Annual report 2014

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

other financial charges and income

(

)

(

)

, equal to the profit

and loss related to the change in value of financial assets and the

termination or change in value of financial liabilities, which primarily

include changes in the fair value of derivative instruments, premiums

from the early redemption of borrowings, the early unwinding of

derivative instruments, the cost of issuing or cancelling credit

facilities, the cash impact of foreign exchange transactions (other

than those related to operating activities, included in the EBIT),

as well as the effect of undiscounting assets and liabilities, and

the financial components of employee benefits (interest cost and

expected return on plan assets);

earnings from discontinued operations

(

)

(

)

; and

provisions for income taxes and adjustments attributable to non-

controlling interests and non-recurring tax items (notably the changes

in deferred tax assets pursuant to Vivendi SA’s tax group and the

Consolidated Global Profit Tax Systems, and the reversal of tax

liabilities relating to risks extinguished over the period).

Cash flow from operations (CFFO)

Vivendi considers cash flow from operations (CFFO), a non-GAAP

measure, to be a relevant measure to assess the group’s operating and

financial performance. The CFFO includes net cash provided by operating

activities, before income tax paid, as presented in the Statement of

Cash Flows, as well as dividends received from equity affiliates and

unconsolidated companies. It also includes capital expenditures, net that

relate to cash used for capital expenditures, net of proceeds from sales

of property, plant and equipment, and intangible assets.

The difference between CFFO and net cash provided by operating

activities, before income tax, consists of dividends received from equity

affiliates and unconsolidated companies and capital expenditures, net,

which are included in net cash used for investing activities and of income

tax paid, net, which are excluded from CFFO.

(*)

Items as presented in the Consolidated Statement of Earnings.

(**)

Items as reported by each operating segment.

1.2.4.

Consolidated Statement of Financial Position

Assets and liabilities that are expected to be realized, or intended for

sale or consumption, within the entity’s normal operating cycle (generally

12 months), are recorded as current assets or liabilities. If their maturity

exceeds this period, they are recorded as non-current assets or liabilities.

Moreover, certain reclassifications have been made to the 2013 and 2012

Consolidated Financial Statements to conform to the presentation of the

2014 and 2013 Consolidated Financial Statements.

1.3. Principles governing the preparation of the Consolidated Financial Statements

Pursuant to IFRS principles, notably IFRS 13 –

Fair Value Measurement

relating to measurement and disclosures, the Consolidated Financial

Statements have been prepared on a historical cost basis, with the

exception of certain assets and liabilities detailed below.

The Consolidated Financial Statements include the financial statements

of Vivendi and its subsidiaries after eliminating intragroup items and

transactions. Vivendi has a December 31 year-end. Subsidiaries that do

not have a December 31 year-end prepare interim financial statements at

that date, except when their year-end falls within the three months prior

to December 31.

Acquired subsidiaries are included in the Consolidated Financial

Statements of the group as of the date of acquisition.

1.3.1.

Use of estimates

The preparation of Consolidated Financial Statements in compliance

with IFRS requires the group’s management to make certain estimates

and assumptions that they consider reasonable and realistic. Although

these estimates and assumptions are regularly reviewed by Vivendi

Management based, in particular, on past or anticipated achievements,

facts and circumstances may lead to changes in these estimates and

assumptions which could have an impact on the reported amount of

group assets, liabilities, equity or earnings.

The main estimates and assumptions relate to the measurement of:

revenue: estimates of provisions for returns and price guarantees

(please refer to Note 1.3.4);

provisions: risk estimates, performed on an individual basis, noting

that the occurrence of events during the course of procedures may

lead to a risk reassessment at any time (please refer to Notes 1.3.8

and 18);

employee benefits: assumptions are updated annually, such as the

probability of employees remaining within the group until retirement,

expected changes in future compensation, the discount rate and

inflation rate (please refer to Notes 1.3.8 and 19);

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Annual Report 2014