2005 IFRS 1 – FIRST-TIME ADOPTION INTERNATIONAL FINANCIAL REPORTING STANDARDS

2005  Provide high-quality information  Transparency  Comparability (between reporting periods)  Adequate introduction to accounting in IFRS  No excessive cost MAIN OBJECTIVES OF IFRS 1 IFRS 1 - FIRST-TIME ADOPTION OF IFRS 1. BACKGROUND

2005 IFRS 1 - FIRST-TIME ADOPTION OF IFRS 2. GENERAL PRINCIPLES  Publication on 19 June 2003 of IFRS 1: First-Time Adoption (FTA)  Effective date: reporting periods from 1 January 2004  IFRS 1 concerns all companies adopting IFRS for the first time  It will be used by all European companies for transition purposes EFFECTIVE DATE

2005  Retrospective application mandatory  Except specific exemptions (optional or obligatory)  Recognition of adjustments in the opening IFRS balance sheet (as of 1 January 2004)  General case: equity (in line with IAS 8 on accounting changes)  Limited exceptions: restatement of goodwill (reclassification of intangible assets as goodwill or excluded from goodwill)  Financial information specific to the transition  Reconciliation of main aggregates between the two systems APPLICATION PRINCIPES IFRS 1 - FIRST-TIME ADOPTION OF IFRS 2. GENERAL PRINCIPLES

2005  Optional:  Business combinations  Fair value or previous valuation such as historic cost  Employee benefits  Translation differences  Compound financial instruments  Different adoption dates for the parent company and subsidiary  Mandatory:  Derecognition of financial assets and financial liabilities  Recognition of hedging instruments  Estimates IFRS 1 - FIRST-TIME ADOPTION OF IFRS 3. RETROSPECTIVE APPLICATION: EXEMPTIONS

2005  Enable users to understand the impact of the transition on the balance sheet, the income statement and the cash flow statement  Mandatory financial information:  Opening IFRS balance sheet at the date of transition (1/1/2004)  Comparative prior period (2004)  Publication of an interim financial report in 2005 (in addition to the disclosures required by IAS 34) IFRS 1 - FIRST-TIME ADOPTION OF IFRS 4. TRANSITIONAL FINANCIAL INFORMATION

2005  Detailed reconciliation of equity in IFRS and local GAAP as of 31/12/2003  Information on the use of fair value as historic cost by the « deemed cost » convention, if exemption is chosen  Information required by IAS 36 if impairment is reversed in the opening IFRS balance sheet INFORMATION IN THE OPENING IFRS BALANCE SHEET (1/1/2004) IFRS 1 - FIRST-TIME ADOPTION OF IFRS 4. TRANSITIONAL FINANCIAL INFORMATION

2005  Detailed reconciliation of equity in IFRS and French GAAP as of 31/12/2004  Detailed reconciliation of net profit or loss for 2004 in IFRS and French GAAP  Explanations of significant adjustments to the cash flow statement  In theory, no impact on cash flow, but possible impact on items in the cash flow statement INFORMATION ON THE COMPARATIVE PRIOR PERIOD (2004) IFRS 1 - FIRST-TIME ADOPTION OF IFRS 4. TRANSITIONAL FINANCIAL INFORMATION

2005  Detailed reconciliation of IFRS / local GAAP for each period presented:  Equity at the end of the interim comparative period (ex: 30/03/2004 for the first quarter financial report in 2005)  Net profit or loss for the comparative interim period and cumulative period (ex: income statements for 3 and 6 months as of 30/06/2004 for the second quarter financial report in 2005) INFORMATION ON AN INTERIM FINANCIAL REPORT IN 2005 IFRS 1 - FIRST-TIME ADOPTION OF IFRS 4. TRANSITIONAL FINANCIAL INFORMATION

2005  Recognise all assets and liabilities in accordance with the IFRS framework  Derecognise all assets and liabilities that do not qualify under IFRS  Reclassify some acquired intangible assets as goodwill  Extract identifiable intangible assets from goodwill  Perform impairment tests  Reclassify certain balance sheet or income statement items  Modify certain values  Modify the presentation of the financial statements  Prepare financial information in conformity with IFRS IFRS 1 - FIRST-TIME ADOPTION OF IFRS 5. CHALLENGES OF FIRST-TIME ADOPTION OF IFRS S U M M A R Y

2005 For instance:  Recognise previously expensed development costs as assets, if they qualify  Recognise derivative financial instruments at fair value  Recognise stock options RECOGNISE ALL ASSETS AND LIABILITIES IN ACCORDANCE WITH IFRS IFRS 1 - FIRST-TIME ADOPTION OF IFRS 5. CHALLENGES OF FIRST-TIME ADOPTION OF IFRS

2005 Derecognition of:  Research costs previously recorded as assets  Start-up and pre-operating costs  Reclassify treasury shares reported as marketable securities as a component of equity. DERECOGNISE ALL ASSETS AND LIABILITIES THAT DO NOT QUALIFY FOR RECOGNITION UNDER IFRS DERECOGNISE ALL ASSETS AND LIABILITIES THAT DO NOT QUALIFY FOR RECOGNITION UNDER IFRS IFRS 1 - FIRST-TIME ADOPTION OF IFRS 5. CHALLENGES OF FIRST-TIME ADOPTION OF IFRS

2005  If they do not meet IFRS criteria  Which include: RECLASSIFY SOME ACQUIRED INTANGIBLE ASSETS AS GOODWILL  Resource controlled by the company  From which future economic benefits flow  Which can be measured reliably  Resource controlled by the company  From which future economic benefits flow  Which can be measured reliably  Identifiable as separate items or  Legally protected  Identifiable as separate items or  Legally protected  Goodwill not transferable separately  Market share  Unprotected lists or files of customers ...  Goodwill not transferable separately  Market share  Unprotected lists or files of customers ... General criteria for assets Specific criteria for intangible assets Assumed to include IFRS 1 - FIRST-TIME ADOPTION OF IFRS 5. CHALLENGES OF FIRST-TIME ADOPTION OF IFRS

2005  Under IAS 38 - In practice  Intangible assets not recognised under previous standards must be recognised as assets  It is necessary to determine whether the assets have an infinite or finite useful life If the useful life is finite: retroactive application of amortisation + impairment testing if appropriate (indications of impairment) If useful life is indefinite: impairment testing is obligatory  Example Development costs of an acquired enterprise are expensed EXTRACT QUALIFYING INTANGIBLE ASSETS FROM GOODWILL IFRS 1 - FIRST-TIME ADOPTION OF IFRS 5. CHALLENGES OF FIRST-TIME ADOPTION OF IFRS

2005 PERFORM IMPAIRMENT TESTS  Systematic testing of goodwill  Including the opening balance sheet for first-time adoption  In compliance with IAS 36 (currently being revised)  Impact on equity IFRS 1 - FIRST-TIME ADOPTION OF IFRS 5. CHALLENGES OF FIRST-TIME ADOPTION OF IFRS

2005  For example  Reclassify subsidies recorded in equity, under either deferred income or as a reduction of assets  Include rehabilitation expenses in the price of the asset and recognise the corresponding provision  For hybrid financial instruments, identify the individual components RECLASSIFY SOME BALANCE SHEET AND INCOME STATEMENT ITEMS IFRS 1 - FIRST-TIME ADOPTION OF IFRS 5. CHALLENGES OF FIRST-TIME ADOPTION OF IFRS

2005 MODIFY CERTAIN VALUES  Classification changes leading to changes in value:  Classification of a building as investment property at fair value  Financial instruments at fair value  Applying IFRS provisions without classification changes:  modification of amortisation period and method (if previous periods were not based on economic criteria) Change in asset’s net value  Discounting effects  Recognition of amortised cost IFRS 1 - FIRST-TIME ADOPTION OF IFRS 5. CHALLENGES OF FIRST-TIME ADOPTION OF IFRS

2005 MODIFY THE PRESENTATION OF THE FINANCIAL STATEMENTS MODIFY THE PRESENTATION OF THE FINANCIAL STATEMENTS  Examples Balance Sheet:  Separate current/non-current balance sheet items Similar concept to ST/LT Current item: from the operating cycle  Record receivables and tax liabilities on specific lines and separate deferred taxes (not current) from current taxes  Reclassify minority interests as a separate equity item Balance Sheet:  Separate current/non-current balance sheet items Similar concept to ST/LT Current item: from the operating cycle  Record receivables and tax liabilities on specific lines and separate deferred taxes (not current) from current taxes  Reclassify minority interests as a separate equity item Income Statement:  Present the result of discontinued operations separately  Reclassify some financial income as operating income  Present a full breakdown of exceptional income Income Statement:  Present the result of discontinued operations separately  Reclassify some financial income as operating income  Present a full breakdown of exceptional income IFRS 1 - FIRST-TIME ADOPTION OF IFRS 5. CHALLENGES OF FIRST-TIME ADOPTION OF IFRS

2005 DISCLOSE ALL FINANCIAL INFORMATION REQUIRED  As required by all current standards:  both throughout the main text of the standards  and in the paragraphs on "disclosures"  And particularly the « transitional» financial information required by IFRS 1 IFRS 1 - FIRST-TIME ADOPTION OF IFRS 5. CHALLENGES OF FIRST-TIME ADOPTION OF IFRS