Assystem - Registration Document 2016

FINANCIAL STATEMENTS

CONSOLIDATED FINANCIAL STATEMENTS

the future cash flows that it expects to derive from each CGU. These projections are based on four-year budgets and cash flows beyond this four-year period are estimated by extrapolating the projections using a perpetuity growth rate (see below). This growth rate must not exceed the medium- to long-term average growth rate for the industry as a whole. Future cash flows are discounted based on the weighted average cost of capital (WACC) of each business segment. The cash flows used were based on budget forecasts drawn up by the operating management teams of each CGU when determining their medium and long-term strategy. The Group applied a normative cost of debt weighted for the Group as a whole and a cost of equity specific to each country in order to determine the WACC (see table below).

The Staffing CGU was identified as having a recoverable amount lower than its carrying amount in 2016, which led to the recognition of a €7.0 million impairment loss. Sensitivity analyses were performed to measure the impact of changes in the main assumptions used for calculating the impairment loss (WACC, EBITDA and perpetuity growth rate). The impacts of changes in scope of consolidation in 2016 are described in Note 3.2 – Business combinations. 3.4 Impairment testing The recoverable amount of the CGUs was calculated based on their value in use. In order to determine value in use, the Group projects

The table below presents the main factors used for modelling the assumptions applied for the impairment tests:

2016

Perpetuity growth rate used for extrapolating future cash flows beyond the projection period

CGU

Discount rate

Global Product Solutions Energy & Infrastructure

1.5% 1.5% 1.0%

7.7% 8.0%

Staffing

10.7%

If any impairment is identified based on the calculation of discounted future cash flows and/or market values of the assets concerned, or if there is a change in market conditions or in the cash flows that were originally estimated, then previously recognised impairment losses may need to be revised or modified.

A 1% (100 basis points) increase in the WACC, EBITDA and perpetuity growth rate assumptions used for the impairment tests carried out on the Global Product Solutions and Energy & Infrastructure CGUs would not result in the recognition of an impairment loss for these CGUs.

SEGMENT REPORTING

NOTE 4

6

Operating segments are components of the Group about which separate financial information is available that is evaluated regularly by Group management in deciding how to allocate resources and in assessing performance. Consequently, the Group has three operating segments: Global Product Solutions (outsourced R&D), Energy & Infrastructure (complex infrastructure engineering) and Staffing (worldwide assignment of consultants specialised in Oil & Gas and other industrial sectors). The main accounting policies used for operating segments are as follows: ● each segment has its own resources and may share certain resources with other segments to create synergies. This sharing is carried out through a reallocation of costs or through contractual relations between different legal entities; ● management costs that are directly attributable to the three operating segments are allocated to each segment concerned;

● the indicator, “EBITA including share of profit of equity-accounted investees”, excludes non-recurring income and expenses. Analysis by operating segment Assets and liabilities allocated by operating segment correspond to operating assets and liabilities used by each division in its operating activities and which are directly attributable to the segment or can be allocated to the segment on a reasonable basis. They correspond to: ● goodwill, intangible assets and property, plant and equipment; ● trade receivables, other receivables and other current assets; ● trade payables, amounts due to suppliers of non-current assets, accrued taxes and payroll costs, liabilities related to share acquisitions, short- term provisions and other current liabilities.

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ASSYSTEM

REGISTRATION DOCUMENT 2016