technicolor - 2020 Universal Registration Document

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

OUR RESPONSE We familiarized ourselves with the information systems and processes used by Technicolor Management to estimate the Group’s cash flow forecasts. We assessed the controls set up to prepare these cash forecasts and in particular: based on our knowledge of the Group, assessed the design of the procedures and controls established to prepare short and medium-term cash • forecasts; assessed the procedures established by the Group to ensure compliance with the specific requirements of the bank covenants and the information • disclosed by the Group in the financial statements regarding compliance with these requirements as of December 31, 2020; assessed the consistency of the business operating assumptions used by Management to prepare cash forecasts, particularly in a context where • the group’s activity remains impacted by the Covid-19 crisis, to prepare cash forecasts with the budget prepared by Management and approved by the Board of Directors on March 11, 2021, particularly with regard to our knowledge of the acquired activity as part of our engagement, business operating assumptions, restructured debt repayment schedules and various available credit lines; throughout fiscal 2020 and in the aforementioned Covid-19 context, we monitored liquidity, compared actual positions with budgeted positions • and analyzed the differences to assess the preparation of these forecasts; inquired whether Management had knowledge of events or circumstances which have occurred or may occur subsequent to December 31, 2020 • that would be likely to compromise the Group’s liquidity; reviewed the accounting treatment of the factoring programs in order to corroborate the deconsolidating nature of these programs. • We also verified the liquidity risk information disclosed in Notes 8.2.3 “Liquidity risk and management of financing and capital structure” and 8.3 “Borrowings” to the consolidated financial statements. Impairment testing of goodwill Note 4 to the consolidated financial statements RISK IDENTIFIED Goodwill is recorded in the balance sheet as of December 31, 2020 at a net carrying amount of €716 million compared with total assets of €3,018 million. Goodwill is recognized in the currency of the acquired subsidiary/associate and measured at cost less accumulated impairment losses and translated into euros at the effective rate at the end of the period. Goodwill is not amortized but is tested annually for impairment. The Group performs impairment tests on goodwill as disclosed in Notes 4.1 “ Goodwill” and 4.5 “ Net impairment on non-current operating assets ” to the consolidated financial statements. We considered the valuation of goodwill to be a key audit matter given the relative weight of these assets in the consolidated financial statements and since the determination of their recoverable amount, generally based on discounted cash flow forecasts, is based on management assumptions, estimates, assessments and judgements, notably concerning business forecasts, long-term growth rates and discount rates that have become increasingly uncertain in the context of the Covid-19 crisis. We focused, in particular, on goodwill of the “DVD Services” segment representing a total balance sheet amount of €142 million as of December 31, 2020, due to the finite useful life of this asset, the uncertainties surrounding the future of physical media in the “DVD Services” sector and the higher-than-expected decline in sales volumes, particularly in the Distribution activity, which gave rise to goodwill impairment of €66 million in the 2020 financial statements. OUR RESPONSE We reviewed the implementation of impairment tests by the Group and focused our procedures on the segments where intangible assets represent a significant portion of net assets and are highly sensitive to changes in budget assumptions.

We reviewed the Group’s process for preparing business plans and assessed the reasonableness of the key estimates by: verifying the consistency of cash flow forecasts with past performance and the budget approved by the Board of Directors; •

comparing growth rates used to extrapolate cash flows beyond the forecast period and discount rates with market data and our benchmarks; • reviewing the sensitivity analyses performed by management and conducting our sensitivity analyses on key assumptions to assess the possible • impacts of such assumptions on impairment test conclusions; and

these analyses were performed with the assistance of our valuation experts. • We verified the disclosures in the notes to the consolidated financial statements.

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