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

share-based compensation: assumptions are updated annually, such

as the estimated term, volatility and the estimated dividend yield

(please refer to Notes 1.3.10 and 20);

certain financial instruments: fair value estimates (please refer to

Notes 1.3.5.8, 1.3.7 and 22);

deferred taxes: estimates concerning the recognition of deferred tax

assets are updated annually with factors such as expected tax rates

and future tax results of the group (please refer to Notes 1.3.9 and 6);

goodwill and other intangible assets: valuation methods adopted

for the identification of intangible assets acquired through business

combinations (please refer to Notes 1.3.5.2);

goodwill, intangible assets with indefinite useful lives and assets in

progress: assumptions are updated annually relating to impairment

tests performed on each of the group’s cash-generating units (CGUs),

future cash flows and discount rates (please refer to Notes 1.3.5.7,

9, 11, and 12); and

UMG content assets: estimates of the future performance of

beneficiaries who were granted advances are recognized in the

Statement of Financial Position (please refer to Notes 1.3.5.3 and 10).

1.3.2.

Principles of consolidation

A list of Vivendi’s major subsidiaries, joint ventures and associated

entities is presented in Note 27.

Consolidation

All companies in which Vivendi has a controlling interest, namely those

in which it has the power to govern financial and operational policies

in order to obtain benefits from their operations, are fully consolidated.

The new model of control, introduced by IFRS 10 which supersedes the

revised IAS 27 –

Consolidated and Separate Financial Statements

, and

interpretation SIC 12 –

Consolidation – Special Purpose Entities

, is based

on the following three criteria to be fulfilled simultaneously to conclude

that the parent company exercises control:

a parent company has power over a subsidiary when the parent

company has existing rights that give it the current ability to direct

the relevant activities of the subsidiary, i.e., the activities that

significantly affect the subsidiary’s returns. Power may arise from

existing or potential voting rights, or contractual agreements. Voting

rights must be substantial, i.e., they shall be exercisable at any

time without limitation, particularly during decision making related

to significant activities. The assessment of the exercise of power

depends on the nature of the subsidiary’s relevant activities, the

internal decision-making process, and the allocation of rights among

the subsidiary’s other shareowners;

the parent company is exposed, or has rights, to variable returns from

its involvement with the subsidiary which may vary as a result of the

subsidiary’s performance. The concept of returns is broadly defined

and includes, among other things, dividends and other economic

benefit distributions, changes in the value of the investment in the

subsidiary, economies of scale, and business synergies; and

the parent company has the ability to use its power to affect the

returns. Exercising power without having any impact on returns does

not qualify as control.

Consolidated Financial Statements of a group are presented as if the

group was a single economic entity with two categories of owners: (i) the

owners of the parent company (Vivendi SA shareowners) and (ii) the

owners of non-controlling interests. A non-controlling interest is defined

as the interest in a subsidiary that is not attributable, directly or indirectly,

to a parent. As a result, changes to a parent company’s ownership

interest in a subsidiary that do not result in a loss of control only impact

equity, as control does not change within the economic entity. Hence, in

the event of the acquisition of an additional interest in a consolidated

entity after January 1, 2009, Vivendi recognizes the difference between

the acquisition price and the carrying value of non-controlling interests

acquired as a change in equity attributable to Vivendi SA shareowners.

Conversely, any acquisition of control achieved in stages or a loss of

control gives rise to profit or loss in the statement of earnings.

Accounting for joint arrangements

IFRS 11, which supersedes IAS 31 –

Financial Reporting of Interests in

Joint Ventures,

and interpretation SIC 13 –

Jointly Controlled Entities

– Non-monetary Contributions by Venturers,

establishes principles for

Financial Reporting by parties to a joint arrangement.

In a joint arrangement, parties are bound by a contractual arrangement,

giving these parties joint control of the arrangement. An entity that

is a party to an arrangement shall assess whether the contractual

arrangement gives all the parties or a group of the parties, control of

the arrangement collectively. Once it has been established that all the

parties or a group of the parties collectively control the arrangement,

joint control exists only when decisions about the relevant activities

require the unanimous consent of the parties that collectively control the

arrangement.

Joint arrangements are classified into two categories:

joint operations: these are joint arrangements whereby the parties

that have joint control of the arrangement have rights to the assets,

and obligations for the liabilities, relating to the arrangement. Those

parties are called joint operators. A joint operator shall recognize

100% of wholly-owned assets/liabilities, expenses/revenues of the

joint operation, and its share of any of those items held jointly; and

joint ventures: these are joint arrangements whereby the parties that

have joint control of the arrangement have rights to the net assets

of the arrangement. Those parties are called joint venturers. Each

joint venturer shall recognize its interest in a joint venture as an

investment, and shall account for that investment using the equity

method in accordance with IAS 28 (please refer below).

The elimination of proportionate consolidation for joint ventures has no

impact on Vivendi, which already accounted for companies that were,

directly or indirectly, jointly controlled by Vivendi under the equity

method, and a limited number of other shareholders under the terms of a

contractual arrangement.

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Annual Report 2014