statement

For further information on all aspects dealt with in the Results section and for a more in depth analysis of the company's financial statements, please refer to the 2004 Form 20-F (annual report filed with the Securities and Exchange Commission in the United States).