Euronext - 2020 Universal Registration Document

Financial Statements

Notes to the Consolidated Financial Statements

Principal Versus Agent Considerations The Group entered into a clearing agreement with LCH SA in respect of the clearing of trades on our continental Europe derivatives markets (the “Derivatives Clearing Agreement”). Under the terms of this Derivatives Clearing Agreement Euronext agreed with LCH SA to share revenues and receives clearing fee revenues based on the number of trades on these markets cleared through LCH SA. In exchange for that, we have agreed to pay LCH SA a fixed fee plus a variable fee based on revenues. The definition of the accounting treatment of this agreement requires significant management judgment for the valuation and weighting of the indicators leading the principal versus agent accounting analysis. Based on all facts and circumstances around this arrangement, management has concluded that Euronext is “principal” in providing Derivatives clearing services to its trading members. Therefore Euronext recognizes (i) the clearing fees received are classified as post trade revenues, and (ii) the fixed and variable fees paid to LCH SA as other operational expenses. (viii) Provision for Expected Credit Losses of Trade and Contract Receivables The Group uses a provision matrix to calculate ECLs for trade and contract receivables. To measure expected credit losses, trade and contract receivables have been grouped based on shared credit risk characteristics and the days past due. The historical loss rates are based on the payment profiles of the sales over a period of 24 months before reporting date and the corresponding historical credit losses experience within this period. The historical loss rates are adjusted to reflect current and forward-looking factors specific to the debtors and economic environment. The provision matrix is initially based on the Group’s historical observed default rates. The Group will calibrate the matrix to adjust the historical credit loss experience with forward-looking information. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed. The assessment of the correlation between historical observed default rates, forecast economic conditions and ECLs is a significant estimate. The amount of ECLs is sensitive to changes in circumstances and of forecast economic conditions. The Group’s historical credit loss experience and forecast of economic conditions may also not be representative of customer’s actual default in the future. The information about the ECLs on the Group’s trade and contract receivables is disclosed in Note 37.4. (ix) Determining the Lease Term of Contracts With Extension and Termination Options In determining the lease term, management assesses the period for which the contract is enforceable. It considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). If the Group concludes that the contract is enforceable beyond the notice period of a cancellable lease (or the initial period of a renewable lease), it then need to assess whether the Group is reasonably certain not to exercise the option to

terminate the lease. However in general, the Group’s lease portfolio contains very limited leases that include renewal or termination options. (x) Estimating the Incremental Borrowing Rate (IBR) The Group cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate (IBR) to measure lease liabilities. The IBR is the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what the Group “would have to pay”, which requires estimation when no observable rates are available or when they need to be adjusted to reflect the terms and conditions of the lease. The Group estimates the IBR using the observable inputs (such as market interest rates) when available and makes certain entity-specific estimates if needed. Y) Changes in Accounting Policies and Disclosures The International Accounting Standards Board (IASB) continues to issue new standards and interpretations, and amendments to existing standards. The Group applies these new standards when effective and endorsed by the European Union. The Group has not Amendments to References to the Conceptual Framework in IFRS Standards Amendments to References to the Conceptual Framework in IFRS Standards sets out the amendments to affected standards, except to IFRS 3 Business Combinations and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, in order to update references to the Conceptual Framework. In most cases, the standard references are updated to refer to the Conceptual Framework. These amendments are effective for reporting periods beginning on or after 1 January 2020. Since the Group’s current practice is in line with these amendments, they had no impact on the Consolidated Financial Statements of the Group. The amendment to IFRS 3 clarifies that to be considered a business, an integrated set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output. Furthermore, it clarified that a business can exist without including all of the inputs and processes needed to create outputs. Companies are required to apply the amended definition of a business to acquisitions that occur on or after 1 January 2020. These amendments had no impact on the business combinations entered into by the Group in 2020, but may impact future periods should the Group enter into any business combinations. Amendments to IFRS 3 Business Combinations – Definition of a Business opted for early adoption for any of these standards. (i) New and Amended Standards and Interpretations The Group has applied the following standards and amendments for the first time for their annual reporting period commencing 1 January 2020.

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2020 UNIVERSAL REGISTRATION DOCUMENT