AXWAY_REGISTRATION_DOCUMENT_2017

AXWAY GROUP AND ITS BUSINESS ACTIVITIES Notes to the financial statements

CORPORATE RESPONSIBILITY

CORPORATE GOVERNANCE

CONSOLIDATED FINANCIAL STATEMENTS

2017 ANNUAL FINANCIAL STATEMENTS

CAPITAL AND AXWAY SOFTWARE STOCK

INFORMATIONS ADMINISTRATIVES ETbJURIDIQUES

COMBINED GENERAL MEETING OFb6bJUNEb2018

6.4 Deferred tax assets and liabilities Deferred tax is recognized using the balance sheet liability method based on temporary differences between the carrying amount of assets and liabilities in the consolidated balance sheet and their tax base.

Deferred tax assets and liabilities are measured for each entity or taxable unit on the basis of the tax rates in force, or substantially adopted, at the reporting date and expected to apply when assets will be realized or liabilities settled. Deferred tax assets arising from tax losses carried forward are recognized if the subsidiaries or the tax consolidation group are likely to have sufficient taxable earnings to use them.

6.4.1 Breakdown by maturity

31/12/2017

31/12/2016

31/12/2015

(in thousands of euros)

Deferred tax assets (DTA)

less than one year more than one year

1,800

8,933

7,353

●

18,659 20,459

37,395 46,328

37,887 45,240

●

Total DTA

Deferred tax liabilities (DTL)

less than one year more than one year

-33

-

-430

●

-387 -420

-995 -995

-6,625 -7,055 38,185

●

Total DTL

Deferred net tax

20,039

45,333

The tax-rate reduction to 28% fromǾ2019, then to 25% byǾ2022, in accordance with the French Finance Act forǾ2018, was used to estimate the deferred tax of Axway Software in France. The tax-rate reduction to 21% fromǾ2018 was used to calculate the deferred tax of Axway Inc in the United States, in accordance with the new corporate tax rules.

Short-term deferred tax assets mainly relate to the intended use of tax loss carry-forwards inǾ2018 by Axway Inc in the United States. Long-term deferred tax assets mainly relate to the intended use of tax loss carry-forwards fromǾ2019 toǾ2022 by Axway Software in France and Axway Inc in the United States.

6.4.2 Change in net deferred tax

31/12/2017

31/12/2016

31/12/2015

(in thousands of euros)

At 1ǾJanuary

45,333

38,185

31,227

Changes in scope of consolidation Tax – income statement impact Tax – shareholders’ equity impact Foreign exchange gains and losses

-

6,323 -250 -236 1,311

-190 4,830 -500 2,818

-20,344

-439

-4,512 20,039

At 31ǾDecember

45,333

38,185

transfer pricing model, the five-year forecasts have been lowered in both regions, and we recognized downward adjustments of €7.3Ǿmillion and €3.1Ǿmillion respectively to reflect these forecasts. InǾ 2017, deferred tax assets were adjusted downwards by charging €20.3Ǿmillion to income. Translation adjustments of (-)€4.5Ǿmillion arise mainly from impact of the fall of the US dollar against the euro. No tax loss carry-forwards were recognized as assets following the acquisition of the Syncplicity group in FebruaryǾ2017.

In DecemberǾ2017, the United States promulgated new legislation concerning corporate taxation rates and rules as from the 2018 tax year. For Axway Inc (the American subsidiary), which applies a standard rule for deferred tax recognition covering the next five years of taxable profit, this significant rate change has negatively impacted the value recognized in our accounts. InǾ2017, a €10.5Ǿmillion charge was recognized in income, reflecting the application of the new taxation rates. Furthermore, in view of our changing income mix (with the development of the Cloud) and our transitional income statement (reflecting the change of business model with the Cloud), particularly in the United States and France, and of our new

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AXWAY - 2017 REGISTRATION DOCUMENT

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