TECHNICOLOR_REGISTRATION_DOCUMENT_2017

6 - FINANCIAL STATEMENTS

Notes to the consolidated financial statements

Group tax proof 6.1.2. The following table shows reconciliation of the expected tax expense the applicable French corporate tax rate of the Group is increased – using the French corporate tax rate of 39% – and the reported tax from 34% to 39%. The reconciling items are described below:

expense. Following the introduction in 2017 of an extraordinary contribution of 15% due by companies with revenues over €1 billion,

2017 (219) (112)

2016* (106)

(in million euros)

Profit (loss) from continuing operations

Income tax

(30)

Share of profit (loss) from associates

-

2

Pre-tax accounting income on continuing operations

(107)

(30) 34%

39%

Expected tax expense

42 86 20

28

Effect of unused tax losses and tax offsets not recognized as deferred tax assets (1)

(61)

Effect of different tax rates applied (2) Effect of change in applicable tax rate (2)

5

(270)

(1)

Effect of permanent differences Withholding taxes not recovered

10 (1)

-

(1)

Other (3)

-

-

Effective tax expense on continuing operations

(112)

(30)

EFFECTIVE TAX RATE ON CONTINUING OPERATIONS

N/R (3)

N/R (3)

2016 amounts are re-presented to reflect the impacts of Discontinued Operations (see note 12) * In 2017, mainly due to: (1) the depreciation of deferred tax assets in France for €113 million mainly due to change in the projections of our Licensing activities following the announcement of the disposal of ■ Patent Licensing business; the reversal of the United States depreciation for €270 million as a result of the change in the tax rate from 35% to 21% following the recent enacted U.S. tax reform; ■ the depreciation of losses carry forward generated in France. ■ In 2016, it was mainly related to the depreciation of deferred tax assets in France. In 2017, the amounts include mainly impact of the change in the U.S tax rate from 35% to 21%. (2) Non-relevant. (3)

Tax position in the statement of financial position 6.2.

Deferred taxes result from: temporary differences arising from differences between the tax bases of assets and liabilities and their carrying amounts in the Group consolidated ■ balance sheets; and the carry forward of unused tax losses and tax credits. ■ Deferred taxes for all temporary differences are calculated for each taxable entity (or group of entities) using the balance sheet liability method. All deferred tax liabilities are recorded except: when the deferred tax liability results from the initial recognition of goodwill, or from the initial recognition of an asset or a liability in a transaction ■ which is not a business combination and, at the trade date, affects neither the net income nor the taxable income or loss; and for taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, when the Group is able to ■ control the timing of the reversal of the temporary differences and when it is probable that these temporary differences will not reverse in the foreseeable future.

210

TECHNICOLOR REGISTRATION DOCUMENT 2017