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

Equity accounting

Entities over which Vivendi exercises significant influence as well as joint

ventures are accounted for under the equity method.

Significant influence is presumed to exist when Vivendi holds, directly

or indirectly, at least 20% of the voting rights in an entity unless it can

be clearly demonstrated that Vivendi does not exercise a significant

influence. Significant influence can be evidenced through other criteria,

such as representation on the Board of Directors or the entity’s equivalent

governing body, participation in policy-making of financial and operational

processes, material transactions with the entity or the interchange of

managerial personnel.

1.3.3.

Foreign currency translation

The Consolidated Financial Statements are presented in millions of euros.

The functional currency of Vivendi SA and the presentation currency of

the group is the euro.

Foreign currency transactions

Foreign currency transactions are initially recorded in the functional

currency of the entity at the exchange rate prevailing at the date of

the transaction. At the closing date, foreign currency monetary assets

and liabilities are translated into the entity’s functional currency at the

exchange rate prevailing on that date. All foreign currency differences are

expensed, with the exception of differences resulting from borrowings

in foreign currencies which constitute a hedge of the net investment

in a foreign entity. These differences are allocated directly to charges

and income directly recognized in equity until the divestiture of the net

investment.

Financial statements denominated in a foreign currency

Except in cases of significant exchange rate fluctuation, financial

statements of subsidiaries, joint ventures or other associated entities for

which the functional currency is not the euro are translated into euros as

follows: the Consolidated Statement of Financial Position is translated

at the exchange rate at the end of the period, and the Consolidated

Statement of Earnings and the Consolidated Statement of Cash Flow

are translated using average monthly exchange rates for the period. The

resulting translation gains and losses are recorded as foreign currency

translation differences in charges and income directly recognized

in equity. In accordance with IFRS 1, Vivendi elected to reverse the

accumulated foreign currency translation differences against retained

earnings as of January 1, 2004. These foreign currency translation

differences resulted from the translation into euros of the financial

statements of subsidiaries that use foreign currencies as their functional

currencies. Consequently, these adjustments are not applied to earnings

on the subsequent divestiture of subsidiaries, joint ventures or associates

whose functional currency is not the euro.

1.3.4.

Revenues from operations and associated costs

Revenues from operations are recorded when it is probable that future

economic benefits will be obtained by the group and when they can be

reliably measured. Revenues are reported net of discounts.

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1.3.4.1.

Canal+ Group

Pay and free-to-air television

Revenues from television subscription services for terrestrial, satellite or

cable pay-television platforms are recognized over the service period, net

of gratuities granted. Revenues from advertising are recognized over the

period during the advertising commercials are broadcast. Revenues from

ancillary services (such as interactive or video-on-demand services) are

recognized when the service is rendered. Subscriber management and

acquisition costs, as well as television distribution costs, are included in

selling, general and administrative expenses.

Equipment rentals

IFRIC 4 –

Determining Whether an Arrangement Contains a Lease

applies to equipment for which a right of use is granted. Equipment lease

revenues are generally recognized on a straight-line basis over the life of

the lease agreement.

Film and television programming

Theatrical revenues are recognized as the films are screened. Revenues

from film distribution and from video and television or pay television

licensing agreements are recognized when the films and television

programs are available for telecast and all other conditions of sale have

been met. Home video product revenues, less a provision for estimated

returns (please refer to Note 1.3.4.3) and rebates, are recognized upon

shipment and availability of the product for retail sale. Amortization of

film and television capitalized and acquisition costs, theatrical print costs,

home video inventory costs and television and home video marketing

costs are included in costs of revenues.

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1.3.4.2.

Universal Music Group (UMG)

Recorded music

Revenues from the physical sale of recorded music, net of a provision

for estimated returns (please refer to Note 1.3.4.3) and rebates, are

recognized upon shipment to third parties, at the shipping point for

products sold free on board (FOB) and on delivery for products sold free

on destination.

Revenues from the digital sale of recorded music, for which UMG has

sufficient, accurate, and reliable data from certain distributors, are

recognized based on their estimate at the end of the month in which

those sales were made to the final customer. In the absence of such data,

revenues are recognized upon notification by the distribution platform (on-

line or mobile music distributor) to UMG of a sale to the final customer.

Music publishing

Revenues from the third-party use of copyrights on musical compositions

owned or administered by UMG are recognized when royalty statements

are received and collectability is assured.

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Annual Report 2014