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

1.3.8.

Other liabilities

Provisions

Provisions are recognized when, at the end of the reporting period,

Vivendi has a legal obligation (legal, regulatory or contractual) or a

constructive obligation, as a result of past events, and it is probable that

an outflow of resources embodying economic benefits will be required

to settle the obligation and the obligation can be reliably estimated.

Where the effect of the time value of money is material, provisions

are discounted to their present value using a pre-tax discount rate that

reflects current market assessments of the time value of money. If the

amount of the obligation cannot be reliably estimated, no provision is

recorded and a disclosure is made in the Notes to the Consolidated

Financial Statements.

Employee benefit plans

In accordance with the laws and practices of each country in which it

operates, Vivendi participates in, or maintains, employee benefit plans

providing retirement pensions, post-retirement health care, life insurance

and post-employment benefits to eligible employees, former employees,

retirees and such of their beneficiaries who meet the required conditions.

Retirement pensions are provided for substantially all employees through

defined contribution plans, which are integrated with local social security

and multi-employer plans, or defined benefit plans, which are generally

managed via group pension plans. The plan funding policy implemented

by the group is consistent with applicable government funding

requirements and regulations.

Defined contribution plans

Contributions to defined contribution and multi-employer plans are

expensed during the year.

Defined benefit plans

Defined benefit plans may be funded by investments in various

instruments such as insurance contracts or equity and debt investment

securities, excluding Vivendi shares or debt instruments.

Pension expenses and defined benefit obligations are calculated by

independent actuaries using the projected unit credit method. This

method is based on annually updated assumptions, which include

the probability of employees remaining with Vivendi until retirement,

expected changes in future compensation and an appropriate discount

rate for each country in which Vivendi maintains a pension plan. The

assumptions adopted in 2013 and 2014, and the means of determining

these assumptions, are presented in Note 19. A provision is recorded

in the Statement of Financial Position equal to the difference between

the actuarial value of the related benefits (actuarial liability) and the fair

value of any associated plan assets, and includes past service cost and

actuarial gains and losses.

The cost of defined benefit plans consists of three components recognized

as follows:

the service cost is included in selling, general and administrative

expenses. It comprises current service cost, past service cost

resulting from a plan amendment or a curtailment, immediately

recognized in profit and loss, and gains and losses on settlement;

the financial component, recorded in other financial charges and

income, consists of the undiscounting of the obligation, less the

expected return on plan assets determined using the discount rate

retained for the valuation of the benefit obligation; and

the remeasurements of the net defined benefit liability (asset),

recognized in items of other comprehensive income not reclassified

to profit and loss, mainly consist of actuarial gains and losses, i.e.,

changes in the present value of the defined benefit obligation and

plan assets resulting from changes in actuarial assumptions and

experience adjustments (representing the differences between the

expected effect of some actuarial assumptions applied to previous

valuations and the effective effect).

Where the value of plan assets exceeds benefit obligations, a financial

asset is recognized up to the present value of future refunds and the

expected reduction in future contributions.

Some other post-employment benefits, such as life insurance and medical

coverage (mainly in the United States) are subject to provisions which are

assessed through an actuarial calculation comparable to the method used

for pension provisions.

On January 1, 2004, in accordance with IFRS 1, Vivendi decided to record

unrecognized actuarial gains and losses against consolidated equity.

1.3.9.

Deferred taxes

Differences existing at closing between the tax base value of assets

and liabilities and their carrying value in the Consolidated Statement

of Financial Position give rise to temporary differences. Pursuant to the

liability method, these temporary differences result in the accounting of:

deferred tax assets, when the tax base value is greater than the

carrying value (expected future tax saving); and

deferred tax liabilities, when the tax base value is lower than the

carrying value (expected future tax expense).

Deferred tax assets and liabilities are measured at the expected tax rates

for the year during which the asset will be realized or the liability settled,

based on tax rates (and tax regulations) enacted or substantially enacted

by the closing date. They are reviewed at the end of each year, in line

with any changes in applicable tax rates.

Deferred tax assets are recognized for all deductible temporary

differences, tax loss carry-forwards and unused tax credits, insofar as it

is probable that a taxable profit will be available, or when a current tax

liability exists to make use of those deductible temporary differences, tax

loss carry-forwards and unused tax credits, except where the deferred tax

asset associated with the deductible temporary difference is generated

by initial recognition of an asset or liability in a transaction which is not a

business combination, and that, at the transaction date, does not impact

earnings, nor tax income or loss.

For deductible temporary differences resulting from investments in

subsidiaries, joint ventures and other associated entities, deferred tax

assets are recorded to the extent that it is probable that the temporary

difference will reverse in the foreseeable future and that a taxable profit

will be available against which the temporary difference can be utilized.

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Annual Report 2014