AXWAY_REGISTRATION_DOCUMENT_2017

AXWAY GROUP AND ITS BUSINESS ACTIVITIES

CORPORATE RESPONSIBILITY

CORPORATE GOVERNANCE

CONSOLIDATED FINANCIAL STATEMENTS

2017 ANNUAL FINANCIAL STATEMENTS

CAPITAL AND AXWAY SOFTWARE STOCK

INFORMATIONS ADMINISTRATIVES ETbJURIDIQUES

COMBINED GENERAL MEETING OFb6bJUNEb2018

Statutory Auditors’ report on the consolidated financial statements

Sometimes, contracts comprising multiple components (license, maintenance, ancillary services, etc.) may be negotiated on a fixed-price basis. In this situation, the amount of revenue attributable to the license is obtained by the difference between the total contract amount and the fair value of its other components. In this context, the audit risks concern in particular the correct separation of fiscal years and the rules and procedures for apportioning revenue to contracts with multiple components. Revenue recognition for this business line is considered a key point in our audit in view of its material significance in the Group’s financial statements, and, in particular, its effect on operating profit. Our response Our audit approach is based on the assessment of the internal control procedures put in place by the Group in order to verify the measurement, exhaustiveness and proper separation of fiscal years for licensing revenue. Our approach also relies on substantive audit procedures. Our work included the following, in particular: ● reviewing the design of the internal system as well as the effectiveness-testing of the key check points in the procedure for recognizing licensing revenue; ● conducting detailed tests, by sampling or other selection methods, on the revenue from licensing contracts signed during the fiscal year in order to verify the reality and measurement of the revenue, and the correct separation of fiscal years; ● in particular, we reconciled the recognized amount of licensing revenue with the contract data, and verified the application of the procedure for apportioning the prices of multiple-component contracts among the different elements of such contracts; ● we examined the proofs of delivery and the terms and procedures for payment. We also assessed the appropriateness of the disclosures in Note 4.1 to the consolidated financial statements. First recognition of Syncplicity in the financial statements (Notes 2.3 and 8.1 to the consolidated financial statements) Risk identified On 22 February 2017, the Group acquired Syncplicity for a consideration of €57 million. As described in Note 2.3 to the consolidated financial statements, the Group applies Revised IFRS 3 relating to business

combinations. Recognition of the identifiable assets acquired and liabilities assumed when businesses combine calls for judgment by the management, on the basis of the contract terms, internal and external economic data and the company’s accounting and management policies, to identify those items and measure them at fair value. In accordance with the procedures described in Note 2.3 to the consolidated financial statements, on completion of the acquisition price allocation, the management recognizes goodwill on acquisition reflecting the difference between, on the one hand, the sum of the acquisition price of the business acquired and the amount of non-controlling interests in the company acquired and, on the other, the net balance of identifiable assets acquired and liabilities assumed. The Group has twelve months from the acquisition date in which to identify the assets acquired and liabilities assumed that were not recognized at the initial recognition of the business combination, and to amend retroactively the values initially allocated. At 31 December 2017, the transaction effected by Axway in acquiring Syncplicity generated acquisition goodwill of €76.6 million, with €11.5 million of intangible assets. Because the management must exercise judgment in a number of instances in identifying the assets and liabilities acquired, and measuring them at fair value, and in view of the significance of this acquisition in respect of the balance sheet total, we regarded recognition of this business combination as a key point in our audit. Our response We examined the methodology applied by the Group, and its compliance with the recommendations of Revised IFRS 3. Our work included the following, in particular: ● on the basis of the acquisition contract terms and the criteria laid down by the relevant accounting standards, we performed a critical analysis of the management’s identification and fair value measurement of the assets acquired and liabilities assumed; ● in particular, concerning the measurement of Syncplicity’s intangible assets, we acted as follows: ● with the support of our own valuation experts, we verified the appropriateness of the models and assumptions used by management and its independent experts for the fair value measurement of the assets acquired and liabilities assumed, ● we ascertained the reasonableness and consistency with the internal and external data available to management of the crucial assumptions including infinity growth rates and discount rates used in the measurement model. Lastly, we verified the appropriateness of the information set out in Notes 2.3 and 8.1 to the consolidated financial statements.

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AXWAY - 2017 REGISTRATION DOCUMENT