technicolor - 2018 Registration document

FINANCIAL STATEMENTS

NOTE 8 FINANCIAL ASSETS, FINANCING LIABILITIES & DERIVATIVE FINANCIAL INSTRUMENTS

Derivative financial instruments

8.6

The effects of hedge accounting are as follows: for fair value hedges of existing assets and liabilities, the hedged • portion of the asset or liability is recognized in the balance sheet at fair value. The gain or loss from remeasuring the hedged item at fair value is recognized in profit or loss and is offset by the effective portion of the loss or gain from remeasuring the hedging instrument at fair value; for cash flow hedges, the portion of the gain or loss on the • hedging instrument that is determined to be an effective hedge is recognized in other comprehensive income (OCI), because the change in the fair value of the hedged portion of the underlying item is not recognized in the balance sheet, and the ineffective portion of the gain or loss on the hedging instrument, if any, is recognized in profit or loss. Amounts recognized in OCI are subsequently recognized in profit or loss in the same period or periods during which the hedged transaction affects profit or loss. Such periods are generally less than 6 months except for the licensing activity. TERMINATION OF HEDGE ACCOUNTING The termination of hedge accounting may occur if the underlying hedged item does not materialize or if there is a voluntary revocation of the hedging relationship at the termination or the arrival of maturity of the hedging instrument. The accounting consequences are then as follows: in case of cash flow hedges, the amounts recorded in other • comprehensive income are taken to profit or loss in the case of the disappearance of the hedged item; in all cases, the result on the hedging instrument is taken into profit • or loss when the hedging relationship is terminated.

GENERAL PRINCIPALS The Group uses derivative instruments notably to hedge its exposure to foreign currency risk and changes in interest rates. The financial derivatives are executed in the over the counter market and are governed by standard ISDA (International Swaps and Derivatives Association, Inc.) agreements or agreements standard for the French market. HEDGE ACCOUNTING Derivative instruments may be designated as hedging instruments in one of three types of hedging relationships: Fair value hedge, corresponding to a hedge of the exposure to the • change in fair value of an asset or a liability; Cash flow hedge, corresponding to a hedge of the exposure to the • variability in cash flows from future assets or liabilities; Net investment hedge in foreign operations, corresponding to a • hedge of the amount of the Group’s interest in the net assets of these operations. Derivative instruments qualify for hedge accounting when at the inception of the hedge; there is a formal designation and documentation of the hedging • relationship when put in place; the hedge is expected to be highly effective; • its effectiveness can be reliably measured and it has been highly • effective throughout the financial reporting periods for which the hedge was designated.

FINANCIAL DERIVATIVE PORTFOLIO 8.6.1 At December 31, 2018 and December 31, 2017 the fair value of the Group’s financial derivatives was as follows:

6

2018

2017

Assets

Liabilities

Assets

Liabilities

(in million euros)

Foreign currency hedges

1 - - 1

4

- - - -

1 - - 1

Interest rate hedges

1 -

Instruments not documented as hedges

TOTAL

5

221

TECHNICOLOR REGISTRATION DOCUMENT 2018