Page 231 - 2012 Annual Report

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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
Assets financed by finance lease contracts are capitalized at the lower
of the fair value of future minimum lease payments and of the market
value and the related debt is recorded as “Borrowings and other financial
liabilities”. In general, these assets are amortized on a straight-line
basis over their estimated useful life, corresponding to the duration
applicable to property, plant and equipment from the same category.
Amortization expenses on assets acquired under such leases are included
in amortization expenses.
After initial recognition, the cost model is applied to property, plant and
equipment.
Vivendi has elected not to apply the option available under IFRS 1,
involving the remeasurement of certain property, plant and equipment at
their fair value as of January 1, 2004.
On January 1, 2004, in accordance with IFRS 1, Vivendi decided to apply
IFRIC Interpretation 4 - Determining whether an arrangement contains a
lease, which currently mainly applies to commercial supply agreements for
the Canal+ Group and GVT satellite capacity and for SFR, Maroc Telecom
Group, and GVT telecommunications services:
✱ Indefeasible Right of Use (IRU) agreements confer an exclusive
and irrevocable right to use an asset during a defined period. IRU
agreements are leases which convey a specific right of use for a
defined portion of the underlying asset in the form of dedicated fibers
or wavelengths. IRU agreements are capitalized if the agreement
period covers the major part of the useful life of the underlying asset.
IRU contract costs are capitalized and amortized over the contract
term; and
✱ Some IRU contracts are commercial service agreements that do not
convey a right to use a specific asset; contract costs under these
agreements are consequently expensed as operational costs for the
period.
1.3.5.7. ASSET IMPAIRMENT
Each time events or changes in the economic environment indicate a
current risk of impairment of goodwill, other intangible assets, property,
plant and equipment, and assets in progress, Vivendi re-examines the
value of these assets. In addition, goodwill, other intangible assets with
an indefinite useful life, and intangible assets in progress are all subject
to an annual impairment test undertaken in the fourth quarter of each
fiscal year, with some exceptions. This test is performed to compare the
recoverable amount of each Cash Generating Unit (CGU) or, if necessary,
groups of CGU to the carrying value of the corresponding assets (including
goodwill). A Cash Generating Unit is the smallest identifiable group of
assets that generates cash inflows that are largely independent of the
cash inflows from other assets or groups of assets. The Vivendi Group
operates through different communication businesses. Each business
offers different products and services that are marketed through different
channels. CGUs are independently defined at each business level,
corresponding to the group operating segments. Vivendi CGUs and groups
of CGU are presented in Note 9.
The recoverable amount is determined as the higher of either: (i) the value
in use; or (ii) the fair value (less costs to sell) as described hereafter, for
each individual asset. If the asset does not generate cash inflows that are
largely independent of other assets or groups of assets, the recoverable
amount is determined for the group of assets. In particular, an impairment
test of goodwill is performed by Vivendi for each CGU or group of CGU,
depending on the level at which Vivendi Management measures return
on operations.
The value in use of each asset or group of assets is determined as the
discounted value of future cash flows (discounted cash flow method (DCF))
by using cash flow projections consistent with the budget of the following
year and the most recent forecasts prepared by the operating segments.
Applied discount rates are determined by reference to available
external sources of information, usually based on financial institutions’
benchmarks, and reflect the current assessment by Vivendi of the time
value of money and risks specific to each asset or group of assets.
Perpetual growth rates used for the evaluation of CGU are those used to
prepare budgets for each CGU or group of CGU, and beyond the period
covered, are consistent with growth rates estimated by the business
by extrapolating growth rates used in the budgets, without exceeding
the long-term average growth rate for the markets in which the group
operates.
The fair value (less costs to sell) is the amount obtainable from the sale
of the asset or group of assets in an arm’s length transaction between
knowledgeable and willing parties, less costs to sell. These values are
determined on the basis of market data (stock market prices or comparison
with similar listed companies, with the value attributed to similar assets
or companies in recent transactions) or on discontinued future cash flows
in the absence of reliable data.
If the recoverable amount is lower than the carrying value of an asset or
group of assets, an impairment loss equal to the difference is recognized
in EBIT. In the case of a group of assets, this impairment loss is recorded
first against goodwill.
The impairment losses recognized in respect of property, plant and
equipment, and intangible assets (other than goodwill) may be reversed
in a later period if the recoverable amount becomes greater than the
carrying value, within the limit of impairment losses previously recognized.
Impairment losses recognized in respect of goodwill cannot be reversed
at a later date.
1.3.5.8. FINANCIAL ASSETS
Financial assets consist of financial assets measured at fair value and
financial assets recognized at amortized cost. Financial assets are initially
recognized at the fair value corresponding, in general, to the consideration
paid, for which the best evidence is the acquisition cost (including
associated acquisition costs, if any).