TECHNICOLOR_REGISTRATION_DOCUMENT_2017

6 - FINANCIAL STATEMENTS Statutory Auditors’ report on the consolidated financial statements for the year ended December 31, 2017

Our response A deferred tax asset is recognized only to the extent that it is probable that the company will generate sufficient taxable income against which unused tax losses can be utilized. Our audit approach consisted in assessing the probability that the relevant jurisdictions will be able to use tax losses carried forward in the future, taking into account: deferred tax liabilities in the same tax jurisdiction which could be offset against existing tax losses carried forward prior to their expiry; and ■ the ability of the relevant tax consolidation groups to generate future taxable profits to absorb prior year tax losses. ■ We verified the appropriateness of the methodology adopted by management to identify existing tax losses carried forward that will be utilized, either by offset against deferred tax liabilities or future taxable profits. To assess future taxable profits, we assessed the reliability of the preparation process for the business plan underlying our assessment of the probability that the Group will recover deferred tax assets by: examining the preparation and approval process for the most recent business plan underlying the estimates; ■ comparing income forecasts for prior years with actual results for the years concerned; ■ examining the impact of activities classified in discontinued and those acquired in 2015 on taxable income; ■ reviewing management assumptions used in preparing income forecasts for the period covered by tax recovery plans by considering ■ information gathered during discussions with management. Our teams included tax specialists who supported our understanding of French and U.S. tax regulations. ACCOUNTING FOR DISCONTINUEDOPERATIONS Note 12 to the consolidated financial statements Risk identified On December 18, 2017, the Group announced being in negotiations for the divestiture of its Patent Licensing division. The disposal has been considered by management as “highly probable” according to IFRS 5, Non-current Assets Held for Sale and Discontinued Operations. Patent Licensing has been presented as Discontinued Operations for all periods reported and assets and liabilities classified as Assets held for sale in the Consolidated Statement of Financial Position as of December 2017. We identified this accounting as a key audit matter due to the significance of this segment for the Group as well as the uncertainty underlying the completion of the transaction considered as highly probable at year-end. Patent Licensing represented substantially all the revenues and income of its former reporting segment “Technology”. As of December 31, 2017, revenue related to this segment is €131 million, net income is €46 million. Assets amount to €7 million and liabilities to €68million, classified as held for sale. Our response According to IFRS 5, assets and liabilities related to the potential sale shall be classified as held for sale in the balance sheet if the asset is available for immediate sale and if the sale is highly probable. In the income statement, the reporting unit is presented as Discontinued Operation in the Statement of operations, Comprehensive income and Statement of Cash-flows for 2017 and the compared period. We assessed the appropriateness of the criteria considered by management to determine that the disposal is highly probable according to IFRS 5 by analyzing the underlying documentation. We reviewed the methodology followed to identify the assets and liabilities to be classified as held for sale.

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TECHNICOLOR REGISTRATION DOCUMENT 2017