TECHNICOLOR_REGISTRATION_DOCUMENT_2017

6 - FINANCIAL STATEMENTS

Notes to the consolidated financial statements

Main assumptions at December 31, 2017 4.4.1. In order to perform the annual impairment test, the Group used the following assumptions to determine the recoverable amount of the main goodwill reporting units: Entertainment Services Connected Home DVD Services Production Services Basis used to determine the recoverable amount Fair Value Value in use Fair Value Description of key assumptions Budget and Business Plans Period for projected future cash flows * 5 years 5 years Growth rate used to extrapolate cash flow projections beyond projection period: As of December 31, 2017 ■ * 2.0% 2.0% As of December 31, 2016 ■ * 2.0% 0.5% Post-tax discount rate applied (1) : As of December 31, 2017 ■ 8.0% 8.0% 10.0% As of December 31, 2016 ■ 8.0% 8.0% 11.0% The corresponding pre-tax discount rates are within a range from 10.6% to 13%. (1) The main activities of the DVD Services Division have been considered to have a finite life, determined on the expected timing for the obsolescence of the underlying Technology * of this activity. Accordingly, no terminal value has been applied for this activity.

Sensitivity of recoverable amounts at 4.4.2. December 31, 2017 For Production Services: an increase of 1 point in the post-tax discount rate assumption ■ would decrease the enterprise value of €249 million without generating an impairment; a decrease of 1 point of the Adjusted EBITDA margin from 2018 ■ would decrease the enterprise value of €126 million without generating an impairment. For DVD Services: an increase of 0.5 point in the post-tax discount rate assumption ■ would decrease the enterprise value by €18 million without generating an impairment; a decrease of 1 point of the Adjusted EBITDA from 2021 would ■ decrease the enterprise value of €41 million without generating an impairment; a decrease of 5% in the Blu-ray TM volume from 2021 would decrease ■ the enterprise value of €12 million without generating an impairment. As the fair value is close to the book value as of December 31, 2017, an accelerated decrease in the DVD and Blu Ray TM markets volume as well as a deterioration of other key assumptions (selling prices, cost structure adaptation to market environment), would lead the recoverable value below the book value.

For the DVD Services GRU, in the absence of a binding sale agreement at closing date, of an active market and of comparable recent transactions, discounted cash flow projections have been used to estimate fair value less costs to sell. Technicolor management considers that fair value less costs to sell is the most appropriate method to estimate the value of its GRU as it takes into account the future restructuring measures the Group will need to make against a rapid technological environment change. Such restructuring actions would be considered by any market participant given the economic environment of the business. The discounted cash flow of DVD Services is computed over a finite life of circa twenty years and accordingly the goodwill will be impaired over this period depending on the evolution of the fair value as determined through the discounted cash flow. The Group didn’t record any impairment charge on goodwill as of December 31, 2016 and 2017.

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TECHNICOLOR REGISTRATION DOCUMENT 2017