228
Annual Report -
2013
-
Vivendi
4
Financial Report | Statutory Auditors’ Report on the Consolidated Financial Statements |
Consolidated
Financial Statements
| Statutory Auditors’ Report on the Financial Statements | Statutory Financial Statements
Note 1. Accounting policies and valuation methods
Theatrical film and television rights produced or acquired to be sold
Theatrical film and television rights produced or acquired before
their initial exhibition, to be sold, are recorded as a content asset at
capitalized cost (mainly direct production and overhead costs) or at their
acquisition cost. Theatrical film and television rights are amortized, and
other related costs are expensed, pursuant to the estimated revenue
method (i.e., based on the ratio of the current period’s gross revenues
to estimated total gross revenues from all sources on an individual
production basis). Vivendi considers that amortization pursuant to the
estimated revenue method reflects the rate at which the entity plans to
consume the future economic benefits related to the asset. Accumulated
amortization under this rate is, for this activity, generally not lower than
the charge that would be obtained under the straight-line amortization
method. If, however, the accumulated amortization would be lower than
this charge, a minimum straight-line amortization would be calculated
over a maximum 12-year period, which corresponds to the typical
screening period of each film.
Where appropriate, estimated losses in value are provided in full
against earnings for the period in which the losses are estimated, on
an individual product basis.
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.
UMG
Music publishing rights and catalogs include music catalogs,
artists’ contracts and publishing rights, acquired through business
combinations, amortized in selling, general and administrative expenses
over a period not exceeding 15 years.
Royalty advances to artists, songwriters, and co-publishers are
capitalized as an asset when their current popularity and past
performances provide a reasonable basis to conclude that the probable
future recoupment of such royalty advances against earnings otherwise
payable to them is reasonably assured. Royalty advances are recognized
as an expense as subsequent royalties are earned by the artist,
songwriter or co-publisher. Any portion of capitalized royalty advances
not deemed to be recoverable against future royalties is expensed
during the period in which the loss becomes evident. These expenses
are recorded in cost of revenues.
Royalties earned by artists, songwriters, and co-publishers are
recognized as an expense in the period during which the sale of the
product occurs, less a provision for estimated returns.
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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 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.
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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.
GVT, SFR, and Maroc Telecom Group
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.
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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.
