NEOPOST_REGISTRATION_DOCUMENT_2017

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Financial statements

Consolidated financial statements

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 entered into a legally binding agreement • 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 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. Revenue is recognized when IAS 18 criteria are met. 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 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 in accordance with IAS 11 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. collection is probable. • Software license sales

Finance leases Neopost has leasing subsidiaries in Australia, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, the Netherlands, Norway, Sweden, Switzerland, the United Kingdom and the United States. These subsidiaries provide leasing services exclusively to Neopost customers that relate solely to Neopost products. When a customer of a Neopost distribution company chooses to finance the acquisition of equipment via a leasing company, the Group recognizes an equipment sale and records as an asset an amount equal to the net present value of the lease payments receivable over the term of the financing. Financial income is then recognized in sales on the basis of interest actually received over the term of the financing. Refinancing costs are recorded as financial expenses. 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. As a supplement to this finance leases activity, Neopost offers financing solutions on franking machines 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 preventative maintenance work and repairs on its products, amoung 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 pro rata 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; • sales of data bases (mostly location-based data); • software maintenance (help desk services and rights to • future product enhancements); software licenses sales;

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REGISTRATION DOCUMENT 2017 / NEOPOST