SOPRA_STERIA_REGISTRATION_DOCUMENT_2017

2017 CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated financial statements

NOTE 1 ACCOUNTING POLICIES

In parallel, the Group has taken part in the discussions organised by Syntec Numérique (the French digital sector trade association) to identify the challenges posed by the application of the new standard and use them to draw conclusions and develop consistent practices together with other leading French companies active in the sector. The diagnostic phase to identify potential discrepancies initially resulted in a mapping of 2016 revenue by category and type. For categories that may give rise to discrepancies, samples of client contracts and projects considered to be sufficiently representative and covering a very substantial portion of revenue were identified so as to be analysed. These samples consisted of contracts that were ongoing at 1 January 2017 and would continue beyond that date, along with any new contracts signed over the course of 2017. Contracts for licence sales as well as development and integration work, fixed-price contracts, services including a transition or transformation phase, and transactions in which the Group acted as a licence or equipment reseller on behalf of its clients were thus analysed using the methodology recommended by the standard. IFRS 15 Revenue from Contracts with Customers provides the following five-step approach to analysing contracts with customers: 1. identify the contract(s) with a customer; 2. identify the performance obligations in the contract; 3. determine the transaction price; 4. allocate the transaction price to the performance obligations in the contract; 5. recognise revenue when (or as) the entity satisfies a performance obligation. Occasional discrepancies with regard to the application of current standards were identified, affecting a limited number of contracts, during the assessment required by each of these steps. In Step 2 under IFRS 15, the performance obligations included in a contract are considered distinct from one another if they are intrinsically distinct and if they are distinct specifically within the context of the contract in question. The application of these principles to the Group’s contracts revealed the need to reconsider the distinctions between the performance obligations contained in contracts, which prompted the decision to group together certain of these obligations. In particular, services may be performed to secure the future execution of contracts. This is the case for transition activities relating to outsourcing or application management and the set-up phases of deliverables made available in SaaS mode in software development. As a general rule, these services do not constitute distinct performance obligations. The standard specifies the process to be applied and allows for the recognition of an asset in respect of their costs, which is then amortised over the duration of the performance obligations involved in these services. This entails an adjustment in the recognition of revenue relating to these contracts. The Group estimates that these changes will have a positive impact of around €3.7 million on Revenue and a positive impact of around €1.6 million on Operating profit on business activity as recognised in the 2017 income statement. Steps 3 and 4 under IFRS 15 specify, respectively, the procedures used to determine the transaction price of a contract and those used to allocate this price to the different performance obligations in the contract. The transaction price includes the following components: p elements of variable consideration granted to the customer such as discounts, penalties or bonuses according to how likely it is that they will be offered; p financing arrangements included in the contract such as, for example, payment terms of more than one year, which require the

The main accounting policies applied in the preparation of the consolidated financial statements are presented below. They have been applied consistently for all of the financial years presented. 1.1. Basis of preparation The consolidated financial statements for the year ended 31 December 2017 have been prepared in accordance with International Financial Reporting Standards (IFRS) as published by the IASB and adopted by the European Union. Information on these standards is provided on the website of the European Commission: https://ec.europa.eu/info/ business-economy-euro/company-reporting-and-auditing/company- reporting/financial-reporting_en. 1.2. Application of new standards and interpretations 1.2.1. New mandatory standards and interpretations New standards, amendments to existing standards and interpretations required for accounting periods starting on or after 1 January 2017 had no material impact on the financial statements. These mainly included: p Recognition of Deferred Tax Assets for Unrealised Losses (Amendment to IAS 12); p Disclosure Initiative – Reconciliation of Liabilities from Financing Activities (Amendment to IAS 7); p Disclosure of Interests in Other Entities – Clarification of the Scope of the Standard (Amendment to IFRS 12). 1.2.2. Standards and interpretations published by the IASB but not applied early The Group has not opted for early application of standards, amendments and interpretations published by the IASB and adopted by the European Union, but whose mandatory effective date was later than 1 January 2017. These mainly include: p IFRS 15 Revenue from Contracts with Customers and its amendments as well as IFRS 9 Financial Instruments , both of which must be applied for reporting periods beginning on or after 1 January 2018; p IFRS 16 Leases , which must be applied for reporting periods beginning on or after 1 January 2019. Furthermore, the Group has not opted for early application of standards, amendments and interpretations published by the IASB, but not yet adopted by the European Union at 31 December 2017. These include the following: Prepayment Features with Negative Compensation (Amendments to IFRS 9), Classification and Measurement of Share- based Payment Transactions (Amendments to IFRS 2), Long-term Interests in Associates and Joint Ventures (Amendments to IAS 28), as well as IFRIC 22 Foreign Currency Transactions and Advance Consideration and IFRIC 23 Uncertainty over Income Tax Treatments . 1.2.3. Application of IFRS 15 Revenue from Contracts with Customers In September 2016 the Group launched a transition project with a view to adopting IFRS 15 Revenue from Contracts with Customers from 1 January 2018. The project mainly consists of: p an initial diagnostic phase to identify and quantitatively assess any potential discrepancies caused by applying the new rules; p followed by a second phase in which any changes found to be necessary are implemented.

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SOPRA STERIA REGISTRATION DOCUMENT 2017