FORM 20-F THOMSON multimedia - Technicolor

activities. These rules create a timing difference between the treatment of restructuring charges
under French GAAP and U.S. GAAP:
) Restructuring provisions may be accrued under French GAAP in one period but not accrued
under U.S. GAAP until a later period; and
) Restructuring provisions may be accrued under U.S. GAAP during the same period in which
the corresponding items are expensed.
Our financial statements under U.S. GAAP are also affected by the classification as
compensation gain or expense of certain advantages granted by Thomson S.A. to our employees in
connection with employee share offerings made in 1999 and 2000. These advantages consist
principally of discounts on the offering price and bonus shares. Since Thomson S.A. supported the
cost of these advantages they do not represent actual cash expenses for us.
Under French GAAP, we recognize certain revenue related to the duplication of VHS cassettes
and DVDs at the time duplication has been completed and title has contractually been transferred.
Title transfers upon completion of the duplication process, which is generally prior to shipment to the
customer, which is made upon customer request. Under U.S. GAAP, we apply the provisions of Staff
Accounting Bulletin No. 101 (SAB 101) when recognizing revenue. Therefore sales of VHS cassettes
and DVDs are treated as ‘‘bill and hold’’ arrangements requiring revenue recognition upon shipment
of videocassettes and DVDs due to the absence of fixed delivery dates.
Purchase price allocation for our acquisition of the Technicolor businesses differs from French to
U.S. GAAP mainly due to the inability to accrue for restructuring actions if specific conditions are not
satisfied under U.S. GAAP as well as the recording of deferred tax assets related to customer
relationships and trademarks. Such intangibles are also amortized under U.S. GAAP as of
year-ended 2001, whereas under French GAAP they are not amortized.
The accounting treatment for derivative instruments may differ between French and U.S. GAAP.
Under French GAAP, we defer premiums and discounts as well as gains and losses on forward
exchange contracts that hedge the following years anticipated commercial commitments and
amortize them to income over the life of the underlying transactions being hedged. Under
U.S. GAAP, we may not defer unrealized gains and losses on forward exchange contracts, which do
not hedge firm commitments and as a result, we recognize them immediately in operating income. In
addition, criteria to determine hedge transactions differ from French to U.S. GAAP and may require
us to record certain derivative instruments at fair value.
Finally, under U.S. GAAP we measure at fair value our available for sale investments and report
unrealized gains or losses as a separate component of shareholder’s equity and declines in value
that are not temporary or realized losses. Under French GAAP such investments are carried at the
lower of cost or fair market value.
New Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board (FASB) issued Statement No. 141,
Business Combinations (‘‘SFAS 141’’) and Statement No. 142, Goodwill and Other Intangible Assets
(‘‘SFAS 142’’). SFAS 141 requires that all business combinations initiated after June 30, 2001 be
accounted for under the purchase method of accounting. Under SFAS 142, goodwill will no longer
be amortized, but will be tested for impairment on an annual basis and whenever indicators of
impairment arise. Additionally, intangible assets with indefinite lives will not be amortized. Instead
they will be carried at the lower cost or market value and tested for impairment at least annually. We
are required to adopt SFAS 142 effective January 1, 2002 for goodwill and intangible assets
acquired prior to July 1, 2001. Upon adoption, all goodwill and indefinite lived intangible assets must
be tested for impairment and a cumulative effect adjustment to net income recognized at that time.
Goodwill and indefinite-lived intangible assets acquired after June 30, 2001 will be subject
immediately to the non-amortization and impairment provisions of SFAS 142.
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