Page 294 - 2012 Annual Report

294 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 23 Financial instruments and management of financial risks
23.2.2. Foreign currency risk management
Excluding Maroc Telecom Group and Activision Blizzard, the group’s
foreign currency risk management is centralized by Vivendi SA’s Financing
department and primarily seeks to hedge budget exposures (80%) resulting
from monetary flows generated by activities performed in currencies
other than the euro as well as from external firm commitments (100%),
primarily relating to the acquisition of editorial content (including sports,
audiovisual and film rights) and certain capital expenditures (set-top
boxes for example), realized in currencies other than the euro. Most of the
hedging instruments are foreign currency swaps or forward contracts that
have a maturity of less than one year. Considering the foreign currency
hedge put into place, an unfavorable and uniform euro change of 1%
against all foreign currencies in position as of December 31, 2012, would
have a non-significant cumulative impact on net earnings (below €1 million
as of December 31, 2012 and December 31, 2011). In addition, the group
may also hedge foreign currency exposure resulting from foreign-currency
denominated financial assets and liabilities. Nevertheless, due to their
non-significant nature, net exposures to subsidiaries net working capital
(internal flows of royalties as well as external purchases) are generally
not hedged. The relevant risks are realized at the end of each month by
translating the sum into the functional currency of the relevant operating
entities.
The principal currency hedged by the group is the US dollar. In particular,
Vivendi converted in euros the $550 million bond issued in April 2012,
by setting up a USD-EUR foreign currency hedge (cross-currency swap)
with a 1.3082 EUR/USD rate, or a €420 million counter value maturing in
April 2015.
In addition, as part of the acquisition of EMI Recorded Music for
£1,130 million, which was completed on September 28, 2012 (please refer
to Note 2.1):
✱ Vivendi had partially hedged the acquisition price through forward
purchase contracts denominated in GBP for a notional amount of
£600 million, with a 0.8144 EUR/GBP rate. From an accounting
perspective, these GBP purchases were considered as cash flow
hedges. On October 1, 2012, this hedge was unwound for €737 million
at the completion in the acquisition.
✱ Simultaneously Vivendi partially hedged the expected income from
the sale of certain EMI Recorded Music assets, in accordance with
commitments made by Vivendi to the European Commission, through
forward sale contracts denominated in GBP for a notional amount
of £430 million, with an average rate of 0.7965 EUR/GBP. From an
accounting perspective, these GBP sales were considered as net
investment hedges and will be unwound once the effective sale of
Parlophone to Warner Music group (please refer to Note 2.1).
Finally, the intercompany loan granted by Vivendi to GVT under market
terms for a total amount of €1,001 million (drawn for €811 million as
of December 31, 2012) is not subject to any foreign currency hedging
in GVT’s Statement of Financial Position. Incurred foreign exchange
losses amounted to €76 million in 2012 and €24 million in 2011. This
intercompany loan is mainly aimed at financing the significant increase in
GVT’s capital expenditures program related to the geographic expansion
of its telecommunication network.
As a reminder, from December 2009 to January 2011, following the
agreement to sell the 20% interest in NBC Universal to GE for a total
amount of $5,800 million, Vivendi gradually hedged its investment in
NBC Universal using currency forward sales contracts denominated in US
dollar, at an average exchange rate of 1.33 EUR/USD. From an accounting
perspective, these forward contracts were qualified as net investment
hedges in NBC Universal.