LEGRAND_REGISTRATION_DOCUMENT_2017

08 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, 2017 and December 31, 2016

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 in consistency with 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 valuation services firm data (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, 2017

December 31, 2016

(in € millions)

France

688.0

685.8

Italy

381.5

381.5

Rest of Europe

327.2

341.4

North and Central America

1,911.6

1,038.9

Rest of the world

622.0

674.3

NET VALUE AT THE END OF THE PERIOD

3,930.3

3,121.9

France, Italy and North and Central America are each considered to be a single cash-generating unit (CGU), whereas both the the rest of Europe and rest of the world regions include several CGUs.

In the Rest of Europe and Rest of the world regions, no final amount of goodwill allocated to a CGU represents more than 10% of total goodwill. Within these two regions, China, India and South America are the largest CGUs.

Changes in goodwill can be analyzed as follows:

December 31, 2017

December 31, 2016

(in € millions)

Gross value at the beginning of the period

3,159.9

2,814.0

W Acquisitions

1,510.6

385.1

W Adjustments

(486.0)

(63.6)

W Translation adjustments

(216.7)

24.4

Gross value at the end of the period

3,967.8

3,159.9

Impairment value at the beginning of the period

(38.0)

(37.7)

W Impairment losses

0.0

0.0

W Translation adjustments

0.5

(0.3)

Impairment value at the end of the period

(37.5)

(38.0)

NET VALUE AT THE END OF THE PERIOD

3,930.3

3,121.9

Adjustments correspond to the difference between provisional and final goodwill.

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REGISTRATION DOCUMENT 2017 - LEGRAND