LEGRAND / 2018 Registration document

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CONSOLIDATED FINANCIAL INFORMATION CONCERNING THE GROUP’S ASSETS, LIABILITIES, FINANCIAL POSITION AND RESULTS

CONSOLIDATED FINANCIAL STATEMENTS IN ACCORDANCE WITH IFRS FOR THE YEARS ENDED DECEMBER 31, 2018 AND DECEMBER 31, 2017

3.1.3 Other intangible assets Other intangible assets are recognized at cost less accumulated amortization and impairment. They include in particular: W costs incurred for development projects (relating to the design and testing of new or improved products). They are amortized from the date of sale of the product on a straight-line basis over the period in which the asset’s future economic benefits are consumed, not exceeding 10 years. Costs incurred for projects that do not meet the IAS 38 definition of an intangible asset are recorded in research and development costs for the year in which they are incurred;

W softwares, which are mostly purchased from external suppliers and generally amortized over 3 years; W customer relationships acquired in business combinations. Corresponding to contractual relationships with key customers, they are measured using the discounted cash flow method and are amortized over a period ranging from 3 to 20 years.

Other intangible assets can be analyzed as follows:

December 31, 2018

December 31, 2017

(in € millions)

Capitalized development costs

381.1

353.0

Softwares

133.6

129.3

Other

368.2

353.0

Gross value at the end of the period

882.9

835.3

Accumulated amortization and impairment at the end of the period

(486.0)

(433.3)

NET VALUE AT THE END OF THE PERIOD

396.9

402.0

To date, no material impairment has been recognized for these items.

3.2 GOODWILL To determine the goodwill for each business combination, the Group applies the partial goodwill method whereby goodwill is calculated as the difference between the consideration paid to acquire the business combination and the portion of the acquisition date fair value of the identifiable net assets acquired and liabilities assumed that is attributable to the Group. Under this method no goodwill is allocated to minority interests. Changes in the percentage of interest held in a controlled entity are recorded directly in equity without recognizing any additional goodwill. Goodwill is tested for impairment annually, in the fourth quarter of each year, and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Within the Legrand Group, the level at which goodwill is measured (cash-generating units) corresponds to individual countries or

to groups of countries, when they either have similar market characteristics or are managed as a single unit. Value in use is estimated based on discounted cash flows for the next five years and a terminal value calculated from the final year of the projection period. The cash flow data used for the calculation is taken from the most recent medium-term business plans approved by Group management. Business plan projections are based on the latest available external forecasts of trends in the Group’s markets. Cash flows beyond the projection period of five years are estimated by applying a growth rate to perpetuity. The discount rates applied derive from the capital asset pricing model. They are calculated for each individual country, based on financial market and/or data from valuation services firms (average data over the last three years). The cost of debt used in the calculations is the same for all individual countries (being equal to the Group’s cost of debt).

Goodwill can be analyzed as follows:

December 31, 2018

December 31, 2017

(in € millions)

France

867.3

688.0

Italy

381.5

381.5

Rest of Europe

325.0

327.2

North and Central America

2,082.5

1,911.6

Rest of the world

665.7

622.0

NET VALUE AT THE END OF THE PERIOD

4,322.0

3,930.3

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LEGRAND

REGISTRATION DOCUMENT 2018