294
Annual Report -
2013
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Vivendi
4
Financial Report | Statutory Auditors’ Report on the Consolidated Financial Statements |
Consolidated
Financial Statements
| Statutory Auditors’ Report on the Financial Statements | Statutory Financial Statements
Note 24. Financial instruments and management of financial risks
24.2.2.
Foreign currency risk management
Excluding Maroc Telecom Group and GVT, the group’s foreign currency
risk management is centralized by Vivendi SA’s Financing and Treasury
departments and primarily seeks to hedge budget exposures (80%)
resulting from monetary flows generated by activities performed
in currencies other than the euro as well as from external firm
commitments (100%), primarily relating to the acquisition of editorial
content (including sports, audiovisual and film rights) and certain
capital expenditures (e.g., set-top boxes), realized in currencies other
than the euro. Most of the hedging instruments are foreign currency
swaps or forward contracts that have a maturity of less than one year.
Considering the foreign currency hedge put into place, an unfavorable
and uniform euro change of 1% against all foreign currencies in position
as of December 31, 2013, would have a non-significant cumulative
impact on net earnings (below €1 million as of December 31, 2013 and
December 31, 2012). In addition, the group may hedge foreign currency
exposure resulting from foreign-currency denominated financial assets
and liabilities. Nevertheless, due to their non-significant nature, net
exposures to subsidiaries’ net working capital (internal flows of royalties
as well as external purchases) are generally not hedged. The relevant
risks are realized at the end of each month by translating the sum into
the functional currency of the relevant operating entities.
The principal currencies hedged by the group are the US dollar (USD)
and the British pound (GBP).
In particular, in 2012 and 2013, Vivendi converted into euros
following US dollar transactions:
–– the $550 million bond issued in April 2012, by setting up a
USD-EUR foreign currency hedge (cross-currency swap) with a
1.3082 EUR/USD rate, or a €420 million counter value. From an
accounting perspective, these USD purchases were considered
as cash flow hedges. This hedge was unwound on November 15,
2013 with the early redemption of this bond;
–– partial hedge of the income from the sale of 88% of Vivendi’s
interest in Activision Blizzard through the purchase of a
contingent forward contract, conditional on the effective sale for
a notional amount of $2 billion, with a 1.3368 EUR/USD rate, or
a counter value of €1,496 million. This hedge, considered as a
cash flow hedge from an accounting perspective, was unwound
on October 11, 2013 at the finalization of the sale, generating a
realized foreign exchange gain of €23 million.
In 2012 and 2013, as part of the acquisition of EMI Recorded Music
(please refer to Note 2.3), Vivendi hedged the GBP foreign exchange
risk as follows:
–– partial hedge of the acquisition price through forward purchase
contracts denominated in GBP for a notional amount of
£600 million, with a 0.8144 EUR/GBP rate. From an accounting
perspective, these GBP purchases were considered as cash
flow hedges. On October 1, 2012, this hedge was unwound for
€737 million at the completion of the acquisition, generating a
realized foreign exchange gain of €19 million;
–– partial hedge of the income from the sale of certain EMI
Recorded Music assets, in accordance with commitments
made by Vivendi to the European Commission, through forward
sale contracts denominated in GBP for a notional amount of
£530 million, with an average rate of 0.8060 EUR/GBP. From an
accounting perspective, these GBP sales were considered as net
investment hedges. This hedge was unwound for a counter value
of €658 million, at the completion of the sale of Parlophone Label
Group and other labels, generating a realized foreign exchange
gain of €39 million.
Moreover, in 2013, to hedge against a possible depreciation of
its net investment in certain subsidiaries in the United Kingdom
due to an unfavorable change in GBP, Vivendi set up a hedge
using put option instruments for a notional amount £692 million,
or €823 million. From an accounting perspective, these hedge
instruments were considered as net investment hedges.
Finally, the intercompany loan granted by Vivendi to GVT under market
terms for a total amount of €1,000 million as of December 31, 2013 (fully
drawn as of that date) was not subject to any foreign currency hedging
in GVT’s Statement of Financial Position: foreign exchange losses
incurred amounted to €186 million in 2013 and to €76 million in 2012. In
January 2014, the amount of this loan was increased to €1,126 million.
This intercompany loan is mainly aimed at financing the increase in
GVT’s capital expenditures program related to the geographic expansion
of its telecommunication network.
