FORM 20-F THOMSON multimedia - Technicolor

and 10% in 1999. The acquisition of Technicolor did not have a significant impact on our geographic
breakdown of net sales.
Effect of exchange rate fluctuations
We estimate that the impact of translating revenues of operating entities that are denominated in
currencies other than euro into euro had a positive impact of 0 204 million in 1999, 0 136 million in
2000 and 0 182 million in 2001 on our net sales as expressed in euro. We believe that the impact of
exchange rate fluctuations on our net income is limited due to certain natural hedges discussed in
Item 11: ‘‘Quantitative and Qualitative Disclosures about Market Risk — Impact of Exchange Rate
and Interest Rate Fluctuations’’. Please see this section for more information on the impact of
exchange rate fluctuations on our net sales and net income and details on our hedging policies.
Use of estimates
The preparation of our consolidated financial statements in conformity with generally accepted
accounting principles in France requires management to make estimates and assumptions that affect
the reported amounts of assets and the reported amounts of the revenues and expenses during the
reporting period in the consolidated statements. Actual results could differ from those estimates.
Estimates made by management relate among other items, to accounts receivable, inventory
and investment valuation allowances, retirement and post-retirement benefits, depreciation and
amortization, loss reserves contingencies and environmental obligations.
Principal Differences between French GAAP and U.S. GAAP
Our consolidated financial statements have been prepared in accordance with French GAAP,
which differs from U.S. GAAP. The principal differences between French and U.S. GAAP affecting
our consolidated financial statements relate to reclassification of provisions, the timing of recording of
provisions, principally for restructuring activities, the accounting treatment of certain advantages in
connection with employee share offerings, the accounting treatment of investment securities and
financial instruments, revenue recognition, purchase price allocation and amortization of intangibles
resulting from our acquisition of the Technicolor businesses and post-retirement transition
obligations.
Under French GAAP, accruals for a number of provisions are charged to other income and
expenses and therefore do not affect operating income. Under U.S. GAAP, these accruals are
reclassified to operating income or loss, leading to differences in our operating results under French
and U.S. GAAP. In 2001 the substantial reassessment of our product portfolio consisting of finished
goods and raw material write-offs, purchase order and other contracts cancellations is included
under ‘‘Other income (expense), net’’ under French GAAP. Under U.S. GAAP these costs are
recorded as operating expenses.
Timing differences with respect to the recording of provisions occur because under French
GAAP we record restructuring liabilities during the period when decisions have been approved by
the appropriate level of management while under U.S. GAAP we have applied the requirements of
EITF 94-3, which state that a provision for restructuring can only be recorded during the period when
specific conditions are satisfied. One of these U.S. GAAP conditions requires that the appropriate
level of management has specifically identified and approved the operations and activities to be
restructured and the employees who are to be made redundant have been notified. In addition,
U.S. GAAP permits costs associated with a restructuring plan to be recognized as restructuring
provisions only if the restructuring actions are not associated with or do not benefit our continuing
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