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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
Assets financed by finance lease contracts are capitalized at the lower
of the fair value of future minimum lease payments and of the market
value and the related debt is recorded as “Borrowings and other financial
liabilities”. In general, these assets are amortized on a straight-line
basis over their estimated useful life, corresponding to the duration
applicable to property, plant and equipment from the same category.
Amortization expenses on assets acquired under such leases are included
in amortization expenses.
After initial recognition, the cost model is applied to property, plant and
equipment.
Vivendi has elected not to apply the option available under IFRS 1,
involving the remeasurement of certain property, plant and equipment at
their fair value as of January 1, 2004.
On January 1, 2004, in accordance with IFRS 1, Vivendi decided to apply
IFRIC Interpretation 4 –
Determining whether an arrangement contains a
lease
, which currently mainly applies to commercial supply agreements
for the Canal+ Group (and GVT) satellite capacity, which are commercial
service agreements that do not convey a right to use a specific asset;
contract costs under these agreements are consequently expensed as
operational costs for the period.
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1.3.5.7.
Asset impairment
Each time events or changes in the economic environment indicate a
current risk of impairment of goodwill, other intangible assets, property,
plant and equipment, and assets in progress, Vivendi re-examines the
value of these assets. In addition, goodwill, other intangible assets with
an indefinite useful life, and intangible assets in progress are all subject
to an annual impairment test undertaken in the fourth quarter of each
fiscal year. This test is performed to compare the recoverable amount of
each Cash Generating Unit (CGU) or, if necessary, groups of CGU to the
carrying value of the corresponding assets (including goodwill). A Cash
Generating Unit is the smallest identifiable group of assets that generates
cash inflows that are largely independent of the cash inflows from other
assets or groups of assets. The Vivendi group operates through different
communication businesses. Each business offers different products
and services that are marketed through different channels. CGUs are
independently defined at each business level, corresponding to the group
operating segments. Vivendi CGUs and groups of CGUs are presented in
Note 9.
The recoverable amount is determined as the higher of: (i) the value in
use; or (ii) the fair value (less costs to sell) as described hereafter, for
each individual asset. If the asset does not generate cash inflows that are
largely independent of other assets or groups of assets, the recoverable
amount is determined for the group of assets. In particular, an impairment
test of goodwill is performed by Vivendi for each CGU or group of CGUs,
depending on the level at which Vivendi Management measures return
on operations.
The value in use of each asset or group of assets is determined as the
discounted value of future cash flows (discounted cash flow method
(DCF)) by using cash flow projections consistent with the budget of the
following year and the most recent forecasts prepared by the operating
segments.
Applied discount rates are determined by reference to available
external sources of information, usually based on financial institutions’
benchmarks, and reflect the current assessment by Vivendi of the time
value of money and risks specific to each asset or group of assets.
Perpetual growth rates used for the evaluation of CGUs are those used to
prepare budgets for each CGU or group of CGUs, and beyond the period
covered, are consistent with growth rates estimated by the business
by extrapolating growth rates used in the budgets, without exceeding
the long-term average growth rate for the markets in which the group
operates.
The fair value (less costs to sell) is the price that would be received from
the sale of an asset or group of assets in an orderly transaction between
market participants at the measurement date, less costs to sell. These
values are determined on the basis of market data (stock market prices
or comparison with similar listed companies, with the value attributed
to similar assets or companies in recent transactions) or on discontinued
future cash flows in the absence of reliable data.
If the recoverable amount is lower than the carrying value of an asset or
group of assets, an impairment loss equal to the difference is recognized
in EBIT. In the case of a group of assets, this impairment loss is first
recorded against goodwill.
The impairment losses recognized in respect of property, plant and
equipment, and intangible assets (other than goodwill) may be reversed
in a later period if the recoverable amount becomes greater than
the carrying value, within the limit of impairment losses previously
recognized. Impairment losses recognized in respect of goodwill cannot
be reversed at a later date.
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1.3.5.8.
Financial assets
Financial assets consist of financial assets measured at fair value and
financial assets recognized at amortized cost. Financial assets are initially
recognized at fair value corresponding, in general, to the consideration
paid, which is best evidenced by the acquisition cost (including
associated acquisition costs, if any).
Financial assets at fair value
Financial assets at fair value include available-for-sale securities,
derivative financial instruments with a positive value (please refer to
Note 1.3.7) and other financial assets measured at fair value through
profit or loss. Most of these financial assets are actively traded in
organized public markets, their fair value being calculated by reference
to the published market price at period end. Fair value is estimated for
financial assets which do not have a published market price on an active
market. As a last resort, when a reliable estimate of fair value cannot
be made using valuation techniques in the absence of an active market,
the group values financial assets at historical cost, less any impairment
losses.
Available-for-sale securities consist of unconsolidated interests and other
securities that cannot be classified in the other financial asset categories
described below. Unrealized gains and losses on available-for-sale
securities are recognized in charges and income directly recognized in
equity until the financial asset is sold, collected or removed from the
Statement of Financial Position in another way, or until there is objective
evidence that the investment is impaired, at which time the accumulated
gain or loss previously reported in charges and income directly recognized
in equity is expensed in other financial charges and income.
Other financial assets measured at fair value through profit or loss mainly
consist of assets held for trading which Vivendi intends to sell in the near
future (primarily marketable securities). Unrealized gains and losses on
these assets are recognized in other financial charges and income.
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