Page 230 - 2012 Annual Report

230 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
Film and television rights catalogs
Catalogs are comprised of film rights acquired for a second television
exhibition, or produced or acquired film and television rights that are sold
after their first television screening (i.e., after their first broadcast on a free
terrestrial channel). They are recognized as an asset at their acquisition
or transfer cost and amortized as groups of films, or individually, based
respectively on the estimated revenue method.
1.3.5.4. RESEARCH AND DEVELOPMENT COSTS
Research costs are expensed when incurred. Development expenses
are capitalized when the feasibility and, in particular, profitability of the
project can reasonably be considered certain.
Cost of software for rental, sale or commercialization
Capitalized software development costs comprise amounts paid to
entitled beneficiaries for the use of their intellectual property content for
developing new games (e.g., software development, graphics and editorial
content), direct costs incurred during the internal development of products
and the acquisition costs of developed software. Software development
costs are capitalized when, notably, the technical feasibility of the
software is established and they are deemed recoverable. These costs are
mainly generated by Activision Blizzard as part of the games development
process and are amortized using the estimated revenue method (i.e.,
based on the ratio of the current period’s gross revenues to estimated
total gross revenues) for a given product, which generally leads to the
amortization of costs over a maximum period of 6 months commencing
on a product’s release date. Technical feasibility is determined on a
product-by-product basis. Non-capitalized software development costs
are immediately recorded as Research and Development costs. The future
recoverability of capitalized software development costs and intellectual
property license costs is assessed every quarter. When their recoverable
value is less than their carrying value, an impairment loss is recognized
against earnings for the period.
Cost of internal use software
Direct internal and external costs incurred for the development of
computer software for internal use, including website development costs,
are capitalized during the application development stage. Application
development stage costs generally include software configuration, coding,
installation and testing. Costs of significant upgrades and enhancements
resulting in additional functionality are also capitalized. These capitalized
costs, mainly recognized at SFR, are amortized over 4 years. Maintenance
and minor upgrade and enhancement costs are expensed as incurred.
1.3.5.5. OTHER INTANGIBLE ASSETS
Intangible assets acquired separately are recorded at cost, and intangible
assets acquired in connection with a business combination are recorded
at their fair value at the acquisition date. The historical cost model is
applied to intangible assets after they have been recognized. Assets with
an indefinite useful life are not amortized but are all subject to an annual
impairment test. Amortization is accrued for assets with a finite useful life.
Useful life is reviewed at the end of each reporting period.
Other intangible assets include trade names, customer bases and licenses.
Music catalogs, trade names, subscribers’ bases and market shares
generated internally are not recognized as intangible assets.
SFR, Maroc Telecom Group and GVT
Licenses to operate telecom networks are recorded at historical cost
based upon the discounted value of deferred payments and amortized
on a straight-line basis from their effective service start date over their
estimated useful life until maturity. Licenses to operate in France are
recognized in the amount of the fixed, upfront fee paid upon the granting
of the license. The variable fee, which cannot be reliably determined
(equal to 1% of the revenues generated by the activity in the case of the
telecommunication licenses in France), is recorded as an expense when
incurred.
1.3.5.6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at historical cost less any
accumulated depreciation and impairment losses. Historical cost includes
the acquisition cost or production cost, the costs directly attributable to
transporting an asset to its physical location and preparing it for use in
operations, the estimated costs for the demolition and the collection
of property, plant and equipment, and the rehabilitation of the physical
location resulting from the incurred obligation.
When property, plant and equipment include significant components
with different useful lives, they are recorded and amortized separately.
Amortization is computed using the straight-line method based on the
estimated useful life of the assets. Useful life is reviewed at the end of
each reporting period.
Property, plant and equipment mainly consist of the network equipment of
telecommunications activities, each part of which is amortized generally
over 1 to 50 years. The useful lives of the main components are as follows:
✱ buildings: over 8 to 25 years;
✱ fiber optic equipment: 50 years;
✱ pylons: over 15 to 20 years;
✱ radio and transmission equipment: over 3 to 10 years;
✱ switch centers: 8 years; and
✱ servers and hardware: over 1 to 8 years.