NEOPOST - 2018 Registration document

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Financial statements

Consolidated financial statements

4-4:

Non-current financial assets

4-4-1:

Accounting principles

Non current financial assets are initially recognized either at their acquisition cost including transaction costs or at the fair value of the assets used for payment. Following initial recognition, assets classified as “Investments in associated companies” or “Non consolidated shares” are measured at fair value on the closing date.

Gains and losses on investments in associated companies are recognized in the income statement. Gains and losses on non consolidated shares are booked under shareholders’ equity. An impairment is booked on non consolidated shares once the loss exceeds 40% of the book value during a period of eighteen consecutive months.

4-4-2:

Detail of other non-current financial assets

31 January 2019

31 January 2018

Deposits, loans and guarantees

4.4

3.3

Pension plan net asset

37.2

35.4

TOTAL

41.6

38.7

At 31 January 2019, the deposits, loans and guarantees include an escrow account for 1.1 million euros related to the sale of Quadient Data USA, and a deposit for 1.0 million euros related to the liquidity contract (1.1 million euros at 31 January 2018). The Group has a pension plan in the United Kingdom that shows a surplus of 32.6 million pounds sterling (37.2 million euros) at 31 January 2019 compared with 31.2 million pounds

sterling (35.4 million euros) at 31 January 2018. The change in the pension plan’s net assets is mainly related to actuarial differences. The tax rate applicable for the cash refund of this asset in the United Kingdom will be 35%. This tax effect is presented in the consolidated financial statements under deferred tax liabilities.

4-5:

Impairment test

4-5-1:

Impairment test method

Impairment tests compare the recoverable amount of a non-current asset with its net carrying amount. If the asset’s carrying amount is higher than its recoverable amount, it is written down to its recoverable amount. The recoverable amount of an asset or group of assets is the higher of its fair value less disposal costs and its value in use. Fair value less disposal costs is determined using available information to establish the best estimate of the disposal price net of the costs necessary to carry out the sale in an arm’s lengh transaction between knowledgeable, willing parties. Value in use corresponds to the present value of the future cash flows expected to be derived from an asset or group of assets, taking into accounts its residual value. Goodwill is tested for impairment at least once a year and whenever there is any evidence of impairment. Goodwill is tested for impairment at the level of the Cash Generated Units (CGU) defined by the Group. A CGU is a business unit generating independent cash flows. In the Group’s organization, CGUs generally correspond to countries for the SME Solutions division and to product lines for the other Goodwill

divisions. The Group has eighteen CGUs as at 31 January 2019. Given the fact that having a reliable basis to determine the fair value less reliable costs of an asset or a group of assets is rare, unless otherwise indicated, the Group uses the value in use to measure the recoverable amount of an asset or group of assets. growth assumptions over five years. Industrial margins and net assets are reallocated to the countries where the equipment in question is installed and leasing margins and net assets are reallocated to the countries where the signatories of finance lease contracts are located. Costs incurred by the holding company that can be linked to a CGU are transferred to the relevant CGU. The other costs are reallocated to the Group's CGU on the basis of their revenue; beyond this explicit time frame, the terminal value is • calculated by applying a perpetuity growth rate to the latest cash flow; The value in use of each CGU is determined as follows: the Group projects future cash flows based on revenue •

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REGISTRATION DOCUMENT 2018 / NEOPOST