technicolor - 2020 Universal Registration Document

FINANCIAL STATEMENTS STATUTORY AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020

OUR RESPONSE We included financial instrument transaction specialists in our team to assess the compliance of the recognition methods for all equity transactions and the transactions relating to the subscription of new loans with prevailing IFRS, particularly IFRS 9 “Financial Instruments” and IFRIC 19 “Extinguishing Financial Liabilities with Equity Instruments”. We focused in particular on the fiducie agreements set up and the absence of any enforcement events provided for in these agreements that may have an impact on the Group’s ability to maintain control. Our work mainly consisted in: assessing compliance with the aforementioned IFRS criteria to recognize the pre-existing debt, particularly the substantial nature of the debt • modification as well as compliance with these standards of the derecognition methods adopted and the accounting treatment of the costs attributable to the transactions according to their nature; assessing the components underlying the fair value measurement of: • the new debt (“New Money”) and the old debt (“RCF and TLB facility”), • the new shares issued following the credit facility equity conversions in relation to the share price at the time these transactions were performed, • the share subscription warrants (“Equity kickers”) granted to the subscribers of the new debt (“New Money”); • verifying that the tax impacts of the financial restructuring transactions were correctly recorded in the consolidated financial statements; • following the set-up of the “Tech 7”, “Gallo 8” and “Créances Tech” fiducie agreements to secure the New Money and the Restructured Debt, • assessing the occurrence of any enforcement events provided for in the fiducie agreements as described in Note 8.3.2 to the consolidated financial statements, that could call into question Technicolor’s control over the entities whose shares are held in the fiducies and therefore their inclusion in the scope of consolidation; verifying the appropriateness of the disclosures in the consolidated financial statements. • RISK IDENTIFIED As of December 31, 2020, available cash totaled €330 million. Net financial debt amounted to €948 million as of December 31, 2020, down €31 million compared to December 31, 2019. In 2020, the Group therefore generated net cash of €979 million, mainly through financial restructuring. Available credit lines not drawn at the closing date totaled €102 million. To regularly measure the Group’s liquidity risk, management assesses liquidity forecasts based on projected consolidated cash flows, including operating cash flows, debt repayment schedules and other financing requirements. Based on these forecasts and at each quarter, the Board of Directors examines whether the Group’s liquidity and cash flows are sufficient to finance current activities and the Group’s working capital requirement, at least for the twelve months after the closing, taking into account available credit lines. Considering the difficulties encountered in the first half of 2020, on June 22, 2020, the Paris Trade Court initiated a 1-month accelerated financial safeguard procedure for Technicolor Group. On the same date, the company and some of its creditors reached an agreement in principle on the main terms and conditions of the Group’s financial restructuring. On September 22, 2020, Technicolor finalized the implementation of its financial restructuring plan. Management determined the scope of this financial restructuring transaction based on its estimated liquidity needs. These estimates were based on the Group’s business forecasts prepared under the 2020-2022 strategic plan, updated for estimated Covid-19 impacts in the ongoing uncertain context of the Covid-19 crisis. The New Money obtained from this financial restructuring transaction is subject to financial covenants, as described in Note 8.3.2 to the consolidated financial statements. In the event of a breach of covenant, the financial debt would become immediately payable and result in the loss of the Group’s control over its subsidiaries. In this context and insofar as management judgement is essential in determining cash flow forecasts, we considered the assessment of liquidity risk to be a key audit matter. Assessment of liquidity risk Notes 8.2.3 and 8.3 to the consolidated financial statements

6

TECHNICOLOR UNIVERSAL REGISTRATION DOCUMENT 2020 273