**Exhibit 15.2**

 

# **TRANSITION TO IFRS**

# ** **

## **1.**                                      INTRODUCTION

## ** **

The European Union has adopted the International Financial ReportingStandards (IFRS) and International Accounting Standards (IAS) issued by theInternational Accounting Standards Board (IASB). Under EC regulation 1606/2002of July 19, 2002, companies listed on a regulated stock exchange in one ofthe member states are required to present their consolidated financialstatements for financial years beginning on or after January 1, 2005 inconformity with IFRS.

 

Euro Disney S.C.A. and its consolidated subsidiaries (the “Group”),which has, up to and including fiscal year 2005, applied French generallyaccepted accounting principles (French GAAP), is subject to this requirement.As a result, the Group is required to prepare its consolidated financialstatements in conformity with IFRS starting from the fiscal year ending September 30,2006.

 

Comparative figures for the fiscal year ended September 30, 2005will also be required when presenting fiscal year 2006 financial results underIFRS. In order to be able to publish this comparative information, the Groupprepared an opening consolidated balance sheet as of October 1, 2004 (thefirst day of fiscal year 2005), which constitutes the starting point for theapplication of IFRS. The cumulative quantitative impacts on the French GAAPbalance sheet from the transition to IFRS as of October 1, 2004, in linewith IFRS 1 “*First-time Adoption ofInternational Financial Reporting Standards*” were recorded directlyto shareholders’ equity. Set out in this report accompanied by explanatorynotes, is the impact of the transition to IFRS on the Group’s financialstatements, as follows:

 

•Consolidated Shareholders’ Equity between October 1, 2004 and September 30,2005;

•Consolidated Statement of Income for the year ended September 30, 2005;

•Consolidated Balance Sheet as of September 30, 2005.

 

A description of the main impacts of IFRS restatements on theConsolidated Statement of Cash Flows is also provided.

 

The impact of the transition to IFRS on the financial statements forthe year ended September 30, 2005 has been reviewed by the statutoryauditors (see section 4 of this report). As a result, management hasdecided to publish this information simultaneously with its annual report for fiscalyear 2005.

 

## **2.**                                      ACCOUNTINGPOLICIES ADOPTED

## ** **

The accounting policies applied by the Group in preparing its firstIFRS financial statements comply with IFRS as adopted by the European Union.The accounting standards published by the IASB as at September 30, 2005,have been approved by the European Union, except for some parts of IAS 39, *“Financial Instruments: Recognition and Measurement”*which was revised and approved April 14, 2005.

 

Because the 2005 comparative information published with the 2006consolidated statements must be prepared on the basis of standards applicableat September 30, 2006, the Group may have to amend the informationcontained in this document to reflect changes to IFRS and the approval of suchchanges by the European Commission. In addition, the Group reserves thepossibility of modifying certain options and accounting methods applied in thisdocument until the final publication of its fiscal year 2006 financialstatements.

 

In preparing its opening balance sheet at October 1, 2004, theGroup applied the principles relating to first-time adoption of IFRS as definedin IFRS 1.

 

The IFRS principles have been applied retrospectively for this report,as though the Group had always applied them. However, IFRS 1 does allow anumber of exemptions to retrospective treatment, which have affected the Group’sapplication of IFRS as follows:

 

1

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•                  **Mandatory exemptions**: for example, IFRS 1requires estimates at the date of transition to be consistent with estimatesmade at the same date under previous French GAAP (i.e., it prohibits the use ofhindsight to correct estimates made while applying previous French GAAP). Also,IFRS 1 does not permit retrospective designation of hedge relationships underIAS 39, “*Financial Instruments: Recognitionand Measurement.*”

 

•                  **Optional exemptions**:

 

The Group has elected retrospective application forthe following:

 

•                  pensions and other employee benefits IAS 19, “*Employee Benefits,”*

•                  financial instruments IAS 32, “*FinancialInstruments: Disclosure and Presentation”* and IAS 39, “*Financial Instruments”*, except with respect to the designation ofhedge relationships as noted above.

 

The Group has not elected retrospective applicationfor the following:

 

•                  restatement under the first-time adoption requirements set out in IFRS 1in relation to IFRS 2, “*Share-Based Payment*”,has been limited to equity instruments granted after November 7, 2002(date of publication of the exposure draft of IFRS 2) and not fully vested on January 1,2005.

 

Other exemptions not mentioned were not applicable tothe Group.

 

## **3.**                                      FRENCHGAAP / IFRS RECONCILIATIONS

## ** **

**3.1.****                           ****STATEMENT OF CHANGES IN EQUITY**

 

The table below shows a reconciliation of movements in consolidatedequity under French GAAP and under IFRS between October 1, 2004 and September 30,2005:

 
| ** **                                     | ** **   | **Increase / (Decrease) Format** | ** ** |
|------------------------------------------------|--------------|----------------------------------|------------|
| **(€ in millions)**                       | *** *** | **Notes**                        | ** ** | **Oct 1,  2004** | ** ** | **Share  Issue** | ** ** | **Legal  Reorg** | ** ** | **Other** | ** ** | **Fiscal Year  2005  Net Loss** | ** ** | **Sept 30,  2005** | ** ** |
| *Shareholders’  Equity -Group*            | * *     | * *                         | * *   | *(59,9* | *)* | *235,0* |   | *215,5* |   | — | * * | *(94,9* | *)* | *295,7* | * * |
| *Minority  Interests*                          | * *     | * *                         |       | *339,6* |   | — | * * | *(215,5* | *)* | *2,8* | * * | *(20,6* | *)* | *106,3* | * * |
| **  Total Equity - French GAAP**          | ** **   | ** **                       | ** ** | **279,7** | ** ** | **235,0** | ** ** | — | ** ** | **2,8** | ** ** | **(115,5** | **)** | **402,0** | ** ** |
|                                           |         |                             |       |   |   |   |   |   |   |   |   |   |   |   |   |
| PP&E -  asset by component method (1) | * *     | *3.4.1*                          |       | 95,8 |   | — |   | — |   | — |   | (1,6 | ) | 94,2 |   |
| PP&E -  government subsidies (1)           | * *     | *3.4.2*                          |       | (11,9 | ) | — |   | — |   | — |   | (0,1 | ) | (12,0 | ) |
| PP&E -  leases(1)                          | * *     | *3.4.3*                          |       | (1,0 | ) | — |   | — |   | — |   | 0,3 |   | (0,7 | ) |
| Financial  liabilities and interest costs      | * *     | *3.4.5*                          |       | (73,3 | ) | — |   | — |   | — |   | 73,4 |   | 0,1 |   |
| Financial  instruments - derivatives           | * *     | *3.4.6*                          |       | (0,3 | ) | — |   | — |   | — |   | 0,6 |   | 0,3 |   |
| Waivers/Contributions  by TWDC (2)        | * *     | *3.4.7*                          |       | — |   | — |   | — |   | 12,7 |   | (10,0 | ) | 2,7 |   |
| Pensions and  other employee benefits          | * *     | *3.4.8*                          |       | (8,8 | ) | — |   | — |   | — |   | (0,9 | ) | (9,7 | ) |
| Share-based  payments                          | * *     | *3.4.9*                          |       | — |   | — |   | — |   | 0,1 |   | (0,1 | ) | — |   |
| Revenue  recognition                           | * *     | *3.4.10*                         |       | (1,6 | ) | — |   | — |   | — |   | 0,8 |   | (0,8 | ) |
| **  Total adjustments**                   |         |                             |       | (1,1 | ) | — | ** ** | — | ** ** | **12,8** |   | **62,4** |   | 74,1 |   |
|                                           |         |                             |       |   |   |   |   |   |   |   |   |   |   |   |   |
| **  Total Equity - IFRS**                 | ** **   | ** **                       | ** ** | **278,6** |   | **235,0** | ** ** | — | ** ** | **15,6** | ** ** | **(53,1** | **)** | **476,1** | ** ** |
| *Shareholders’  Equity -Group*            | * *     | * *                         | * *   | *(61,0* | *)* | *235,0* | * * | *215,5* | * * | *12,8* | * * | *(43,7* | *)* | *358,6* | * * |
| *Minority  Interests*                          | * *     | * *                         |       | *339,6* | * * | — | * * | *(215,5* | *)* | *2,8* | * * | *(9,4* | *)* | *117,5* | * * |

 

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(1)              PP&E refers toProperty, plant and equipment.

(2)              TWDC refers to TheWalt Disney Company.

 

2

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**3.2.****                           ****STATEMENT OF INCOME FOR FISCALYEAR 2005**

 

Adjustments to convert the French GAAP statement of income to IFRS,arising from first-time adoption of IFRS have been split into two categories:

 

•                  Adjustments,which have an impact on consolidated net results, and

•                  Reclassifications,which only impact the way in which items are classified within the statement ofincome.

 
| ** **                                                      | ** ** | ** ** | ** ** | ** **             | ** ** | **IFRS  Adjustments** | ** ** | **IFRS  Reclasses** | ** ** | ** **     | ** ** |
|-----------------------------------------------------------------|------------|------------|------------|------------------------|------------|-----------------------|------------|---------------------|------------|----------------|------------|
| **(€ in millions)**                                        | ** ** | **Notes**  | ** ** | **2005  French  GAAP** | ** ** | **3.4**               | ** ** | **3.5**             | ** ** | **2005  IFRS** | ** ** |
| Revenues                                                        |       |       |       | 1 076,0                |       | 0,8                   |       | (36,2               | )          | 1 040,6        |       |
|                                                            |       |       |       |                   |       |                  |       |                |       |           |       |
| Costs and  Expenses                                             |       |       |       | (1 102,9               | )          | (1,6                  | )          | 31,6                |       | (1 072,9       | )          |
|                                                            |       |       |       | (26,9                  | )          | (0,8                  | )          | (4,6                | )          | (32,3          | )          |
| **Loss  from Continuing Operations before Financial and Taxes** |       |       |       |                   |       |                  |       |                |       |           |       |
| *% of  Revenues*                                                | * *   | * *   | * *   | *-3*                   | *%*        | * *              | * *   | * *            | * *   | *-3*           | *%*        |
|                                                            |       |       |       |                   |       |                  |       |                |       |           |       |
| Financial  Income                                               |       |       |       | 3,9                    |       | 0,1                   |       | —              |       | 4,0            |       |
| Financial  Expense                                              |       |       |       | (91,8                  | )          | 14,3                  |       | (4,4                | )          | (81,9          | )          |
| Gain on  Extinguishment of Modified Debt (1)                    |       |       |       | —                 |       | 58,9                  |       | —              |       | 58,9           |       |
| Equity in  the Income of Investees (1)                          |       |       |       | —                 |       | —                |       | (0,7                | )          | (0,7           | )          |
|                                                            |       |       |       | (87,9                  | )          | 73,3                  |       | (5,1                | )          | (19,7          | )          |
|                                                            |       |       |       |                   |       |                  |       |                |       |           |       |
| **Loss  from Continuing Operations before Taxes**               |       |       |       | (114,8                 | )          | 72,5                  |       | (9,7                | )          | (52,0          | )          |
|                                                            |       |       |       |                   |       |                  |       |                |       |           |       |
| Exceptional  Result (2)                                    |       |       |       | 0,4                    |       | (10,1                 | )          | 9,7                 |       | —         |       |
| Income Tax                                                      |       |       |       | (1,1                   | )          | —                |       | —              |       | (1,1           | )          |
|                                                            |       |       |       |                   |       |                  |       |                |       |           |       |
| **Net Loss**                                                    |       |       |       | (115,5                 | )          | 62,4                  |       | 0,0                 |       | (53,1          | )          |
|                                                            |       |       |       |                   |       |                  |       |                |       |           |       |
| **Net Loss  attributable to:**                                  |       |       |       |                   |       |                  |       |                |       |           |       |
| Equity  holders of the parent                                   |       |       |       | (94,9                  | )          | 51,2                  |       | —              |       | (43,7          | )          |
| Minority  interests                                             |       |       |       | (20,6                  | )          | 11,2                  |       | —              |       | (9,4           | )          |
|                                                            |       |       |       |                   |       |                  |       |                |       |           |       |
| **Basic  and diluted earnings per share (in €)(3)**        |       |       |       | (0,03                  | )          |                  |       |                |       | (0,02          | )          |
|                                                            |       |       |       |                   |       |                  |       |                |       |           |       |
| **Additional  Information**                                     |       |       |       |                   |       |                  |       |                |       |           |       |
| **Loss  from Continuing Operations before Interest and Taxes**  |       |       |       | (26,9                  | )          | (0,8                  | )          | (4,6                | )          | (32,3          | )          |
| Plus:  Depreciation and amortisation                            |       |       |       | 144,0                  |       | 2,2                   |       | (0,2                | )          | 146,0          |       |

 

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(1)              Newline in IFRS Statement of Income.

 

(2)              Lineno longer included in IFRS Statement of Income.

 

(3)              Basic earning per share amounts arecalculated by dividing net income/(loss) for the year attributable to ordinaryequity holders of the parent by the weighted average number of ordinary sharesoutstanding during the year. As September 30, 2005, basic and fullydiluted earnings per share are equivalent as the inclusion of 98 million ofpotential shares in the computation of diluted earning per share would havebeen anti-dilutive.

 

3

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**3.2.1.****                  Details ofAdjustments to Convert the French GAAP Statement of Income to IFRS for Fiscal Year 2005**

 
| ** **                                                     | ** ** | ** ** | ** ** | **Increase / (Decrease) Format**           | ** ** | ** **                 |
|----------------------------------------------------------------|------------|------------|------------|--------------------------------------------|------------|----------------------------|
| ** **                                                     | ** ** | ** ** | ** ** | **Property,  Plant &  Equipment** | ** ** | **Financial  Instruments** | ** ** | **Waiver TWDC  Credit Line** | ** ** | **Pensions** | ** ** | **Shared-Based  Payments** | ** ** | **Revenue** | ** ** | **Total  Adjustments** | ** ** |
| **(€ in millions)**                                       | ** ** | **Notes**  | ** ** | **3.4.1-4**                                | ** ** | **3.4.5-6**                | ** ** | **3.4.7** | ** ** | **3.4.8** | ** ** | **3.4.9** | ** ** | **3.4.10** | ** ** | ** ** | ** ** |
| Revenues                                                       | ** ** | ** ** | ** ** | **—**                                 | ** ** | **—**                 | ** ** | **—** | ** ** | **—** | ** ** | **—** |   | 0.8 | ** ** | **0.8** | ** ** |
|                                                           |       |       |       |                                       |       |                       |   |   |   |   |   |   |   |   |   |   |   |
| Costs and Expenses                                             |       |       |       | (0.9                                       | )          | 0.3                        | ** ** | **—** |   | (0.9 | ) | (0.1 | **)** | **—** | ** ** | **(1.6** | **)** |
| **Loss from Continuing Operations  before Interest and Taxes** |       |       |       | (0.9                                       | )          | 0.3                        | ** ** | **—** |   | (0.9 | ) | (0.1 | ) | 0.8 | ** ** | **(0.8** | **)** |
|                                                           |       |       |       |                                       |       |                       |   |   |   |   |   |   |   |   |   |   |   |
| Financial Income                                               |       |       |       | —                                     |       | —                     |   | — |   | — |   | — |   | 0.1 | ** ** | **0.1** | ** ** |
| Financial Expense                                              |       |       |       | (0.5                                       | )          | 14.8                       |   | — |   | — |   | — |   | — | ** ** | **14.3** | ** ** |
| Gain on the Extinguishment  of Modified Debt (1)               |       |       |       | —                                     |       | 58.9                       |   | — |   | — |   | — |   | — | ** ** | **58.9** | ** ** |
| Equity in the Income of  Investees (1)                    | ** ** | ** ** | ** ** | **—**                                 | ** ** | **—**                 | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** |
|                                                           |       |       |       | (0.5                                       | )          | 73.7                       |   | — |   | — |   | — |   | 0.1 | ** ** | **73.3** | ** ** |
| **Loss from Continuing Operations  before Taxes**              |       |       |       | (1.4                                       | )          | 74.0                       |   | — |   | (0.9 | ) | (0.1 | ) | 0.9 | ** ** | **72.5** | ** ** |
|                                                           |       |       |       |                                       |       |                       |   |   |   |   |   |   |   |   |   |   |   |
| Exceptional Income/Loss (2)                                    |       |       |       | (0.1                                       | )          | —                     |   | (10.0 | ) | — |   | — |   | — | ** ** | **(10.1** | **)** |
| Income Tax                                                     |       |       |       | —                                     |       | —                     |   | — |   | — |   | — |   | — | ** ** | **—** | ** ** |
|                                                           |       |       |       |                                       |       |                       |   |   |   |   |   |   |   |   |   |   |   |
| **Net Loss**                                                   | ** ** | ** ** | ** ** | **(1.5**                                   | **)**      | **74.0**                   | ** ** | **(10.0** | **)** | **(0.9** | **)** | **(0.1** | **)** | **0.9** | ** ** | **62.4** | ** ** |
|                                                           |       |       |       |                                       |       |                       |   |   |   |   |   |   |   |   |   |   |   |
| **Net Loss attributable to:**                                  |       |       |       |                                       |       |                       |   |   |   |   |   |   |   |   |   |   |   |
| Equity Holders of the Parent                                   |       |       |       | (1.2                                       | )          | 60.7                       |   | (8.2 | ) | (0.7 | ) | (0.1 | ) | 0.7 | ** ** | **51.2** | ** ** |
| Minority interests                                             |       |       |       | (0.3                                       | )          | 13.3                       |   | (1.8 | ) | (0.2 | ) | — |   | 0.2 | ** ** | **11.2** | ** ** |

 

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(1)              Newline in IFRS Statement of Income.

 

(2)              Lineno longer included in IFRS Statement of Income.

 

4

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**3.2.2.****                  Details ofReclassifications to Convert the French GAAP Statement of Income to IFRS forFiscal Year 2005**

 
| ** **                                                     | ** ** | ** ** | ** ** | **Increase / (Decrease) Format** | ** ** |
|----------------------------------------------------------------|------------|------------|------------|----------------------------------|------------|
| ** **                                                     | ** ** | ** ** | ** ** | **Agency  Revenues**             | ** ** | **Exceptional  Items** | ** ** | **Joint  Ventures** | ** ** | **Credit card  Commissions and  Forex** | ** ** | ** ** | ** ** |
| **(€ in millions)**                                       | ** ** | **Notes**  | ** ** | **3.5.2**                        | ** ** | **3.5.3** | ** ** | **3.5.8** | ** ** | **3.5.9** | ** ** | **Total  Reclasses** | ** ** |
| Revenues                                                       |       |       |       | (36,4                            | )          | **—** |   | 0,2 |   | — | ** ** | **(36,2** | **)** |
|                                                           |       |       |       |                             |       |   |   |   |   |   |   |   |   |
| Costs and  Expenses                                            |       |       |       | 36,4                             |       | (1,3 | ) | 0,5 |   | (4,0 | ) | **31,6** | ** ** |
| **Loss  from Continuing Operations before Interest and Taxes** |       |       |       | —                           |       | (1,3 | ) | 0,7 |   | (4,0 | **)** | **(4,6** | **)** |
| ** **                                                     | ** ** | ** ** | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Financial  Income                                              |       |       |       | —                           |       | — |   | — |   | — | ** ** | **—** | ** ** |
| Financial  Expense                                             |       |       |       | —                           |       | (8,4 | ) | — |   | 4,0 | ** ** | **(4,4** | **)** |
| Gain on the  Extinguishment of Modified Debt (1)               |       |       |       | —                           |       | — |   | — |   | — | ** ** | **—** | ** ** |
| Equity in  the Income of Investees (1)                    | ** ** | ** ** | ** ** | **—**                       | ** ** | **—** |   | (0,7 | ) | — | ** ** | **(0,7** | **)** |
|                                                           |       |       |       | —                           |       | (8,4 | ) | (0,7 | ) | 4,0 | ** ** | **(5,1** | **)** |
|                                                           |       |       |       |                             |       |   |   |   |   |   |   |   |   |
| **Loss  from Continuing Operations before Taxes**              |       |       |       | —                           |       | (9,7 | ) | — |   | — | ** ** | **(9,7** | **)** |
|                                                           |       |       |       |                             |       |   |   |   |   |   |   |   |   |
| Exceptional Income/Loss (2)                               |       |       |       | —                           |       | 9,7 |   | — |   | — | ** ** | **9,7** | ** ** |
| Income Tax                                                     |       |       |       | —                           |       | — |   | — |   | — | ** ** | **—** | ** ** |
|                                                           |       |       |       |                             |       |   |   |   |   |   |   |   |   |
| **Net Loss**                                                   | ** ** | ** ** | ** ** | **—**                       | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** |

 

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(1)              Newline in IFRS Statement of Income.

 

(2)              Lineno longer included in IFRS Statement of Income.

 

5

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**3.3.****                           ****CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30,2005**

 

Adjustments to convert the French GAAP Balance Sheet to IFRS arisingfrom first-time adoption of IFRS, have been split into two categories:

 

•                  Adjustments,which have an impact on total equity, and

•                  Reclassifications,which only impact the way in which items are classified within the balancesheet.

 
| ** **                                          | ** ** | ** ** | ** ** | ** **       | ** ** | **IFRS  Adjustments** | ** ** | **IFRS  Reclasses** | ** ** | ** **  | ** ** |
|-----------------------------------------------------|------------|------------|------------|------------------|------------|-----------------------|------------|---------------------|------------|-------------|------------|
| **(€ in millions)**                            | ** ** | **Notes**  | ** ** | **French  GAAP** | ** ** | **3 .4**         | ** ** | **3 .5**       | ** ** | **IFRS**    | ** ** |
| **Non-Current Assets**                              |       |       |       |             |       |                  |       |                |       |        |       |
| Property,  Plant and Equipment                      | ** ** | ** ** | ** ** | **2,295.2**      |       | (5.9                  | )          | (2.0                | )          | 2,287.3     |       |
| Investment  property (1)                            | ** ** | ** ** | ** ** | **—**       | ** ** | **—**            |       | 43.4                |       | 43.4        |       |
| Intangible  assets                                  | ** ** | ** ** | ** ** | **55.6**         | ** ** | **—**            |       | —              |       | 55.6        |       |
| Financial  assets                                   | ** ** | ** ** | ** ** | **11.3**         | ** ** | **—**            |       | (0.6                | )          | 10.7        |       |
| Other (1)                                           | ** ** | ** ** | ** ** | **—**       |       | 9.6                   |       | 6.7                 |       | 16.3        |       |
| ** **                                          | ** ** | ** ** | ** ** | **2,362.1**      | ** ** | **3.7**               | ** ** | **47.5**            | ** ** | **2,413.3** | ** ** |
| **Current Assets**                                  |       |       |       |             |       |                  |       |                |       |        |       |
| Inventories                                         | ** ** | ** ** | ** ** | **39.2**         | ** ** | **—**            | ** ** | **—**          |       | 39.2        |       |
| Trade and  other receivable                         | ** ** | ** ** | ** ** | **153.8**        |       | 0.4                   |       | (8.2                | )          | 146.0       |       |
| Cash and  short-term deposits                       | ** ** | ** ** | ** ** | **290.9**        |       | —                |       | (0.4                | )          | 290.5       |       |
| Other (1)                                           | ** ** | ** ** | ** ** | **—**       |       | —                |       | 8.9                 |       | 8.9         |       |
| ** **                                          | ** ** | ** ** | ** ** | **483.9**        | ** ** | **0.4**               | ** ** | **0.3**             | ** ** | **484.6**   | ** ** |
|                                                |       |       |       |             |       |                  |       |                |       |        |       |
| **Deferred Charges**(2)                             | ** ** | ** ** | ** ** | **48.1**         | ** ** | **—**            |       | (48.1               | )          | —      |       |
|                                                |       |       |       |             |       |                  |       |                |       |        |       |
| **Total Assets**                                    | ** ** | ** ** | ** ** | **2,894.1**      | ** ** | **4.1**               | ** ** | **(0.3**            | **)**      | **2,897.9** | ** ** |
|                                                |       |       |       |             |       |                  |       |                |       |        |       |
| **Shareholders’ Equity**                       |       |       |       |             |       |                  |       |                |       |        |       |
| Share  capital                                      | ** ** | ** ** | ** ** | **39.0**         |       | —                |       | —              |       | 39.0        |       |
| Share  premium                                      | ** ** | ** ** | ** ** | **1,442.5**      |       | 12.7                  |       | 173.0               |       | 1,628.2     |       |
| Retained earnings                                   | ** ** | ** ** | ** ** | **(1,185.8**     | **)**      | 50.2                  |       | (173.0              | )          | (1,308.6    | )          |
| Asset  revaluation and other reserves (1)           | ** ** | ** ** | ** ** | **—**       |       | 0.1                   |       | —              |       | 0.1         |       |
| ** **                                          | ** ** | ** ** | ** ** | **295.7**        | ** ** | **63.0**              | ** ** | **—**          | ** ** | **358.7**   | ** ** |
|                                                |       |       |       |             |       |                  |       |                |       |        |       |
| M inority  interests                                | ** ** | ** ** | ** ** | **106.3**        |       | 11.1                  |       | —              |       | 117.4       |       |
|                                                |       |       |       |             |       |                  |       |                |       |        |       |
| **Total Equity**(1)                                 | ** ** | ** ** | ** ** | **402.0**        | ** ** | **74.1**              | ** ** | **—**          | ** ** | **476.1**   | ** ** |
|                                                |       |       |       |             |       |                  |       |                |       |        |       |
| **Non-current liabilities**                         |       |       |       |             |       |                  |       |                |       |        |       |
| Provisions  for risks and charges                   | ** ** | ** ** | ** ** | **96.9**         |       | (85.7                 | )          | 0.4                 |       | 11.6        |       |
| Borrowings                                          | ** ** | ** ** | ** ** | **1,943.4**      |       | (15.5                 | )          | (37.9               | )          | 1,890.0     |       |
| Deferred  revenues                                  | ** ** | ** ** | ** ** | **93.8**         |       | (2.2                  | )          | (50.0               | )          | 41.6        |       |
| Other  (1)                                          | ** ** | ** ** | ** ** | **—**       |       | 33.3                  |       | 20.6                |       | 53.9        |       |
| ** **                                          | ** ** | ** ** | ** ** | **2,134.1**      | ** ** | **(70.1**             | **)**      | **(66.9**           | **)**      | **1,997.1** | ** ** |
| **Current Liabilities**                             |       |       |       |             |       |                  |       |                |       |        |       |
| Accounts  payable and accrued liab ilities          | ** ** | ** ** | ** ** | **358.0**        |       | 0.1                   |       | 16.1                |       | 374.2       |       |
| Current  portion of borrowings (1)                  | ** ** | ** ** | ** ** | **—**       |       | —                |       | 0.5                 |       | 0.5         |       |
| Financial  derivatives (1)                          | ** ** | ** ** | ** ** | **—**       |       | —                |       | —              |       | —      |       |
| Deferred  revenues(1)                               | ** ** | ** ** | ** ** | **—**       |       | —                |       | 50.0                |       | 50.0        |       |
| Provisions  for risks and charges (1)               | ** ** | ** ** | ** ** | **—**       |       | —                |       | —              |       | —      |       |
| ** **                                          | ** ** | ** ** | ** ** | **358.0**        | ** ** | **0.1**               | ** ** | **66.6**            | ** ** | **424.7**   | ** ** |
|                                                |       |       |       |             |       |                  |       |                |       |        |       |
| **Total Shareholders’ Equity and Liabilities** | ** ** | ** ** | ** ** | **2,894.1**      | ** ** | **4.1**               | ** ** | **(0.3**            | **)**      | **2,897.9** | ** ** |

 

----

(1)              Newline in IFRS Balance Sheet.

(2)              Lineno longer used in IFRS Balance Sheet.

 

6

----

 

**3.3.1.****                  Details ofAdjustments to Convert the French GAAP Balance Sheet to IFRS as of September 30, 2005**

 
| ** **                                           | ** ** | ** ** | ** ** | **Increase / (Decrease) Format**           | ** ** |
|------------------------------------------------------|------------|------------|------------|--------------------------------------------|------------|
| ** **                                           | ** ** | ** ** | ** ** | **Property,  Plant &  Equipment** | ** ** | **Financial  Instruments** | ** ** | **Contributions  Waivers from  TWDC** | ** ** | **Pensions** | ** ** | **Shared  Based  Payments** | ** ** | **Revenue** | ** ** | ** ** | ** ** |
| **(€ in millions)**                             | ** ** | **Notes**  | ** ** | **3.4.1-4**                                | ** ** | **3.4.5-6** | ** ** | **3.4.7** | ** ** | **3.4.8** | ** ** | **3.4.9** | ** ** | **3.4.10** | ** ** | **Total  Adjustments** | ** ** |
| **Non-Current  Assets**                              |       |       |       |                                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Property,  Plant and Equipment                       |       |       |       | (1,4                                       | )          | (4,5 | ) | — |   | — |   | — |   | — | ** ** | **(5,9** | **)** |
| Investment  property (1)                             | ** ** | ** ** | ** ** | **—**                                 | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** |
| Intangible  assets                                   | ** ** | ** ** | ** ** | **—**                                 | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** |
| Financial  assets                                    | ** ** | ** ** | ** ** | **—**                                 | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** |
| Other (1)                                            | ** ** | ** ** | ** ** | **—**                                 |       | 9,6 | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** | **9,6** | ** ** |
|                                                 |       |       |       | (1,4                                       | )          | 5,1 |   | — |   | — |   | — |   | — | ** ** | **3,7** | ** ** |
| **Current  Assets**                                  |       |       |       |                                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Inventories                                          | ** ** | ** ** | ** ** | **—**                                 | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** |
| Trade and  other receivable                          | ** ** | ** ** | ** ** | **—**                                 |       | 0,4 | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** | **0,4** | ** ** |
| Cash and short-term  deposits                        | ** ** | ** ** | ** ** | **—**                                 | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** |
| Other (1)                                            | ** ** | ** ** | ** ** | **—**                                 | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** |
|                                                 |       |       |       | —                                     |       | 0,4 |   | — |   | — |   | — |   | — | ** ** | **0,4** | ** ** |
|                                                 |       |       |       |                                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| **Deferred  Charges****(2)**                         | ** ** | ** ** | ** ** | **—**                                 | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** |
|                                                 |       |       |       |                                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total  Assets**                                    | ** ** | ** ** | ** ** | **(1,4**                                   | **)**      | **5,5** | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** | **4,1** | ** ** |
|                                                 |       |       |       |                                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| **Shareholders’  Equity**                       |       |       |       |                                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Share  capital                                       |       |       |       | —                                     |       | — |   | — |   | — |   | — |   | — | ** ** | **—** | ** ** |
| Share  premium                                       | ** ** | ** ** | ** ** | **—**                                 |       | — |   | 12,7 |   | — |   | — |   | — | ** ** | **12,7** | ** ** |
| Retained  earnings                                   |       |       |       | 66,8                                       |       | 0,3 |   | (8,2 | ) | (8,0 | ) | (0,1 | ) | (0,6 | ) | **50,2** | ** ** |
| Asset  revaluation and other reserves(1)             |       |       |       | **—**                                 | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** | 0,1 |   | — |   | **0,1** | ** ** |
|                                                 |       |       |       | 66,8                                       |       | 0,3 |   | 4,5 |   | (8,0 | ) | — |   | (0,6 | ) | **63,0** | ** ** |
|                                                 |       |       |       |                                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Minority  interests                                  |       |       |       | 14,7                                       |       | 0,1 |   | (1,8 | ) | (1,7 | ) | — |   | (0,2 | ) | **11,1** | ** ** |
|                                                 |       |       |       |                                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total  Equity****(1)**                             | ** ** | ** ** | ** ** | **81,5**                                   | ** ** | **0,4** | ** ** | **2,7** | ** ** | **(9,7** | **)** | **—** | ** ** | **(0,8** | **)** | **74,1** | ** ** |
|                                                 |       |       |       |                                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| **Non-current  liabilities**                         |       |       |       |                                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Provisions  for risks and charges                    |       |       |       | (85,7                                      | )          | — |   | — |   | — |   | — |   | — | ** ** | **(85,7** | **)** |
| Borrowings                                           |       |       |       | 1,5                                        |       | (17,0 | ) | — |   | — |   | — |   | — | ** ** | **(15,5** | **)** |
| Deferred  revenues                                   |       |       |       | (0,3                                       | )          | — |   | (2,7 | ) | — |   | — |   | 0,8 | ** ** | **(2,2** | **)** |
| Other (1)                                            |       |       |       | 1,5                                        |       | 22,1 |   | — |   | 9,7 |   | — |   | — | ** ** | **33,3** | ** ** |
|                                                 |       |       |       | (83,0                                      | )          | 5,1 |   | (2,7 | ) | 9,7 |   | — |   | 0,8 | ** ** | **(70,1** | **)** |
| **Current  Liabilities**                             |       |       |       |                                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Accounts  payable and accrued liabilities            |       |       |       | 0,1                                        |       | — |   | — |   | — |   | — |   | — | ** ** | **0,1** | ** ** |
| Current  portion of borrowings (1)                   |       |       |       | —                                     |       | — |   | — |   | — |   | — |   | — | ** ** | **—** | ** ** |
| Financial  derivatives (1)                           |       |       |       | —                                     |       | — |   | — |   | — |   | — |   | — | ** ** | **—** | ** ** |
| Deferred  revenues (1)                               |       |       |       | —                                     |       | — |   | — |   | — |   | — |   | — | ** ** | **—** | ** ** |
| Provisions  for risks and charges (1)                |       |       |       | —                                     |       | — |   | — |   | — |   | — |   | — | ** ** | **—** | ** ** |
|                                                 |       |       |       | 0,1                                        |       | — |   | — |   | — |   | — |   | — | ** ** | **0,1** | ** ** |
|                                                 |       |       |       |                                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total  Shareholders’ Equity and Liabilities** | ** ** | ** ** | ** ** | **(1,4**                                   | **)**      | **5,5** | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** | **4,1** | ** ** |

 

----

(1)              Newline in IFRS Balance Sheet.

(2)              Lineno longer used in IFRS Balance Sheet.

 

7

----

 

**3.3.2.****                  Details ofReclassifications to Convert the French GAAP Balance Sheet to IFRS as of September 30, 2005**

 
| ** **                                           | ** ** | ** ** | ** ** | **Increase / (Decrease) Format** | ** ** |
|------------------------------------------------------|------------|------------|------------|----------------------------------|------------|
| ** **                                           | ** ** | ** ** | ** ** | **Current**                      | ** ** | **Investment** | ** ** | **Deferred** | ** ** | **Waivers from** | ** ** | **Joint** | ** ** | ** ** | ** ** |
| ** **                                           | ** ** | ** ** | ** ** | **Non-Current**                  | ** ** | **Property** | ** ** | **Charges** | ** ** | **TWDC** | ** ** | **Ventures** | ** ** | **Total** | ** ** |
| **(€ in millions)**                             | ** ** | **Notes**  | ** ** | **3.5.4**                        | ** ** | **3.5.5** | ** ** | **3.5.6** | ** ** | **3.5.7** | ** ** | **3.5.8** | ** ** | **Reclasses** | ** ** |
| **Non-Current  Assets**                              |       |       |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| Property,  plant and equipment                       |       |       |       | —                           |       | (43.4 | ) | 41.4 |   | — |   | — | ** ** | **(2.0** | **)** |
| Investment  property (1)                             |       |       |       | —                           |       | 43.4 |   | — |   | — |   | — | ** ** | **43.4** | ** ** |
| Intangible  assets                                   |       |       |       | —                           | ** ** | **—** |   | — |   | — |   | — | ** ** | **—** | ** ** |
| Financial  assets                                    |       |       |       | (0.6                             | )          | **—** |   | — |   | — |   | — | ** ** | **(0.6** | **)** |
| Other (1)                                            | ** ** | ** ** | ** ** | **—**                       | ** ** | **—** |   | 6.7 | ** ** | **—** | ** ** | **—** | ** ** | **6.7** | ** ** |
|                                                 | ** ** | ** ** | ** ** | (0.6                             | )          | **—** |   | 48.1 |   | — |   | — | ** ** | **47.5** | ** ** |
| **Current  Assets**                                  |       |       |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| Inventories                                          | ** ** | ** ** | ** ** | **—**                       | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** |
| Trade and  other receivable                          |       |       |       | 0.6                              | ** ** | **—** |   | (8.9 | **)** | **—** |   | 0.1 | ** ** | **(8.2** | **)** |
| Cash and  short-term deposits                        | ** ** | ** ** | ** ** | **—**                       | ** ** | **—** | ** ** | **—** | ** ** | **—** |   | (0.4 | ) | **(0.4** | **)** |
| Other (1)                                            | ** ** | ** ** | ** ** | **—**                       | ** ** | **—** |   | 8.9 | ** ** | **—** | ** ** | **—** |   | **8.9** | ** ** |
| ** **                                           | ** ** | ** ** | ** ** | **0.6**                          | ** ** | **—** | ** ** | **—** | ** ** | **—** |   | (0.3 | ) | **0.3** | ** ** |
|                                                 |       |       |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| **Deferred  Charges****(2)**                         |       |       |       | —                           | ** ** | **—** |   | (48.1 | ) | — |   | — |   | **(48.1** | **)** |
|                                                 |       |       |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| **Total  Assets**                                    | ** ** | ** ** | ** ** | **—**                       | ** ** | **—** | ** ** | **—** | ** ** | **—** |   | (0.3 | ) | **(0.3** | **)** |
|                                                 |       |       |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| **Shareholders’  Equity**                       |       |       |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| Share  capital                                       | ** ** | ** ** | ** ** | **—**                       |       | — |   | — | ** ** | **—** |   | — | ** ** | **—** | ** ** |
| Share  premium                                       | ** ** | ** ** | ** ** | **—**                       |       | — |   | — |   | 173.0 |   | — | ** ** | **173.0** | ** ** |
| Retained  earnings                                   | ** ** | ** ** | ** ** | **—**                       |       | — |   | — |   | (173.0 | ) | — | ** ** | **(173.0** | **)** |
| Asset  revaluation and other reserves (1)            | ** ** | ** ** | ** ** | **—**                       | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** |
|                                                 |       |       |       | —                           |       | — |   | — |   | — |   | — | ** ** | **—** | ** ** |
|                                                 |       |       |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| Minority  interests                                  |       |       |       | —                           | ** ** | **—** |   | — |   | — | ** ** | **—** | ** ** | **—** | ** ** |
|                                                 |       |       |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| **Total  Equity****(1)**                             | ** ** | ** ** | ** ** | **—**                       | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** |
|                                                 |       |       |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| **Non-current  liabilities**                         |       |       |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| Provisions  for risks and charges                    | ** ** | ** ** | ** ** | **—**                       | ** ** | **—** | ** ** | **—** |   | — | ** ** | 0.4 | ** ** | **0.4** | ** ** |
| Borrowings                                           |       |       |       | (37.9                            | )          | **—** | ** ** | **—** | ** ** | **—** |   | — | ** ** | **(37.9** | **)** |
| Deferred  revenues                                   |       |       |       | (50.0                            | )          | **—** | ** ** | **—** | ** ** | **—** |   | — | ** ** | **(50.0** | **)** |
| Other (1)                                            |       |       |       | 20.6                             | ** ** | **—** | ** ** | **—** | ** ** | **—** |   | — | ** ** | **20.6** | ** ** |
|                                                 | ** ** | ** ** | ** ** | (67.3                            | )          | **—** |   | — |   | — |   | 0.4 | ** ** | **(66.9** | **)** |
| **Current  Liabilities**                             |       |       |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| Accounts  payable and accrued liabilities            |       |       |       | 16.8                             | ** ** | **—** | ** ** | **—** |   | — |   | (0.7 | ) | **16.1** | ** ** |
| Current  portion of borrowings (1)                   |       |       |       | 0.5                              | ** ** | **—** | ** ** | **—** |   | — |   | — | ** ** | **0.5** | ** ** |
| Financial  derivatives (1)                           |       |       |       | —                           | ** ** | **—** | ** ** | **—** |   | — |   | — | ** ** | **—** | ** ** |
| Deferred  revenues (1)                               |       |       |       | 50.0                             | ** ** | **—** | ** ** | **—** |   | — |   | — | ** ** | **50.0** | ** ** |
| Provisions  for risks and charges (1)           |       |       |       | —                           | ** ** | **—** |   | — |   | — | ** ** | **—** | ** ** | **—** | ** ** |
|                                                 |       |       |       | 67.3                             |       | — |   | — |   | — |   | (0.7 | ) | **66.6** | ** ** |
|                                                 |       |       |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| **Total  Shareholders’ Equity and Liabilities** | ** ** | ** ** | ** ** | **—**                       | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** | **(0.3** | **)** | **(0.3** | **)** |

 

----

(1)              Newline in IFRS Balance Sheet.

(2)              Lineno longer used in IFRS Balance Sheet.

 

8

----

 

**3.4.****                           ****DESCRIPTION OF  ADJUSTMENTS TO CONVERT FRENCH GAAP FINANCIALSTATEMENTS TO IFRS**

 

**3.4.1.****                  Property, Plantand Equipment – Asset by Component Method (IAS 16)**

 

**UnderFrench GAAP:** Property, plant and equipment are stated athistorical cost less accumulated depreciation and any accumulated impairmentlosses, and depreciated over their estimated useful lives.

 

**UnderIFRS:** Property, plant and equipment will also bestated at historical cost less accumulated depreciation and any impairmentlosses, and depreciated over their estimated useful lives.

 

**The Groupdecided not to apply the following options available in IFRS:**

 

•                  The exemption provided for in IFRS 1,which consists of measuring items of property, plant and equipment at theirfair value at the IFRS transition date and using that fair value as the assets’deemed historical cost at the date of the IFRS opening balance sheet, and

 

•                  The revaluation model provided for in IAS16*, “Property, Plant and Equipment*,”which consists of revaluing property, plant and equipment at fair value at eachperiod-end.

 

***Asset by Component Approach-*** IFRS also requires that assets bedefined using a components approach, which consists of identifying assetsseparately in the accounting records in sufficient detail to allow assets thatare components of larger assets to be amortized separately over their usefullives. Subsequent expenditures to replace a defined fixed asset component willbe capitalized and the replaced component written-off. All other subsequent expenditures,except those which substantially improve the life or utility of the assetconcerned, will be expensed as incurred.

 

As the Group’sfixed assets ledgers and accounting records were already maintained using highlevel of detail, the impact of creating additional fixed asset components onthe opening balance sheet was minor.

 

***Planned Major Renovations-*****Under the Group’s application of FrenchGAAP, expenditures for planned major fixed asset renovations are accrued asoperating expense in advance on a straight-line basis during the period betweenplanned renovations. Under IFRS, expenditures for planned major fixed assetrenovations will be expensed as incurred except for those specific expendituresthat respond to the definition of a defined fixed asset component (i.e.replacement and/or improvement of an existing component).

 

As a result, forthe purpose of converting the French GAAP balance sheet to an IFRS format, thebalance of the accrual for future major fixed asset renovations as of October 1,2004 of € 87.7 million was reversed and recorded as a credit to shareholders’equity. In addition, past planned major renovation expenditures were analyzedin detail to identify expenditures that met the definition of a fixed assetcomponent. As a result of this analysis, € 8.1 million of net book value wasadded to property, plant and equipment and credited to shareholders’ equity asof October 1, 2004. Thus, the net impact on opening equity of theimplementation of IFRS for the accounting of planned major renovations is €95.8 million.

 

***Residual values-*******Under IFRS consistent with French GAAP, no residualvalues have been taken into account because the Group plans to use itsproperty, plant and equipment over their entire useful lives.

 

**3.4.2.****                  Property, Plant andEquipment – Government Subsidies (IAS 20)**

 

**UnderFrench GAAP**:  Land grants of € 12.3 million were providedto the Group by local government authorities between fiscal years 1990 and2000, to assist the Group in the development of the infrastructure necessaryfor the site. These grants were recorded as unearned revenues and amortized toexceptional income over 10 years from the date of grant. As of October 1,2004, € 0.4 million of the total grants received remain in unearned revenue.

 

**Under IFRS**:  Theoption exists to record these grants consistent with current French GAAP or torecord the grants as a reduction of the cost of the asset to which it relates.The Group has opted to change its method and record these grants as a reductionof the related land costs.

 

9

----

 

**3.4.3.****                  Property, Plantand Equipment – Leases (IAS 17)**

 

**UnderFrench GAAP: **The Group records all leasing contractsas rentals as the amounts are contractually due and does not capitalize leasingtransactions that respond to the definition of a financing transaction.

 

**UnderIFRS:**  Leases that transfer to the lesseesubstantially all risks and rewards incidental to ownership of the asset areaccounted for as an asset financing. Under IAS 17, assets leased undercontracts qualifying as financing leases are capitalized and amortized overtheir estimated useful lives and the related lease obligations are recorded asborrowings. Lease payments are allocated between reimbursement of theborrowings and interest using the Group’s incremental borrowing rate.Additionally, under IFRS operating lease payments (resulting from leases thatdo not qualify as financial leases) must be recognized as expense on astraight-line basis over the lease term unless another systematic basis is morerepresentative of the time pattern of the user’s benefit.

 

In order toprepare its opening balance sheet under IFRS, the Group reviewed its leasingcontract commitments as of October 1, 2004 to identify leasing contracts,which responded to the definition of a financing transaction. As a result ofthis review, equity was increased by € 0.6 million and assets with a net bookvalue of € 4.7 million and borrowings of € 4.1 million were recorded as of October 1,2004. During Fiscal Year 2005, no additional leases were capitalized. Inaddition, an adjustment of € 1.6 million debit to opening IFRS equity wasrecorded to adjust operating lease expenses to reflect the straight-line methodversus the as contractually due method used under French GAAP.

 

**3.4.4.****                  Property, Plantand Equipment – Impairment of Assets (IAS 36)**

 

**UnderFrench GAAP: **The Group prepares regular impairmenttests with respect to its assets to ensure that the net book value of property,plant and equipment does not exceed their value in use or fair value. UnderFrench GAAP, the non-discounted operating cash flows of the Group’s tworeporting segments, Resort and Real Estate, were grouped for purposes of thecalculation.

 

**UnderIFRS:** IFRS 36 requires that the Group performs animpairment test as of the opening balance sheet date, October 1, 2004, andwhenever indicators of impairment exist. For purposes of those tests,consistent with the method used under French GAAP, operating assets have beengrouped into cash-generating units, which corresponded to the Group’s reportingsegments. The Resort cash-generating unit includes the theme parks, hotels andDisney Village and related guest amenity facilities. The Real Estate Segmentcash-generating unit includes primarily investment property (land) underlong-term ground leases to third parties.

 

Under IFRS animpairment reserve is recorded when the recoverable amount of a cash-generatingunit is less than its net book value of the assets. For the Group, therecoverable amount of a cash-generating unit represents its “value-in-use”,which is calculated as the present value of estimated future cash flowsexpected to arise from the continuing use of fixed assets and their disposal atthe end of their useful life.

 

The IFRS openingbalance sheet impairment analysis was prepared as of October 1, 2004 andresulted in no impairment adjustment.(1)

 

**3.4.5.****                  FinancialLiabilities and Interest Costs (IAS 23, 32 and 39)**

 

**UnderFrench GAAP: **The Group currently records its financialliabilities at cost. Interest costs are recorded under the accrual method usingthe contractual rate. In addition, debt issue costs are deferred and amortizedover the contractual life of the related debt; however, costs incurred torenegotiate or modify the terms of existing debt are recorded as incurred asexceptional expenses.

 

**UnderIFRS:**  Borrowings, notes payable and receivables arerecorded using the effective interest method. Debt issue costs are deferred andamortized over the contractual life of the related debt. Costs incurred torenegotiate the terms of existing debt instruments are recorded as financialexpense as incurred, if the negotiated modifications qualify as significant.Costs incurred for non-significant modifications to existing debt are deferredand amortized to financial expense using the effective interest method over theremainder of the life of the renegotiated debt.

 

The Group’s debtportfolio includes fixed and variable debt that was incurred to finance theconstruction of Disneyland Resort Paris. Portions of the Group’s debt portfoliowere restructured or substantially modified in negotiations that were finalizedin fiscal years 1994, 2000, and 2005. The modifications over the years to theGroup’s loan agreements have included interest waivers and deferrals ofprincipal repayments. Under French GAAP, these changes were accounted for basedon the contractual terms in the specific years affected and were not reflectedin the Group’s measurement of the outstanding loans or in the measurement ofinterest costs for the periods unaffected by the changes.

 

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(1)  The Group evaluates its fixed assets forimpairment whenever adverse changes in the technological, market, economic orlegal environment indicate that an impairment loss may have occurred.  If a possible impairment were indicated, theGroup would compare the carrying amount of its fixed assets, to their value inuse, which would be determined by discounting the cash flows from the use ofthe fixed assets over their remaining useful life.  If the value in use of the fixed assets wereto be less than their carrying amount, the Group would record an impairmentcharge for the difference.

 

10

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Under IFRS, theopening balance sheet as of October 1, 2004 (first day of fiscal year2005) includes a reduction in shareholders’ equity of € 82.8 million reflectingthe impact of the effective interest method on the Group’s cumulative interestcosts as of that date. In addition, the opening balance sheet and fiscal year2005 financial statements were restated for minor differences in the treatmentof debt restructuring costs, capital leases and the discounting of long-termpayables and receivables to reflect the time value of money. The table belowsummarizes the adjustments and net borrowings* as of the openingbalance sheet date:

 

**Reconciliationof Net Borrowings as of October 1, 2004 :**

 
| ** **                                    | ** ** | **Increase / (Decrease) Format** | ** ** |
|-----------------------------------------------|------------|----------------------------------|------------|
| **(€ in millions)**                      | ** ** | **Principal****(1****)**         | ** ** | **Deferred Debt Issue Costs****(2****)** | ** ** | **Effective   Interest**** ****Accrual****(3****)** | ** ** | **Net Borrowings** | ** ** |
| ** **                                    |
| ** **                                    |
| **French  GAAP - October 1, 2004**       | ** ** | **1,968.5**                      | ** ** | **(9.2** | **)** | **—** | ** ** | **1,959.3** | ** ** |
|                                          |       |                             |       |   |   |   |   |   |   |
| **IFRS Adjustments:**                         |       |                             |       |   |   |   |   |   |   |
| Adjustments resulting from 1994 Restructuring |       | **—**                       | ** ** | **—** | ** ** | 82.8 |   | 82.8 |   |
| Adjustments resulting from 2005 Restructuring |       | **—**                       | ** ** | (9.5 | ) | **—** | ** ** | (9.5 | ) |
| **Sub-total Effective Interest Method**       | ** ** | **—**                       | ** ** | **(9.5** | **)** | **82.8** | ** ** | **73.3** | ** ** |
| Capital Lease Obligation                      |       | 4.1                              |       | **—** | ** ** | **—** | ** ** | 4.1 |   |
|                                          |       |                             |       |   |   |   |   |   |   |
| **IFRS - October 1, 2004**               | ** ** | **1,972.6**                      | ** ** | **(18.7** | **)** | **82.8** | ** ** | **2,036.7** | ** ** |

 

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(1)              Excluding accrued current interest, howeverincluding a long-term contractual obligation classified in “Accounts Payableand Accruals” in French GAAP and “Other Non-Current Liabilities” in IFRS in theamount of € 22.5 million as of October 1, 2004.

 

(2)              Deferred debt issue costs are classified inthe balance sheet as “Deferred Charges” under French GAAP and as “Other Assets”under IFRS.

 

(3)              Effective interest accruals are classified inthe IFRS balance sheet as “Other Non-Current Liabilities.”

 

*               Net borrowings represent the principal ofoutstanding loans or other long-term obligations less deferred debt issue costsand discounts, plus accrued effective interest.

 

11

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In fiscal year 2005, the Group completed acomprehensive restructuring with its stakeholders. The terms of several of theGroup’s loans were significantly modified. In accordance with IFRS 39,paragraph 39-42, the significantly modified loans were accounted for as anextinguishment of the existing debt, with the difference between the fair valueof the new debt and the carrying value of the existing debt recorded as a €58.9 million gain on the extinguishment of debt, which has been recorded on aseparate line in the financial charges section of the Statement of Income.The significantly modified loans were re-recorded at their fair market value onthe effective date of the restructuring (February 23, 2005), reflecting a€ 19.3 million discount from their nominal value. This discount will beamortized to interest expense over the remaining term of the loans. Theunamortized discount balance as of September 30, 2005 was € 17.0 million.Under French GAAP, no adjustments were made to the book values of the modifiedloans.

 

The table below reconciles net borrowings*and financial charges under French GAAP to IFRS as of September 30, 2005and for the year then ended:

 

**Reconciliation of Net Borrowings as of September 30,2005:**

 
| **(€ in millions)**                      | ** ** | **Increase / (Decrease) Format**     | ** ** |
|-----------------------------------------------|------------|--------------------------------------|------------|
| **Principal****(1)**                          | ** ** | **Deferred Debt Issue Costs****(2)** | ** ** | **Borrowings Discount****(3)** | ** ** | **Effective Interest Accrual****(4)** | ** ** | **Net Borrowings** | ** ** |
| ** **                                    |
| ** **                                    |
| **French  GAAP - September 30, 2005**    | ** ** | **1,926.3**                          | ** ** | **(6.7** | **)** | — | ** ** | — | ** ** | **1,919.6** | ** ** |
|                                          |       |                                 |       |   |   |   |   |   |   |   |   |
| **IFRS  Adjustments:**                        |       |                                 |       |   |   |   |   |   |   |   |   |
| Adjustments resulting from 1994 Restructuring |       | —                               |       | — |   | — |   | 25.1 |   | 25.1 |   |
| Adjustments resulting from 2005 Restructuring |       | —                               |       | (11.2 | ) | (17.0 | ) | 1.3 |   | (26.9 | ) |
| Phase IA / IB Debt Issue Costs                |       | —                               |       | 1.5 |   | — |   | — |   | 1.5 |   |
| Discount of  long-term obligation             |       | —                               |       | — |   | (4.2 | ) | — |   | (4.2 | ) |
| **Sub-total  Effective Interest Method**      | ** ** | —                               | ** ** | **(9.7** | **)** | **(21.2** | **)** | **26.4** | ** ** | **(4.5** | **)** |
| Capital Lease  Obligation                     |       | 1.5                                  |       | — |   | —- |   | — |   | 1.5 |   |
|                                          |       |                                 |       |   |   |   |   |   |   |   |   |
| **IFRS - September 30,  2005**           | ** ** | **1,927.8**                          | ** ** | **(16.4** | **)** | **(21.2** | **)** | **26.4** | ** ** | **1,916.6** | ** ** |

 

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(1)              Excluding accrued current interest, howeverincluding a long-term contractual obligation classified in “Accounts Payableand Accruals” in French GAAP and “Other Non-Current Liabilities” in IFRS in theamount of € 20.3 million as of September 30, 2005.

 

(2)              Deferred debt issue costs are classified inthe balance sheet as “Deferred Charges” under French GAAP and as “Other Assets”under IFRS.

 

(3)              Discounts classified in the IFRS balancesheet on the line on which the related obligation is classified.

 

(4)              Effective interest accruals are classified inthe IFRS balance sheet as “Other Non-Current Liabilities.”

 

**Reconcilation of Net Financial Charges for Fiscal Year 2005:**

 
| **(€ in millions)**             | ** ** | **Interest Expenses** | ** ** | **Interest Hedging Contracts** | ** ** | **Capitalised Interest** | ** ** | **Debt Issue/Mod Costs** | ** ** | **Fees &  Other** | ** ** | **Total** | ** ** |
|--------------------------------------|------------|-----------------------|------------|--------------------------------|------------|--------------------------|------------|--------------------------|------------|----------------------------|------------|-----------|------------|
| ** **                           |
| ** **                           |
| **French  GAAP - Fiscal Year 2005**  |       | 84.2                  |       | 0.1                            |       | (0.8                     | )          | 2.4                      |       | 5.9                        |       | 91.8      |       |
|                                 |       |                  |       |                           |       |                     |       |                     |       |                       |       |      |       |
| **IFRS  Adjustments:**               |       |                  |       |                           |       |                     |       |                     |       |                       |       |      |       |
| Effective Interest Adjustments       |       | (4.3                  | )          | —                         |       | —                   |       | —                   |       | —                     |       | (4.3      | )          |
| Interest on Capital Lease Obligation |       | 0.5                   |       | —                         |       | —                   |       | —                   |       | —                     |       | 0.5       |       |
| Other                                |       | —                |       | —                         |       | —                   |       | (1.3                     | )          | (0.8                       | )          | (2.1      | )          |
| Sub-total IFRS  Adjustments          |       | (3.8                  | )          | —                         |       | —                   |       | (1.3                     | )          | (0.8                       | )          | (5.9      | )          |
|                                 |       |                  |       |                           |       |                     |       |                     |       |                       |       |      |       |
| **IFRS -  Fiscal Year 2005**         | ** ** | **80.4**              | ** ** | **0.1**                        | ** ** | **(0.8**                 | **)**      | **1.1**                  | ** ** | **5.1**                    | ** ** | 859       | ** ** |

 

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*       Net borrowings represent the principal ofoutstanding loans or other long-term obligations less deferred debt issue costsand discounts, plus accrued interest.

 

12

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**3.4.6.****                  FinancialInstruments - Derivatives (IAS 32 and 39)**

 

**UnderFrench GAAP:**  Financial derivatives are measured at costand changes in their fair value are not recorded in the financial statements.Currently, the Group uses financial derivatives to hedge future cash flows forinterest expense and certain other non-euro denominated cash flows. The cashflows associated with these derivatives are recorded on an accrual basis tocompensate the gains and losses generated by the underlying cash flow beinghedged.

 

**UnderIFRS:**  Financial derivatives are measured at fairvalue in the balance sheet. Changes in the fair value of these instruments mustbe recognized in the income statement, unless the instrument qualifies as acash flow hedge, in which case movements in the fair value are recognized ascomponents of shareholders’ equity.

The net IFRSadjustments related to interest rate and foreign currency financial derivativesin the opening balance sheet and in the financial statements of fiscal year2005 were immaterial.

 

**3.4.7.****                  Waivers/Contributionsgranted by TWDC during Fiscal Year 2005**

 

**Under French GAAP:**  Waivers or contributions received from aprincipal shareholder are recorded as exceptional income.

 

**Under IFRS:**  The IASB conceptual Framework, paragraph 35requires that transactions be recorded for and presented in accordance withtheir economic substance and not merely their legal form.

 

During fiscal year 2005, The Walt DisneyCompany (“TWDC”), which consolidates the Group in its financial statements,granted to the Group a permanent waiver of € 10 million on the repayment of thebalance of an expiring credit line. In addition, TWDC provided the Group € 2.7million in cash funds to be used for a computer system upgrade required toaccommodate TWDC’s financial reporting needs. Under French GAAP, the € 10million waiver on the line of credit was recorded as exceptional income, whilethe cash provided for the computer system upgrade was recorded as unearnedrevenue as of September 30, 2005 and was to be recognized as revenue overthe life of the computer system upgrade. Applying the concept ofsubstance-over-form under IFRS, the forgiveness of debt and contributionof cash for the computer system upgrade by TWDC have been recorded asadditional capital contributions by TWDC and not income.

 

**3.4.8.****                  Pensions andOther Employee Benefits (IAS 19)**

 

**UnderFrench GAAP:**  The Group currently values and discloses theobligation linked to defined benefit pension plans provided to employees, buthas not recorded the obligation in its financial statements.

 

**Under IFRS:** Defined-benefit pension plan obligations arerequired to be recorded in the financial statements. The actuarial assumptionsused by the Group for its current French GAAP disclosures are consistent withthose that will be used to record the obligation under IFRS.(2)

 

All Groupemployees participate in state funded pension plans in accordance with Frenchlaws and regulations. Certain employees also participate in supplementaldefined contribution plans. Contributions to these plans are shared betweenemployees and the Group. The Group’s portion of these contributions is expensedas incurred.

The Group has nofuture commitment with respect to these benefits.

 

In addition to theabove plans the Group’s collective bargaining agreements call for retirementindemnities ranging from one-half a month to 3 months of gross wages beprovided to employees who retire from the Group at the age of 60 or older aftercompleting at least one year of service. The actuarially calculated presentvalue of the obligation for these benefits as of October 1, 2004 is € 8.8million and has been recorded in the Group’s balance sheet in accordance withthe requirements of IAS 19.

 

**3.4.9.****                  Share-BasedPayments (IFRS 2)**

 

**UnderFrench GAAP:**EuroDisney S.C.A. has granted stock options to certain Group employees. UnderFrench GAAP, no expense is recognized in connection with the granting of stockoptions. On exercise of stock options, Euro Disney S.C.A. issues new shares viaa capital increase. Only the cash exercise price received in exchange for theshares with a corresponding entry in share capital and share premium isrecognized in the financial statements.

 

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(2) The present value of the obligation of thesebenefits is based upon assumptions relating to inflation rate, discount rate,salary growth, turnover and mortality rates and is calculated using theProjected Unit Credit Method. The hypotheses for the present value of thisobligation as of September 30, 2004 were the following inflation rate of 2.0%,discount rate of 5.25% and salary growth rates ranging from 2.75% to 3.25%.

 

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**UnderIFRS:**IFRS 2requires than an expense be recognized equal to the fair value of the servicesrendered by the employees in return for the equity instruments granted to them.Compensation expense related to stock options (which the Group measures at thegrant date using the Black-Scholes-Merton Model) is deferred and charged toincome over the vesting period of the options.

 

Under thefirst-time adoption requirements set out in IFRS in relation to IFRS 2, onlythe accounting for employee stock options granted after November 7, 2002and not fully vested at January 1, 2005 is required to be retroactivelyadjusted. As the Group had no new stock option grants during this period, IFRS2 has no impact on financial statements as of the opening balance sheet of October 1,2004 (first day of fiscal year 2005).

 

In September 2005,Euro Disney S.C.A. granted 53 million stock options to management, which givesrise to a total compensation expense of € 2.8 million, net of estimatedforfeitures. This expense will be recognized over the four-year vesting periodof the options. In fiscal year 2005, compensation expense recognized for thisgrant was € 0.1 million (on a pro-rata basis).

 

**3.4.10.****           Revenue Recognition(IAS 18)**

 

**UnderFrench GAAP:**  The Group’s operating activities are dividedinto two reporting segments: Resort and Real Estate. Revenues under French GAAPare measured at their nominal value when earned.

Revenues in the Group’s Resort segment are generatedprimarily from services rendered to guests and from the sale of food, beveragesand merchandise. Revenues for services are recorded as and when provided toguests while sales of food, beverages and merchandise are recorded at the pointof sale. This segment also generates revenues associated with long-termsponsorship contracts with various third-party companies participating inbringing the resort experience to the Group’s guests, which are recognizedstraight-line over the term of the contracts.

 

In the Group’sReal Estate segment, transactions include primarily land sales to developers(occasionally with deferred payment terms), long-term ground lease transactionsand project management and development services provided to third parties.Revenues are recognized for land sales upon closing and transfer of title.Revenues under ground lease contracts are recognized straight-line over theterm of the contract, while revenue associated with project management anddevelopment services are recognized as the service is rendered.

 

**UnderIFRS**:  The guidance provided in IAS 18 is consistentwith the Group’s current revenue recognition policies under French GAAP, exceptwith respect to the measurement of revenues for transactions that involvepayments over a period longer than the operating cycle (one-year for theGroup). IAS 18, paragraph 11 requires that the time value of money at themoment of the transaction be reflected in the measurement of revenue for thesetransactions. In addition, application of the guidance provided in IAS 18concerning revenue recognition of multi-element contracts, may requirethat the Group defer revenue from future transactions that may have beenrecognized over shorter periods of time under French GAAP. The opening balancesheet under IFRS as of October 1, 2004 (the first day of fiscal year 2005)includes the impact of deferring a fee paid by a vendor over the term of therelated contract (under French GAAP this fee was recognized in full in the yearit was received) and the impact of discounting revenues associated withinstallment land sales.

 

**3.4.11.****           Consolidation ofSpecial Purpose Entities (IAS 27, SIC 12)**

 

**UnderFrench GAAP****:**  In accordance with the Financial Security Law*(Loi de Sécurité Financière)*, theGroup currently consolidates financing companies that are in-substancecontrolled by the Group. The consolidated special purpose entities (“SPEs”) owna substantial portion of the Group’s operating assets.

 

**UnderIFRS:**  Subsidiaries controlled by aparent company are required to be consolidated. IAS 27, *ConsolidatedFinancial Statements and Accounting for Investments in Subsidiaries*,in SIC-12 expands the definition of subsidiaries including entities, which perform activitiesfor or on behalf of the reporting entity. The criteria for control are:

 

•                  the SPE performs activities onbehalf of the reporting entity;

•                  the reporting entity hasdecision-making powers (directly or indirectly through an autopilot mechanism);

•                  the reporting entity has the rightto obtain the majority of the benefits of the SPE; or

•                  the reporting entity retains the majorityof the residual or ownership risks related to the SPE or its assets.

 

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No adjustments ofthe French GAAP financial statements were required to comply with IAS 27 andSIC 12.

 

**3.4.12.****           Income Taxes (IAS 12)**

 

**UnderFrench GAAP****:**  The Group provides for deferred income taxeson temporary differences between financial and tax reporting using theliability method, which calculates deferred tax assets and liabilities byapplying the currently enacted tax rates expected to be in effect when thetemporary differences will reverse.

 

**UnderIFRS**:  In general, the accounting treatment requiredby IAS 12, *Income Taxes*, isconsistent with the Group’s current method under French GAAP.

The Groupcurrently has relatively minor temporary differences between book and taxreporting and in addition had approximately € 0.9 and € 1.0 billion of tax losscarry forwards available as of October 1, 2004 and September 30,2005, respectively. Under French GAAP, the deferred tax asset associated withthese tax loss carry forwards has not been recognized in accordance with theprinciple of prudence provided under French GAAP with respect to therecognition of this asset.

No adjustments ofthe French GAAP financial statements were required to comply with IAS 12.

 

**3.5.****                           ****DESCRIPTION OF IFRSRECLASSIFICATIONS**

 

**3.5.1.****                  GeneralPresentation of the Statement of Income****(3)**

 

Under IFRS 1, the statement of income may bepresented either by nature or by function. The Group currently presents itsincome statement by function and has not yet concluded its assessment as towhether it will maintain this presentation or adopt a presentation by nature ofcosts. This assessment will be completed before the issuance of the Group’sfirst half 2006 financial statements, the Group’s first publication of resultsunder IFRS. This decision is not likely to change the presentation on the faceof the statement of income, but could affect the content of the supportingfootnotes.

 

In addition, the line Exceptional Income/Loss currentlyincluded in the French GAAP statement of income will no longer appear in theIFRS format. The line “Equity in the Income of Investees” has been added to theIFRS statement of income (see section 3.5.8 to this report).

 

**3.5.2.****                  Agency Revenues(IAS 18)**

 

**Under French GAAP:** Currently the Group classifies revenues generated from the sale toguests of third-party travel services gross of the related cost of sales forsuch services.

 

**Under IFRS:** Revenues generated in cases where the Group acts as agent and notprincipal are required to be classified net of the related cost of sales (i.e.reported revenue is the net commission on such transactions).

 

The Group’s activities include those carriedout by Euro Disney Vacances, S.A.S(“EDV”), a French licensed travel agency. EDV provides travel agent services toindividual guests wishing to book a stay at Disneyland Resort Paris. The travelservices provided include not only Disneyland Resort Paris specific product,but also travel (e.g., air, train, rental car) and non-Euro Disney excursions(for example to Paris or to the Loire Valley). In addition, the Group hascontracts with several third-party hotels operating either directly on theResort site or in the surrounding area, which give the Group the right to sellrooms at these hotels in EDV travel packages.

 

Under IFRS, these transactions meet thecriteria of an agency relationship and are recorded in revenue net of therelated cost of sales.

 

**3.5.3.****                  ExceptionalItems**

 

**Under French GAAP:**  Certain types of revenues and expenses arecurrently classified as exceptional items, including gains and losses on thesale or write-off of fixed assets, restructuring costs, and theme parkpre-opening costs.

 

**Under IFRS:**  The exceptional classification does notexist. IFRS requires that these costs be classified as operating or financialdepending on their nature or function.

 

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(3)  TheGroup has two reportable segments: the Resort Segment, which includes theoperations of the Theme Parks, Hotels and Disney Village, and the Real EstateSegment. This is consistent with the internal financial reporting of the Group.

 

 

15

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**3.5.4.****                  GeneralPresentation of the Balance Sheet**

 

Under IAS 1, the balance sheet distinctionbetween current and non-current items is the most significant change in thepresentation of the IFRS balance sheet when compared to the French GAAP balancesheet.

 

In addition, under French GAAP, minorityinterests were presented separate from shareholders’ equity. Under IFRSminority interests are presented within shareholders’ equity.

 

New lines and lines that will not longer beincluded on the IFRS balance sheet are indicated in section 3.3 of thisreport.

 

**3.5.5.****                  InvestmentProperty (IAS 40)**

 

**Under French GAAP:**Investment property is recorded atcost less any accumulated depreciation and accumulated impairment losses.

 

**Under IFRS**:  Investment property is defined as property(land or a building, or part of a building, or both) held to earn rentalsor for capital appreciation or both, rather than for:

 

•                  use in the production or supply ofgoods or services or for administrative purposes; or

•                  sale in the ordinary course ofbusiness.

 

IFRS provides the option to measureinvestment property at fair value or cost. Under the fair value modelinvestment property is measured at fair value without deduction of transactioncosts, with adjustments in value included in the statement of income as theyarise. Under the cost model, investment properties are carried at cost less anyaccumulated depreciation and accumulated impairment losses.

 

The Group leases land with a net book valueof € 43.4 million to various third parties under long-term ground leases. Theseproperties constitute investment property under IFRS and as such are classifiedon a separate line of the balance sheet. The Group has opted to measure theseproperties at cost.

 

**3.5.6.****                  Deferred Charges**

 

The current French GAAP balance sheetincludes a caption called “Deferred Charges” which includes deferred debt issuecosts and various contributions to the local authorities for the constructionof certain secondary infrastructure on the resort site.

 

Under IFRS, the line “Deferred Charges” willno longer be included on the IFRS balance sheet. Deferred debt issue costs havebeen reclassified to the line “Other Non-Current Assets.”  The Group’s contribution to the constructioncost of the resort site infrastructure have been transferred to “Property,Plant and Equipment.”

 

**3.5.7.****                  PermanentWaivers Granted by TWDC during 1994 Financial Restructuring**

 

**Under French GAAP:**  Waivers or contributions received from ashareholder are recorded as exceptional income. Other forms of aid from aprincipal shareholder are recorded based upon the legal form of thetransaction.

 

**Under IFRS:**  The IASB Framework, paragraph 35 requiresthat transactions be recorded and presented in accordance with their economicsubstance and not merely their legal form.

 

During fiscal year 1994, the Group underwenta major financial restructuring. As part of that restructuring, TWDCagreed to make the following concessions and contributions to the Group:

 

•                  TWDCagreed to permanently waive € 184.2 million of current liabilities owed by theGroup to TWDC as of March 1994,

 

•                  TWDCagreed to subscribe to € 152.4 million of bonds redeemable in shares issued bythe Group in conjunction with the 1994 restructuring. The bonds had a 10-yearterm and a stated interest rate of 1%. The fair value of these bonds takinginto account the prevailing interest rate and the conversion terms at theirissuance date was estimated at € 49.4 million, resulting in a € 114.3 million benefitto the Group. Out of the total € 49.4 million fair value, € 11.2 millionrepresented the interest element of the instrument. These bonds matured on July 11,2004.

 

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Each of the above transactions was analyzedunder IFRS using the principle of substance over form. As a result, thefollowing reclassifications to the French GAAP classifications were recordedbetween retained earnings and share premium to reflect additional capitalcontributions by TWDC:

 

 

| **(€ in millions)**          | ** ** | ** ** | ** ** |
|-----------------------------------|------------|------------|------------|
| TWDC permanent waiver of payables |       | (184.2     | )          |
| Redeemable Bonds interest element |       | 11.2       |       |
| **Total  Reclassification**       | ** ** | **(173.0** | **)**      |

 

See section 3.4.7 for a discussion ofadditional waivers / contributions granted by TWDC during year 2005.

 

**3.5.8. Joint Ventures**

 

**Under French GAAP:**  Entities for which joint control is legallyestablished under a contractual agreement are recorded using the proportionateconsolidation method.

 

**Under IFRS: **Entities jointlycontrolled under contractual agreements can be consolidated using either theproportionate consolidation method or the equity investment method.

 

The Group is currently participating in twojoint ventures:

 

•                  Convergence Achats S.A.R.L. – a jointventure with *Groupe Flo* tonegotiate food purchasing contracts, and

 

•                  Les Village Nature de Val d’Europe S.A.R.L*.* – a joint venture with *Pierre and**Vacances*to establish a feasibility study concerning apotential resort development concept.

 

The activities associated with these venturesare currently recorded using the proportionate consolidation method. The Grouphas opted to change its method of consolidating these entities to the equityinvestment method. The adjustment has no net impact on shareholders’ equity.

 

**3.5.9****                     Credit CardCommission Expenses and Gains and Losses on Foreign Currency Exchange**

 

Currently, credit card commission expensesand gains and losses on foreign currency exchange are classified as financialexpense in the French GAAP income statement.

 

Under IFRS, credit card commission expensesand gains and losses on foreign currency exchange will be classified as directoperating costs.

 

**3.5.10.****           Impact of IFRSAdjustments on the Statement of Cash Flows**

 

The restatements and reclassificationsarising from first-time adoption of IFRS do not have a significant impact oncash and cash equivalents. The restatement linked to changing the method ofconsolidation for joint ventures reduces cash equivalents by € 0.3 million asof September 30, 2005.

 

The Statement of Cash Flows required underIAS 7 is fairly close to that already used by the Group under French GAAP.Consequently, there is unlikely to be any major change in the presentation ofthe consolidated statement of cash flows.

 

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