BIC - 2019 Universal Registration Document

FINANCIAL STATEMENTS

Consolidated financial statements

The goodwill impairment test methodology is based on a comparison between the recoverable amount of each of the Group’s cash-generating units and the corresponding assets’ net book value (including goodwill). Such recoverable amounts correspond to the value in use and are determined using discounted future cash flow projections over a maximum of five years and a terminal value using the perpetual annuity method, including notably the following: the discount rate before taxes used is the weighted average ● cost of capital. Particular attention has been paid to the analysis of the main market items used for the calculation of the discount rates; the perpetual growth rates were determined based on ● external (inflation rate) and internal (business growth) sources. Perpetual growth rates above 2% take into account market specifics. In early December 2019 and with a view providing financial resources for the Cello subsidiary, the Group initiated a transfer of the Cello trademark from India to France. In this context an

independent valuation expert was appointed to determine the fair value of the trademark. As a result of this appraisal, the trademark was written down by 21 million euros to 24 million euros (see note 11). Furthermore, at the end of December, in light of the adverse business environment of Cello both in India and its major export markets, Bic performed an additional impairment test of the Cello unit using the latest long-term strategic plan available, an 11.9% weighted average cost of capital (WACC) before tax and an 4.0% perpetual growth rate. This test led to the full depreciation of the Cello goodwill of 23 million euros. Considering the full impairment on Cello goodwill, any negative variance of drivers (discount rate, performance and perpetual growth rates) would lead to an additional impairment of other assets. The sensitivity of the other impairment tests to changes in the key assumptions indicates that no reasonably likely change would lead to impairment, taking into account the observed headroom on the other tests conducted.

NOTE 11

INTANGIBLE ASSETS

Accounting policies Internally-generated intangible assets – research and development expenditure An internally-generated intangible asset arising from the development or a development phase of an internal project is only recognized on the balance sheet if an entity can demonstrate all of the following : the technical feasibility of completing the intangible asset so that it will be available for use or sale; ● its intention to complete the intangible asset and use or sell it; ● its ability to use or sell the intangible asset; ● how the intangible asset will generate probable future economic benefits. Among other things, the entity must demonstrate the ● existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset; the availibility of adequate technical, financial and other resources to complete the development and to use or sell the intangible ● asset; its ability to measure reliably the expenditure attribuable to the intangible asset during its development. ● Internally-generated intangible assets are amortized on a straight-line basis over their estimated useful life. When the requirements for recognition of internally-generated intangible assets are not satisfied, development expenditure is charged to profit or loss in the period in which it is incurred. Patents, trademarks, licenses and software Patents, trademarks, licenses and softwares are measured initially at purchase cost less accumulated amortization and impairment loss. Amortization is booked to proft or loss so as to reduce the carrying amount of assets over their estimated useful life, using the straight-line method. Impairment of intangible assets (excluding goodwill) See Note 9-2

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• BIC GROUP - 2019 UNIVERSAL REGISTRATION DOCUMENT •