AXWAY_REGISTRATION_DOCUMENT_2017

CORPORATE GOVERNANCE AXWAY GROUP AND ITS BUSINESS ACTIVITIES Statutory Auditors’ report on the consolidated financial statements CORPORATE RESPONSIBILITY

CONSOLIDATED FINANCIAL STATEMENTS

2017 ANNUAL FINANCIAL STATEMENTS

CAPITAL AND AXWAY SOFTWARE STOCK

INFORMATIONS ADMINISTRATIVES ETbJURIDIQUES

COMBINED GENERAL MEETING OFb6bJUNEb2018

Measurement and impairment of goodwill (Notes 8.1 and 8.2 to the consolidated financial statements) Risk identified For the purposes of its development, the Group has conducted targeted external growth operations entailing recognition of several goodwill items. These goodwill items, corresponding to the difference between the price paid and the fair value of the assets acquired and liabilities assumed, are described in Notes 2.3 and 8.1 to the consolidated financial statements. This goodwill is allocated to the sole cash generating unit (CGU) identified in the Axway Group, namely the Group itself. The management ensures at each year-end, and whenever indication of an impairment loss is identified, that the net carrying amount of such goodwill, recognized in the balance sheet at €288.8 million at 31 December 2016, and at €333.6 million at 31 December 2017, is not greater than its recoverable amount. A cash generating unit’s recoverable amount is the higher of its fair value (generally market value) less costs of disposal, and its value-in-use. The value-in-use is determined using the discounted future cash flowmethod: The procedures for the impairment test used are described in Note 8.2, together with the details of the assumptions adopted. At 31 December 2017, the impairment test performed did not identify any impairment loss in the goodwill recognized. Determination of the recoverable amounts of goodwill, which is of particular significance in comparison to the balance sheet total, relies very largely on the management’s judgment; this concerns in particular the definition of the cash generating units, the infinity growth rate adopted for the cash flow forecasts and the discount rate applied to them. We therefore considered measurement of goodwill and the implementation of impairment tests as a key point in our audit. ● examining the compliance of the methodology applied by the Group to the current accounting standards and, in particular, ascertaining whether the allocation of the assets to the sole CGU identified is exhaustive; ● assessing the reasonableness of the assumptions used to determine future cash flows having regard to operating data, in light of the economic and financial context in which the Group operates; ● with the support of our valuation experts, assessing the consistency of the infinity growth rate and discount rate in all their components; Our response Our work included the following, in particular:

● analyzing the sensitivity of the value-in-use determined by management to changes in the main assumptions adopted. Lastly, we ascertained whether the disclosures in Notes 2.3, 8.1 and 8.2 were appropriate. Recoverability of deferred tax assets in respect of tax loss carryforwards (Note 6.4 to the consolidated financial statements) Risk identified At 31 December 2017, eligible tax losses carried forward amounted to €178 million. In respect of these tax loss carryforwards, the Group recognized deferred tax assets in the balance sheet amounting to €19.5 million. The Group recognizes deferred tax using the balance sheet liability method based on temporary differences between the carrying amount of assets and liabilities in the consolidated financial statements and their tax base. Deferred tax assets relating to tax losses carried forward are recognized if the subsidiaries or the tax consolidation group are likely to have sufficient taxable profits to offset against them. We considered recognition and assessment of the recoverability of these deferred tax assets to be a key point in our audit, in view of their significance in the Group’s financial statements and on account of the fact that their recoverable amount, which is based in particular on future profit forecasts, requires the use of assumptions, estimates or assessments by management. Our response We obtained details of the deferred tax assets and taxable profit forecasts for Axway Software and Axway Inc. and, on the basis of this information, we conducted the following procedures: ● we reviewed the calculations and assessed the reasonableness of the main estimates, particularly for the forecasts of future taxable profits; ● we analyzed the consistency of the forecasts with the Group’ historic performance, its transfer pricing policy and the assumptions used in determining the value-in-use of the sole CGU; ● we inspected the various taxation rates used in determining the deferred tax assets, particularly in France and the United States, in order to verify whether the changes in tax legislation had been taken into account. Lastly, we verified the appropriateness of the disclosures in Note 6.4.

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AXWAY - 2017 REGISTRATION DOCUMENT

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