PSA_GROUP_REGISTRATION_DOCUMENT_2017

CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2017 Notes to the consolidated financial Statements at December 2017

OPERATING INCOME

NOTE 5

The difference between the sale price and the buyback price is recognised as rental revenue on a straight-line basis over the duration of the buyback commitment. The vehicle is initially recognised at production cost in property, plant and equipment. Depreciation expense is calculated over the term of the lease by the straight-line method, on the basis of the vehicle’s cost less its estimated residual value, representing the anticipated resale price on the used vehicle market. Any additional gain made on the final sale of the vehicle is recognised in the period in which it is sold on the used vehicle market. If the net difference is a loss, an allowance is booked when the buyback contract is signed. Sales incentives The cost of current and future sales incentive programmes is accrued on the basis of historical costs for the previous three months, determined country by country, and charged against profit for the period in which the corresponding sales are recognised. In cases where the cost of the programme varies according to sales, it is deducted from revenue. The Group’s incentive programmes include retail financing granted at a significant discount to market interest rates. The corresponding cost is recognised at the time of the sale. Automotive Equipment segment (b) The Automotive Equipment segment performs development work and manufactures or purchases specific tooling to produce parts or modules for programmes covered by specific customer orders. The revenue recognition criteria provided for in IAS 18 are not met in cases where development and tooling costs are paid in proportion to parts delivered to the customer, with their full recovery being subject to an unguaranteed minimum level of orders placed by the customer. Under such circumstances, development work and tooling cannot be considered as having being sold. The development costs are recognised in intangible assets (see Note 5.3.A) and tooling in property, plant and equipment (see Note 8.2.A). If the contract includes a payment guarantee, the development and tooling costs are recognised in inventories and work-in-progress. The corresponding revenue is recognised when the customer signs off on each technical phase. Finance companies (2) The Group’s finance companies and the finance companies in partnership with Santander provide wholesale financing to dealer networks and retail financing to customers of the Peugeot Citroën DS automotive business. Since 1 November 2017, the finance companies in partnership with BNP Paribas have been providing wholesale financing to the dealer networks and retail financing to the customers of the Opel - Vauxhall automotive business. Financing may take the form of conventional loans, finance leases, buyback contracts or long-term leasing. Sales financing revenues are recorded using the yield-to-maturity method, so as to recognise a constant rate of interest over the life of the loan. Most of the finance activities are managed in partnership with Santander and BNP Paribas. The revenue of these operations is not included in the Group’s consolidated revenue as these companies are accounted for by the equity method (see Note 11.4). The revenue of all financing activities at 100% is presented in Note 4.1.

Operating income corresponds to profit (loss) (1) before net financial income or expense, current and deferred taxes and the Group’s share in the net earnings of equity-accounted companies. The Group uses recurring operating income as its main business performance indicator. Recurring operating income corresponds to operating income before other non-recurring income and expenses, defined restrictively as material items of income and expense that are unusual in nature or infrequent in occurrence and not included in the Group’s recurring performance. In practice, other non-recurring operating income and expenses consist mainly of the following items which are described in the notes to the financial statements where appropriate (see Note 5.4): restructuring and early-termination plan costs; „ impairment losses (and subsequent adjustments) recognised on „ (i) non-current assets following impairment tests performed on the cash-generating units (CGUs) to which they belong, and (ii) the corresponding onerous contracts; gains on disposals of real estate and impairment of real estate „ held for sale. Selling, general and administrative expenses Selling, general and administrative expenses correspond to general administrative expenses, indirect selling expenses and warranty costs. Manufacturing and sales companies (1) Peugeot Citroën DS and Opel Vauxhall Automotive (a) segments Revenue includes mainly revenues from the sale and leasing of vehicles and the sale of other goods and services. In accordance with IAS 18 “Revenue” , new vehicle sales are recognised on the date the risks and rewards of ownership are transferred. This generally corresponds to the date when the vehicles are made available to non-Group dealers or the delivery date, in the case of direct sales. Sales at cost of items purchased on behalf of other parties and sales to subcontractors of raw materials, parts and mechanical sub-assemblies that are intended to be bought back at cost are not included in revenue. Sales of new vehicles with a buyback commitment are not recognised at the time of delivery but accounted for as operating leases when it is probable that the vehicle will be bought back. This principle applies: whatever the duration of the buyback commitment; „ for both direct sales and sales financed by Banque PSA Finance „ and its subsidiaries. REVENUE 5.1. Accounting policies A.

Consolidated profit (loss) from continuing operations, excluding “other expenses related to the non-transferred financing of operations (1) to be continued in partnership”.

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GROUPE PSA - 2017 REGISTRATION DOCUMENT