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Consolidated
Financial Statements
| Statutory Auditors’ Report on the Financial Statements | Statutory Financial Statements
Note 1. Accounting policies and valuation methods
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1.3.5.3.
Content assets
Canal+ Group
Film, television or sports broadcasting rights
When entering into contracts for the acquisition of film, television
or sports broadcasting rights, the rights acquired are classified as
contractual commitments. They are recorded in the Statement of
Financial Position and classified as content assets as follows:
p
p
film and television broadcasting rights are recognized at their
acquisition cost when the program is available for screening and are
expensed over their broadcasting period;
p
p
sports broadcasting rights are recognized at their acquisition cost at
the opening of the broadcasting period of the related sports season or
upon the first payment and are expensed as they are broadcast; and
p
p
expensing of film, television or sports broadcasting rights is included
in cost of revenues.
Theatrical film and television rights produced or acquired to be sold
Theatrical film and television rights produced or acquired before their
initial exhibition to be sold, are recorded as a content asset at capitalized
cost (mainly direct production and overhead costs) or at their acquisition
cost. Theatrical film and television rights are amortized, and other related
costs are expensed, pursuant to the estimated revenue method (i.e.,
based on the ratio of the current period’s gross revenues to estimated
total gross revenues from all sources on an individual production basis).
Vivendi considers that amortization pursuant to the estimated revenue
method reflects the rate at which the entity plans to consume the future
economic benefits related to the asset. Accumulated amortization
under this rate is, for this activity, generally not lower than the charge
that would be obtained under the straight-line amortization method.
If, however, the accumulated amortization would be lower than this
charge, a minimum straight-line amortization would be calculated over
a maximum 12-year period, which corresponds to the typical screening
period of each film.
Where appropriate, estimated losses in value are provided in full against
earnings for the period in which the losses are estimated, on an individual
product basis.
Film and television rights catalogs
Catalogs comprise film rights acquired for a second television exhibition,
or produced or acquired film and television rights that are sold after
their first television screening (i.e., after their first broadcast on a free
terrestrial channel). They are recognized as an asset at their acquisition
or transfer cost and amortized as groups of films, or individually, based
respectively on the estimated revenue method.
UMG
Music publishing rights and catalogs include music catalogs, artists’
contracts and publishing rights, acquired through business combinations,
amortized in selling, general and administrative expenses over a period
not exceeding 15 years.
Royalty advances to artists, songwriters, and co-publishers are capitalized
as an asset when their current popularity and past performances provide
a reasonable basis to conclude that the probable future recoupment of
such royalty advances against earnings otherwise payable to them is
reasonably assured. Royalty advances are recognized as an expense as
subsequent royalties are earned by the artist, songwriter or co-publisher.
Any portion of capitalized royalty advances not deemed to be recoverable
against future royalties is expensed during the period in which the loss
becomes evident. These expenses are recorded in cost of revenues.
Royalties earned by artists, songwriters, and co-publishers are recognized
as an expense in the period during which the sale of the product occurs,
less a provision for estimated returns.
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1.3.5.4.
Research and Development costs
Research costs are expensed when incurred. Development expenses
are capitalized when the feasibility and, in particular, profitability of the
project can reasonably be considered certain.
Cost of internal use software
Direct internal and external costs incurred for the development of
computer software for internal use, including website development costs,
are capitalized during the application development stage. Application
development stage costs generally include software configuration,
coding, installation and testing. Costs of significant upgrades and
enhancements resulting in additional functionality are also capitalized.
These capitalized costs are amortized over 5 to 10 years. Maintenance,
minor upgrade, and enhancement costs are expensed as incurred.
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1.3.5.5.
Other intangible assets
Intangible assets separately acquired are recorded at cost, and intangible
assets acquired in connection with a business combination are recorded
at their fair value at the acquisition date. The historical cost model is
applied to intangible assets after they have been recognized. Assets with
an indefinite useful life are not amortized but are subject to an annual
impairment test. Amortization is accrued for assets with a finite useful
life. Useful life is reviewed at the end of each reporting period.
Other intangible assets include trade names, customer bases and
licenses. Music catalogs, trade names, subscribers’ bases and market
shares generated internally are not recognized as intangible assets.
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1.3.5.6.
Property, plant and equipment
Property, plant and equipment are carried at historical cost less any
accumulated depreciation and impairment losses. Historical cost includes
the acquisition cost or production cost, costs directly attributable to
transporting an asset to its physical location and preparing it for its
operational use, the estimated costs relating to the demolition and the
collection of property, plant and equipment, and the rehabilitation of the
physical location resulting from the incurred obligation.
When property, plant and equipment include significant components
with different useful lives, they are recorded and amortized separately.
Amortization is calculated using the straight-line method based on the
estimated useful life of the assets. Useful lives of the main components
are reviewed at the end of each reporting period and are as follows:
p
p
buildings: 5 to 40 years;
p
p
equipment and machinery: 3 to 8 years;
p
p
set-top boxes: 5 to 7 years; and
p
p
other: 2 to 10 years.
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