Euronext - 2019 Universal Registration Document

Other information

Independent Auditor’s Report

ACCOUNTING FOR THE ACQUISITION OF OSLO BØRS VPS Risk

In 2019, Euronext acquired all shares of Oslo Børs VPS. As disclosed in notes 2 and 5 to the financial statements the total considerations was €693 million. The acquisition has been included in the consolidated financial position and results of Euronext from the moment control was obtained in June 2019. Based on the purchase price allocations performed, with the support of external valuation experts, separately identifiable intangible assets of €252 million and goodwill of €503 million have been recognized. Accounting for business combinations involves a number of judgments, such as the identification of intangible assets, the choice of valuation techniques and underlying assumptions, as well as the allocation to cash generating units. The use of different techniques and assumptions could produce significantly different estimates. Given the relative size of the amounts involved and the inherent complexity, we consider this as a key audit matter. Our audit approach We gained an understanding of the acquisition and made an assessment of the process that management has undertaken to

determine the allocation of the purchase price, including understanding the scope of work, assessing the qualifications and competence of the external valuation experts and evaluating whether the correct accounting treatment has been applied in accordance with IFRS 3. We tested the considerations paid and the identification and valuation of the identifiable tangible and intangible assets acquired, in particular the customer relations and software. We have audited the fair value measurements prepared by management and their valuation experts including assessing the key valuation assumptions used and engaged our valuation specialists to evaluate the methodology and assumptions applied by Euronext. Furthermore, we benchmarked key data inputs used in the valuation model such as the EBIT margin, longevity of acquired customer relationships and reviewed the reasonableness of the amortization period applied. Finally, we have evaluated the appropriateness of the disclosure related to business combinations, included in notes 2 and 5 to the financial statements. We found the identification and measurement of the goodwill, identifiable assets and liabilities related to the 2019 acquisition of Oslo Børs VPS reasonable. The disclosures on the business combination are in accordance with the requirements under EU-IFRS.

Key observations

MEASUREMENT OF FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME Risk Euronext holds a direct and an indirect minority interest in Euroclear S.A./N.V.

As described in note 20 to the financial statements this interest is classified as a financial asset at fair value through other comprehensive income. As Euroclear is a non-listed company, Euronext applies an internally developed model to estimate the fair value. Since 2018, a weighted approach is applied which is based on the return on equity, dividend growth rate and cost of capital of comparable regulated entities and market observable transactions less a discount for illiquidity. In 2019, Euronext revalued its interest by EUR 9 million, increasing the fair value to €197 million. The determination of the fair value of the interest in Euroclear involves significant management judgment and assumptions as certain unobservable inputs are used. The use of different valuation techniques and assumptions could produce significantly different estimate of fair value. Given the inherent subjectivity we determined this a key matter for our audit. Our audit approach Our audit procedures comprised, among others, an assessment of the methodology and the appropriateness of the valuation model for consistency and an assessment against generally accepted market practice and inputs used to value the investments. Further, we used our valuation specialists to independently assess the valuation performed. As part of these audit procedures we tested the reasonability of key inputs used in the valuation such as the market observable transfers, the return on equity and expected dividend growth rates. Finally, we evaluated the completeness and appropriateness of the disclosure related to financial assets at fair value through other comprehensive income as included in note 20 to the financial statements.

Key observations

We found the valuation techniques used to be adequate, and the key inputs and fair value of the financial investment reasonable. The disclosures on the financial assets at fair value through other comprehensive income are in line with the requirements under EU-IFRS.

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2019 UNIVERSAL REGISTRATION DOCUMENT