technicolor - 2019 Universal registration document

6 FINANCIAL STATEMENTS INFORMATION ON OPERATIONS

a funded research cooperation agreement, under which InterDigital d) Labs and Technicolor R&I Labs will collaborate in the development of research programs in the areas of video coding, connected home and immersive technologies until December 31, 2021. The Research Cooperation Agreement cannot be considered as a separate transaction to the sale. The research projects developed under this Agreement extensively use the patents-portfolio, which has been sold to InterDigital. By allocating 50 searchers on a full-time basis on projects which can become patentable under the sole ownership of

Interdigital, the Group is providing services, at a price, which, as defined in the contract, is not a market price. The total value of the transaction is then based on the addition of the fair value of each of above-identified item. As a result, the accounting treatment of the sale transaction is resulting in a net gain of €210 million presented in the Net profit from discontinued operations in the consolidated statement of operations (see note 12.1) and detailed as follows:

December 31, 2018

(in million euros)

Up-front payment (U.S.$150 million) (1)

129

Earn-out (2)

-

Grant back (3)

92

Net commitment under research cooperation agreement (4)

(33) 188

CONSIDERATION PRICE

Assets and liabilities transferred net of transaction costs

22

CAPITAL GAIN BEFORE TAX

210

the up-front payment is recognized at spot rate. (1) earn-out: the contingent variable consideration will be recognized when earned by analogy to the principles of IFRS 15 – Revenue recognition on variable consideration. As the (2) Group does not control InterDigital licensing activities, the contingent variable consideration will be recognized only when it becomes highly probable. the perpetual grant-back licensing agreement is an intangible asset evaluated €92 million on the basis of royalty rates used by other licensors for similar license programs applied (3) to the forecasted volumes over 11 years. This intangible asset is amortized over the average remaining life of the patents according to the method described in 4.2.2 by the 2 operating segments using the asset. the cooperation agreement generates a deferred income, recorded at transaction date as a decrease of the transaction consideration and recognized over time as the services are (4) rendered. Its fair value is the difference between the contractual price to be paid by InterDigital (U.S.$5 million per year, ie €15 million in total) and the fair value of the services to be rendered over 3 years and 5 months (€48 million).

The net impact on the cash flows statement amounts to €116 million and is presented in the line Net cash from discontinued operations.

Investments in associates & joint ventures

2.4 The Group has less than €1 million investments accounted for using the equity method or joint ventures (see main entities in note 15). All investments are private companies; therefore, no quoted market prices are available for its shares. Neither associate nor joint venture is individually material to the Group.

The consolidated financial statements include transactions made by the Group with associates and joint ventures. These transactions are performed in normal market conditions. In 2019 and 2018, there is no significant transaction with the Group associates and joint ventures.

Information on operations

NOTE 3

Information by business segments

3.1 Technicolor has three continuing businesses and reportable operating segments under IFRS 8: Production services, DVD services and Connected Home.

The Group’s Executive Committee makes its operating decisions and assesses performances based on three operating businesses. All remaining activities, including unallocated corporate functions, are grouped in a segment “Corporate & Other”. Therefore, Technicolor activities are disclosed as follows:

212

TECHNICOLOR UNIVERSAL REGISTRATION DOCUMENT 2019