technicolor - 2020 Universal Registration Document

6 FINANCIAL STATEMENTS

NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS Note 2 - Operating result

Impacts of translation of foreign currency transactions Foreign currency transactions are translated into euros at the exchange rate effective on the trade date. Receivables and payables in foreign currency are revalued at closing rate. The differences arising on the translation compared to the historical rate are recorded as translation adjustments in the balance sheet (a provision for exchange risk is recognized in case of unrealized exchange loss). Foreign exchange gains or losses are included in “other operating income (expenses)” for commercial transactions and in “other net financial income (expenses)” for other transactions. The Treasury Department manages the Group’s exposure to foreign exchange risk globally and does not take any risks regarding its financial debt and loans in foreign currencies. Accordingly, Technicolor SA’s currency term loan is only used to provide loans and current accounts in the currency of foreign subsidiaries, so the overall foreign exchange result is completely symmetrical and neutral in the income statement. Forward foreign currency contracts (set up by central Treasury with subsidiaries to cover their commercial exposures), as well as external transactions with banks, are accounted at the Group Treasury Department level by valuing them at their market price at the closing date and taking the gains and losses fully realized as well as the result impact on the underlying hedged item. Term points are recorded as a financial result, pro-rata temporis over the duration of the contracts. Should a derivative exceptionally not qualify as hedge (isolated open position), its market value is reported in “Other current assets and liabilities”, in return of deferred income/charges. Any unrealized losses are covered by a provision for exchange risk. The realized gain or loss at maturity are recorded as a financial result or operating result, in the event that they relate to commercial transactions. Information on exchange derivative instruments is commented in note 9.4.

USE OF ESTIMATES 1.2.2 As part of the annual account setting process, the assessment of certain balance sheet or income statement balances requires the use of estimates and assumptions. The Company regularly reviews its valuations and bases its estimates on comparable historical data and on various assumptions that, in the circumstances, are considered the most reasonable and probable, which serve as the basis for determining the balance sheet values of assets and liabilities and revenues and expenses. Actual results may differ from these estimates due to different assumptions and circumstances. Global treasury management Management of the Group’s market and liquidity risks is centralized in its Group Treasury Department in France in accordance with Group procedures covering, among other aspects, responsibilities, authorizations, limits, permitted financial instruments and tracking tools. All financial market risks are monitored continually and reported regularly to the Chief Financial Officer, the Investment Committee and the Executive Committee via various reports showing the Company’s exposures to these risks with details of the transactions undertaken to reduce them. To reduce interest rate and currency exchange rate risk, the Group enters into hedging transactions using derivative instruments. However, Technicolor’s policy is not to use derivatives for any purpose other than for hedging its commercial and financial exposures: from an operational point of view, the Company is contracting foreign • exchange guarantees with its subsidiaries, under which subsidiaries’ transaction risk is hedged for a given period (up to twelve months or longer when justified). These commitments are described further in note 12.4; in order to cover the risk arising from these internal liabilities as well as • its own risk, the Company manages an exchange position using hedging derivatives, so that the residual foreign exchange risk to the Company is negligible. The derivatives used are subscribed to leading banks. ACCOUNTING FOR FOREIGN CURRENCIES TRANSACTIONS 1.2.3

Operating result

NOTE 2

Revenue

2.1

2020

2019

(in million euros)

Intra-group invoicing Trademark royalties Other external revenues TOTAL REVENUES

32 18

32 22

-

-

49

54

Including revenues in France

18

18

TECHNICOLOR UNIVERSAL REGISTRATION DOCUMENT 2020 286