Page 226 - 2012 Annual Report

226 VIVENDI l 2012 l Annual Report
FINANCIAL REPORT – CONSOLIDATED FINANCIAL STATEMENTS – STATUTORY AUDITORS’ REPORT ON THE
CONSOLIDATED FINANCIAL STATEMENTS – STATUTORY AUDITORS’ REPORT ON THE FINANCIAL STATEMENTS –
STATUTORY FINANCIAL STATEMENTS 4
4
III - CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2012
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Accounting policies and valuation methods
Statement of Earnings and the Consolidated Statement of Cash Flow
are translated using average monthly exchange rates for the period. The
resulting translation gains and losses are recorded as foreign currency
translation differences in charges and income directly recognized in equity.
In accordance with IFRS 1, Vivendi elected to reverse the accumulated
foreign currency translation differences against retained earnings as of
January 1, 2004. These foreign currency translation differences resulted
from the translation into euro of the financial statements of subsidiaries
having foreign currencies as their functional currencies. Consequently,
these adjustments are not applied to earnings on the subsequent
divestiture of subsidiaries, joint ventures or associates, whose functional
currency is not the euro.
1.3.4. Revenues from operations and associated costs
Revenues from operations are recorded when it is probable that future
economic benefits will be obtained by the group and when they can be
reliably measured. Revenues are reported net of discounts.
1.3.4.1. ACTIVISION BLIZZARD
Video games
Revenues from the sale of boxes for video-games are recorded, net of
a provision for estimated returns and price guarantees (please refer
to Note 1.3.4.5 below) as well as rebates, if any. Regarding boxes for
video-games with significant online functionality, revenues are recorded
ratably over the estimated relationship period with the customer, usually
beginning in the month following the shipment of boxes for video-games
developed by Activision Blizzard and upon activation of the subscription for
Massively Multiplayer Online Role Playing Games (MMORPG) of Blizzard
(World of Warcraft and its expansion packs). The estimated relationship
period with the customer over which revenues are recognized currently
ranges from a minimum of five months to a maximum of less than a year.
Deferral of Activision Blizzard revenues
Activision Blizzard believes that online functionality for console games,
along with its obligation to ensure durability, constitute, for certain games,
a service forming an integral part of the game itself. In this case, Activision
Blizzard does not account separately for the revenues linked to the sale
of the boxed software and those linked to the online services because it
is not possible to determine their respective values, the online services
not being charged for separately. As a result, the company recognizes all
of the revenues from the sale of these games ratably over the estimated
service period, usually beginning the month following shipment.
Regarding games that can be played with hardware, Activision Blizzard
determines that certain hardware components have stand alone values
with established fair values, as the hardware is either currently being sold
separately or will be sold separately in the future. Where this is the case,
Activision Blizzard recognizes revenues for the hardware upon sale and
defers the software revenues, if applicable, over the estimated service
period based on the relative fair value of the components.
Deferral of Blizzard’s MMORPG revenues
Based upon the view that the service proposed by the expansion pack
is closely linked to the initial World of Warcraft boxed software and to
the subscription to online service, thus valuing a global approach of the
game, revenues related to the sale of World of Warcraft boxed software,
including the sale of expansion packs and other ancillary revenues, are
deferred and recognized ratably over the estimated service relationship
period with the customer beginning upon activation of the software by the
customer through subscription.
Other revenues
Revenues generated by subscriptions and prepaid cards for online games
are recognized on a straight-line basis over the duration of the service.
Revenues from third-party licensees in certain countries (Russia, China,
and Taiwan) who distribute and host Blizzard’s World of Warcraft game
are recognized as royalties, when the sale to the customer is made on
behalf of the third party. Any upfront licensing fee received from third
parties is recognized over the term of the contracts.
Costs of revenues
Costs of revenues include manufacturing, warehousing, shipping and
handling costs, royalty, Research and Development expenses, and the
amortization of capitalized software development costs. Costs of sales
associated with revenues from the sale of boxes for video games with
significant online functionality are recorded ratably according to the same
method for revenues.
1.3.4.2. UNIVERSAL MUSIC GROUP (UMG)
Recorded music
Revenues from the physical sale of recorded music, net of a provision
for estimated returns (please refer to Note 1.3.4.5) and rebates, are
recognized upon shipment to third parties, at the shipping point for
products sold free on board (FOB) and on delivery for products sold free
on destination.
Revenues from the digital sale of recorded music, for which UMG has
sufficient, accurate, and reliable data from certain distributors, are
recognized based on their estimate at the end of the month in which
those sales were made to the final customer. In the absence of such data,
revenues are recognized upon notification by the distribution platform (on-
line or mobile music distributor) to UMG of a sale to the final customer.