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Consolidated
Financial Statements
| Statutory Auditors’ Report on the Financial Statements | Statutory Financial Statements
Note 1. Accounting policies and valuation methods
Costs of revenues
Costs of revenues include manufacturing and distribution costs, royalty
and copyright expenses, artists’ costs, recording costs, and direct
overheads. Selling, general and administrative expenses primarily include
marketing and advertising expenses, selling costs, provisions for doubtful
receivables and indirect overheads.
■
■
1.3.4.3.
Other
Provisions for estimated returns and price guarantees
are deducted
from sales of products to customers through distributors. The provisions
are estimated based on past sales statistics and take into account the
economic environment and product sales forecast to final customers.
Selling, general and administrative expenses
primarily include
salaries and employee benefits, rent, consulting and service fees,
insurance costs, travel and entertainment expenses, administrative
department costs, provisions for receivables and other operating
expenses.
Advertising costs
are expensed when incurred.
Slotting fees and cooperative advertising expenses
are recorded
as a reduction in revenues. However, cooperative advertising at UMG is
treated as a marketing expense and expensed when its expected benefit
is individualized and can be estimated.
1.3.5.
Assets
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■
1.3.5.1.
Capitalized financial interest
Until December 31, 2008, Vivendi did not capitalize financial interest
incurred during the construction and acquisition period of intangible
assets, and property, plant and equipment. Since January 1, 2009,
according to amended IAS 23 –
Borrowing Costs
, this interest is included
in the cost of qualifying assets. Vivendi applies this amendment to
qualifying assets for which the commencement date for capitalization of
costs is January 1, 2009 onwards.
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1.3.5.2.
Goodwill and business combinations
Business combinations from January 1, 2009
Business combinations are recorded using the acquisition method. Under
this method, upon the initial consolidation of an entity over which the
group has acquired exclusive control:
p
p
the identifiable assets acquired and the liabilities assumed are
recognized at their fair value on the acquisition date; and
p
p
non-controlling interests are measured either at fair value or at the
non-controlling interest’s proportionate share of the acquiree’s net
identifiable assets. This option is available on a transaction-by-
transaction basis.
On the acquisition date, goodwill is initially measured as the difference
between:
(i)
the fair value of the consideration transferred, plus the amount
of non-controlling interests in the acquiree and, in a business
combination achieved in stages, the acquisition-date fair value of
the previously held equity interest in the acquiree; and
(ii)
the net fair value of the identifiable assets and liabilities assumed on
the acquisition date.
The measurement of non-controlling interests at fair value results in
an increase in goodwill up to the extent attributable to these interests,
thereby leading to the recognition of a “full goodwill”. The purchase price
allocation shall be performed within 12 months after the acquisition date.
If goodwill is negative, it is recognized in the Statement of Earnings.
Subsequent to the acquisition date, goodwill is measured at its initial
amount less recorded accumulated impairment losses (please refer to
Note 1.3.5.7 below).
In addition, the following principles are applied to business combinations:
p
p
on the acquisition date, to the extent possible, goodwill is allocated
to each cash-generating unit likely to benefit from the business
combination;
p
p
contingent consideration in a business combination is recorded at
fair value on the acquisition date, and any subsequent adjustment
occurring after the purchase price allocation period is recognized in
the Statements of Earnings;
p
p
acquisition-related costs are recognized as expenses when incurred;
p
p
in the event of the acquisition of an additional interest in a subsidiary,
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; and
p
p
goodwill is not amortized.
Business combinations prior to January 1, 2009
Pursuant to IFRS 1, Vivendi elected not to restate business combinations
that occurred prior to January 1, 2004. IFRS 3, as published by the IASB
in March 2004, retained the acquisition method. However, its provisions
differed from those of its revised standard in respect of the main
following items:
p
p
minority interests were measured at their proportionate share of
the acquiree’s net identifiable assets as there was no option for
measurement at fair value;
p
p
contingent consideration was recognized in the cost of acquisition
only if the payment was likely to occur and the amounts could be
reliably measured;
p
p
transaction costs that were directly attributable to the acquisition
formed part of acquisition costs; and
p
p
in the event of the acquisition of an additional interest in a subsidiary,
the difference between the acquisition cost and the carrying value of
minority interests acquired was recognized as goodwill.
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