SAINT_GOBAIN_REGISTRATION_DOCUMENT_2017

Financial and accounting information Statutory Auditors' report on the consolidated financial statements

Planned acquisition of a controlling interest in Sika Description of risk

As indicated in Notes 2.2, 2.4 and 8.4 to the consolidated financial statements, the Saint-Gobain Group announced, on December 8, 2014, its plan to acquire a controlling interest in Sika. The project consists in acquiring, for CHF 2.83 billion, Schenker Winkler Holding AG (SWH), which controls Sika and is currently held by the Burkard family. The transaction is subject to a favorable outcome for SWH in the case it brought before the Swiss courts against Sika’s Board of Directors’ decision of April 2015 to restrict SWH’s voting rights for certain resolutions at Sika’s General Shareholders’ Meetings. Saint-Gobain had foreseen the situation by allowing itself the option of extending the term of the purchase agreement with the Burkard family relating to the disposal of SWH shares. Saint-Gobain exercised its rights, extending the agreement several times, with the most recent extension in October 2017 taking its term to June 30, 2018. At this date, Saint-Gobain will once again have the option of extending the term of the agreement until December 31, 2018. The Group’s commitment to acquire SWH shares exposes it to currency risk, which was hedged using financial instruments measured in accordance with IAS 39. Assessing the transaction’s likelihood of occurrence, which affects the accounting treatment of the hedging transaction, is a key audit matter, as the Group’s Senior Management considers that the acquisition is “highly probable”. How our audit addressed this risk To obtain a clear understanding of this transaction, including its terms, conditions and likelihood of occurrence, we analyzed the various contracts between the Group and the Burkard family, and contacted the main Group departments involved. We also reviewed the Board of Directors’ minutes relating to the planned transaction, court rulings, and the attorneys’ opinions on the procedure underway before the Swiss courts. We also analyzed the currency hedges taken out by the Group in connection with its commitment to acquire the SWH shares and checked the appropriateness of their accounting treatment in accordance with IFRS. We assessed the appropriateness of information provided in the notes to the consolidated financial statements regarding the planned acquisition and its accounting impact. The Building Distribution Sector accounted for 46% of the Group’s sales for fiscal year 2017. The profitability of the Sector’s business activities varies depending on supplier discounts received, which lower the cost price of negotiated goods. As indicated in Notes 3.1.2, 3.5.1 and 3.5.2 to the consolidated financial statements, the recognition of supplier discounts specifically affects “Cost of sales” in the consolidated income statement as well as “Inventories” and “Other receivables” in the consolidated balance sheet. Given the diversity of products and suppliers in the Building Distribution Sector, supplier contracts are numerous, complex and varied. They give rise to several supplier discounts, some of which are subject to volume conditions or targets, granted at various Sector levels (local, regional, national and international). Measuring accrued supplier discounts is a key audit matter as it is complex and requires significant estimates made by Management. Determining the amounts of supplier discounts to be taken into account when measuring inventories for brands in the Building Distribution Sector is also a significant audit matter. How our audit addressed this risk We gained an understanding of the process used by the Sales and Finance Departments of the Building Distribution Sector to estimate accrued supplier discounts at the reporting date and performed tests on the effectiveness of the controls performed by Management. We also assessed, on a multi-year basis, the consistency of the supplier discount rates obtained per brand and country, confirmed by interviews with the Sales and Finance Departments at various levels within the Sector. Using a sample, we remeasured the supplier discounts obtained based on the terms and conditions of the relevant agreements and volumes purchased. We also retrospectively cross-checked cash and credit notes received after the reporting date against the receivables recognized and asked a sample of suppliers to directly confirm the discount amounts due for the fiscal year. Measurement of supplier discounts in the Building Distribution Sector Description of risk

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