229
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
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.
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 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 GVT, SFR, and Maroc
Telecom Group 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 CGUs are presented in Note 10.
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 CGUs, 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 CGUs are those used
to prepare budgets for each CGU or group of CGUs, 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 price that would be received from
the sale of an asset or group of assets in an orderly transaction between
market participants at the measurement date, 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.
