Page 234 - 2012 Annual Report

234 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
1.3.8. Other liabilities
Provisions
Provisions are recognized when, at the end of the reporting period, Vivendi
has a legal obligation (legal, regulatory or contractual) or a constructive
obligation, as a result of past events, and it is probable that an outflow
of resources embodying economic benefits will be required to settle the
obligation and the obligation can be reliably estimated. Where the effect
of the time value of money is material, provisions are discounted to their
present value using a pre-tax discount rate that reflects current market
assessments of the time value of money. If no reliable estimate can be
made of the amount of the obligation, no provision is recorded and a
disclosure is made in the Notes to the Consolidated Financial Statements.
Employee benefit plans
In accordance with the laws and practices of each country in which it
operates, Vivendi participates in, or maintains, employee benefit plans
providing retirement pensions, post-retirement health care, life insurance
and post-employment benefits to eligible employees, former employees,
retirees and such of their beneficiaries who meet the required conditions.
Retirement pensions are provided for substantially all employees through
defined contribution plans, which are integrated with local social security
and multi-employer plans, or defined benefit plans, which are generally
managed via group pension plans. The plan funding policy implemented by
the group is consistent with applicable government funding requirements
and regulations.
Defined contribution plans
Contributions to defined contribution and multi-employer plans are
expensed during the year.
Defined benefit plans
Defined benefit plans may be funded by investments in various instruments
such as insurance contracts or equity and debt investment securities,
excluding Vivendi shares or debt instruments.
Pension expenses are calculated by independent actuaries using the
projected unit credit method. This method is based on annually updated
assumptions, which include the probability of employees remaining with
Vivendi until retirement, expected changes in future compensation and an
appropriate discount rate for each country in which Vivendi maintains a
pension plan. The assumptions adopted in 2011 and 2012, and the means
of determining these assumptions, are presented in Note 20. As such, the
group recognizes pension-related assets and liabilities and the related net
expense.
A provision is recorded in the Statement of Financial Position equal to the
difference between the actuarial value of the related benefits (actuarial
liability) and the fair value of any associated plan assets, net of past
service cost and unrecognized actuarial gains and losses which remain
unrecognized in the Statement of Financial Position. Where the value of
plan assets exceeds benefit obligations, a financial asset is recognized up
to the maximum cumulative amount of net actuarial losses, unrecognized
past service cost, and the present value of future refunds and the expected
reduction in future contributions.
Actuarial gains and losses are recognized through profit and loss for the
year using the “corridor method”: actuarial gains and losses in excess
of 10% of the greater of the benefit obligation and the fair value of plan
assets at the beginning of the fiscal year are divided by the expected
average working life of beneficiaries. On January 1, 2004, in accordance
with IFRS 1, Vivendi decided to record unrecognized actuarial gains and
losses against consolidated equity.
The cost of plans is included in selling, general and administrative
expenses, except for the financial component which is recorded in other
financial charges and income. The financial component of this cost
consists of the undiscounting of the actuarial liability and the expected
return on plan assets.
Some other post-employment benefits, such as life insurance and medical
coverage (mainly in the United States) are subject to provisions which
are assessed through an actuarial computation comparable to the method
used for pension provisions.
1.3.9. Deferred taxes
Differences existing at closing between the tax base value of assets
and liabilities and their carrying value in the Consolidated Statement
of Financial Position give rise to temporary differences. Pursuant to the
liability method, these temporary differences result in the accounting of:
✱ deferred tax assets, when the tax base value is greater than the
carrying value (expected future tax saving); and
✱ deferred tax liabilities, when the tax base value is lower than the
carrying value (expected future tax expense).
Deferred tax assets and liabilities are measured at the expected tax rates
for the year during which the asset will be realized or the liability settled,
based on tax rates (and tax regulations) enacted or substantially enacted
by the closing date. They are reviewed at the end of each year, in line with
any changes in applicable tax rates.
Deferred tax assets are recognized for all deductible temporary
differences, tax loss carry-forwards and unused tax credits, insofar as it
is probable that a taxable profit will be available, or when a current tax
liability exists to make use of those deductible temporary differences, tax