NEOPOST - 2018 Registration document

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Financial statements

Consolidated financial statements

Software license sales Software license revenue comprises all amounts invoiced related to the right to use the software, either through an initial license or through the purchase of additional modules or user rights. This kind of license transfers a right of use of intellectual property as it stands at the time of the license grant. The revenue is thus recognized when the performance obligations are satisfied. In the pay-per-click mode, the revenue is recognized on the actual consumption. Software maintenance Software maintenance is included in most software license contracts and is generally priced as a percentage of the initial software license fees. Maintenance provides customers with rights to uncritical software upgrades, maintenance enhancements and access to the help desk during the term of the contract. Revenue is recognized on a straight-line basis over the term of the arrangement. Professional services Software implementation and support services represent income from consulting and implementation services sold separately under professional service contracts. Professional service contracts are accounted for on a percentage-of-completion basis whereby revenue and profit recognized during the year are based on project hours incurred as a proportion of the total projected hours to complete. These estimates are continually re-evaluated and revised, when necessary, at each reporting date. Any adjustments to revenue and profit due to changes in estimates are accounted for in the period in which the change in estimates occurs. When estimates indicate that a loss will be incurred on a contract upon completion, a provision for the expected loss is recorded in the period in which the loss becomes evident.

The accounting treatment for the lease financing activity of these companies is justified by the fact that the Group transfers to its customers almost all of the risks and benefits inherent in the ownership of the assets in question in accordance with IAS 17. This accounting treatment will not be called into question with the application of IFRS 16. As a supplement to this finance leases' activity, Neopost offers financing solutions on franking in the United States and in the United Kingdom. Maintenance contracts At the request of postal organizations, Group companies may be required to carry out preventive maintenance work and repairs on its products, among other things. These operations are conducted under maintenance contracts and are invoiced to customers at the start of the contract. Sales relating to maintenance and rental contracts are presented under deferred income and recognized as revenue on a prorata basis, reflecting the degree of progress of the transaction. Software and associated services The Group derives revenues from the following sources: • pay-per-click software or solutions; • software maintenance (help desk services and rights to • future product enhancements); software implementation and support services. • The Group begins to recognize revenue once the arrangements are signed and as long as all the following conditions are met: the Group has signed a contract with a customer; • the software or service has been delivered; • license fees are fixed and there are no uncertainties on • the completion of the contract; software license sales;

revenue collection is probable. •

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REGISTRATION DOCUMENT 2018 / NEOPOST