Page 228 - 2012 Annual Report

228

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

III - CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2012

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 1 Accounting policies and valuation methods

Film and television programming

Theatrical revenues are recognized as the films are screened. Revenues

from film distribution and from video and television or pay television

licensing agreements are recognized when the films and television

programs are available for telecast and all other conditions of sale have

been met. Home video product revenues, less a provision for estimated

returns (please refer to Note 1.3.4.5) and rebates, are recognized upon

shipment and availability of the product for retail sale. Amortization of

film and television capitalized and acquisition costs, theatrical print costs,

home video inventory costs and television, and home video marketing

costs are included in costs of revenues.

1.3.4.5. OTHER

Provisions for estimated returns and price guarantees

are deducted

from sales of products to customers through distributors. They are

estimated based on past sales statistics and they take into account the

economic environment and product sales forecast to final customers.

The recognition of awards associated with loyalty programs

in the

form of free or discounted goods or services are recorded according to

IFRIC 13. Loyalty programs of SFR (valid until the third quarter of 2012),

Maroc Telecom, and Canal+ Group grant to existing customers awards

in the form of free services, according to the length of the relationship

with the customer and/or loyalty points for subsequent conversion into

either handset renewal subsidies, or free services. IFRIC 13 - Interpretation

is based upon the principle of measuring loyalty awards by reference to

their fair value. Fair value is defined as the excess price over the sales

incentive that would be granted to any new customer and, should any such

excess price exist, would result in deferring the recognition of the revenue

associated with the subscription in the amount of such excess price.

Selling, general and administrative expenses

primarily include

salaries and employee benefits, rent, consulting and service fees,

insurance costs, travel and entertainment expenses, administrative

department costs, provisions for receivables and other operating

expenses.

Advertising costs

are expensed as incurred.

Slotting fees and cooperative advertising expenses

are recorded

as a reduction in revenues. However, cooperative advertising at UMG and

Activision Blizzard is treated as a marketing expense and expensed when

its expected benefit is individualized and can be estimated.

1.3.5.

Assets

1.3.5.1. CAPITALIZED FINANCIAL INTEREST

Until December 31, 2008, Vivendi did not capitalize financial interest

incurred during the construction and acquisition period of intangible

assets, and property, plant and equipment. Since January 1, 2009,

according to amended IAS 23 - Borrowing Costs, this interest is included in

the cost of qualifying assets. Vivendi applies this amendment to qualifying

assets for which the commencement date for capitalization of costs is

January 1, 2009 onwards.

1.3.5.2. GOODWILL AND BUSINESS COMBINATIONS

Business combinations from January 1, 2009

Business combinations are recorded using the acquisition method. Under

this method, upon the initial consolidation of an entity over which the

group has acquired exclusive control:

✱

the identifiable assets acquired and the liabilities assumed are

recognized at their fair value on the acquisition date; and

✱

non-controlling interests are measured either at fair value or at the

non-controlling interest’s proportionate share of the acquiree’s net

identifiable assets. This option is available on a transaction-by-

transaction basis.

On the acquisition date, goodwill is initially measured as the difference

between:

(i)

the fair value of the consideration transferred, plus the amount of non-

controlling interests in the acquiree and, in a business combination

achieved in stages, the acquisition-date fair value of the previously

held equity interest in the acquiree; and

(ii)

the net fair value of the identifiable assets and liabilities assumed on

the acquisition date.

The measurement of non-controlling interests at fair value results in

an increase in goodwill up to the extent attributable to these interests,

thereby leading to the recognition of a “full goodwill”. The purchase price

allocation shall be performed within 12 months after the acquisition date.

If goodwill is negative, it is recognized in the Statement of Earnings.

Subsequent to the acquisition date, goodwill is measured at its initial

amount less recorded accumulated impairment losses (please refer to

Note 1.3.5.7 below).

In addition, the following principles are applied to business combinations:

✱

on the acquisition date, to the extent possible, goodwill is allocated

to each cash-generating unit likely to benefit from the business

combination;