registration document France Telecom 2009 - Orange.com

financial information concerning the issuer’s assets and liabilities, financial position and profits and losses
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NOTES TO THE ANNUAL FINANCIAL STATEMENTS OF FRANCE TELECOM S.A.
The straight-line basis is usually applied over the following estimated useful lives:
Buildings and leasehold improvements
Infrastructure (civil works, cables, telephone poles)
N etwork equipment including the inseparable underlying software (switching, transmission, local loop software, etc…)
Computer hardware, handsets
Other property, plant and equipment
10-30 years
15-30 years
4-20 years
3-5 years
3-10 years
In 2009 the Company made us of accelerated depreciation
allowed under the tax regulations in force. The difference
between accelerated depreciation and straight-line depreciation
is recorded as a regulated provision in the Balance Sheet .
2.2.6 Impairment of non-current assets
An impairment loss is recognized when the fair value of an asset
falls sustainably below its carrying amount due to events or
circumstances arising during the period (such as obsolescence,
wear and tear, signifi cant changes to the manner in which the
asset is used, worse than expected economic performance, a
drop in revenues or other external indicators). Fair value is the
higher of recoverable amount and value in use.
Impairment tests are carried out on groups of assets and consist
of comparing their recoverable amount to their carrying amount.
For assets which are to be held and used, fair value is usually
determined on the basis of value in use, which is the present
value of the future economic benefi ts expected to be derived
from the use and disposal of the asset. For assets which are
due to be sold, fair value is determined on the basis of realizable
value assessed by reference to market prices.
2.2.7 Financial Assets
Equity interests are recorded at cost. Transaction costs are
expensed as incurred.
An impairment loss is recognized when fair value falls below
cost.
Fair value is equal to value in use for strategic interests.
However, when an interest is due to be sold, it is measured at
market value.
Due to the short-term volatility of the stock market and the
strategic nature of its equity interests, France Telecom S.A. uses
discounted cash fl ows adjusted for net debt to assess value in
use. Discounted cash fl ows are based on fi nancial and regulatory
assumptions, and assumptions relating to license renewal
and operating conditions, forecast by France Telecom S.A.
management as follows:
■ cash fl ows are taken from business plans covering a
timeframe of three to fi ve years;
■ beyond that timeframe, cash fl ows are extrapolated by
applying a perpetual growth rate specifi c to each business
activity;
■ cash fl ows are discounted using rates appropriate for the
type of business activity.
In the economic environment induced by the fi nancial crisis
since 2008:
■ business plans were drafted during the fourth quarter of each
year to factor in the latest trends, particularly regarding the
fi rst year of the plans;
■ the discount rate used to determine values in use may
incorporate a specifi c premium to account for contingencies
in the execution of certain business plans or country risk
(such as for certain African countries);
■ the perpetual growth rates used were maintained, on the
whole, as in the France Telecom’s assessment carried out
at the end of 2009, the economic environment should not
lead to any change in the long-term outlook of its industry.
Perpetual growth rates were revised for a limited number
of Eastern European countries to factor in the effects of the
fi nancial crisis.
Market value is the best estimate of the amount obtainable from
the sale of an asset in an arm’s length transaction less costs
to sell. This estimate is made on the basis of available market
information, taking into account any specifi c circumstances.
Depending on the specifi c nature of each investment, other
criteria such as market price, development and profi tability
prospects, equity capital and materiality (on a historical basis)
may also be taken into account alone or in combination with the
value in use, to determine current value.
2.2.8 Inventories
Network maintenance equipment and equipment intended for
sale to customers are measured at the lower of cost or likely
realizable value. Cost corresponds to purchase or production
cost determined by the weighted average cost method.
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2009 REGISTRATION DOCUMENT / FRANCE TELECOM
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