SOMFY // 2022 Annual Report

05 CONSOLIDATED FINANCIAL STATEMENTS

INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT NOTE 5 — GOODWILL AND IMPAIRMENT TESTS NOTE 5.1

Goodwill Note 5.1.1

Accounting principle Note 5.1.1.1 Goodwill is measured using the method described in note 2.3.1. Goodwill is subject to impairment tests at least once annually, or more frequently when events or changes in circumstances indicate that the goodwill has been impaired (indication of impairment, seenote 5.1.2). Recognised impairment cannot be reversed.

Detailed information Note 5.1.1.2 € thousands

Value

If the recoverable amount exceeds the net book value of the CGU at period end, no impairment is recognised. However, if this amount is lower than the net book value, an impairment loss equal to the difference is recognised in priority against goodwill. This impairment loss may not be reversed. Fair value after deduction of disposal costs is the amount obtainable from the sale of an asset in an arm’s length transaction between knowledgeable, willing parties, after deducting disposal costs. Value in use is determined based on cash flows, which are estimated using plans or budgets over a maximum period of five years; the cash flows beyond that date are extrapolated by applying a constant or decreasing rate of change, and are discounted by using long-term post-tax market rates, which reflect the market’s estimates of the time value of money and the specific risks inherent to the assets. In certain cases, cash flows can be estimated over longer periods, to be justified CGU by CGU. Cash flows are evaluated based on budgets and three-year forecasts for companies which operate in a market they know and understand well. Generally, these are companies whose strategies are not expected to change greatly. On the other hand, the period is extended to five years for companies in emerging markets, for which the growth potential and maturity are further away. These cash flows have been projected over several years using specific growth rates which are consistent with the Group’s historical growth rates. The growth rate used to project cash flows to infinity is consistent with the long-term inflation rate relevant to the countries concerned. The discount rate used corresponds to the weighted average cost of capital and reflects the expected return on invested capital (equity and liabilities necessary to finance operations). It is calculated based on the financial data extracted from a sample of comparable companies, comprising listed companies operating in the same business segment as the companies to be valued. Risk is mainly taken into account at a cash flow level. Detailed information Note 5.1.2.2 At 31 December 2022, as at every year-end or every time that indications of impairment exist, the Group re-examined the value of goodwill associated with Cash Generating Units. Despite an unstable geopolitical environment and persistent supply shortages, SOMFY’s business model has withstood recent crises, buoyed by the need to address key housing-related issues, with households increasingly demanding greater comfort and energy-efficiency.

At 1 January 2021

94,390

Impact of changes in consolidation scope and method Impact of changes in foreign exchange rates

24,813

-168

Charge for impairment AT 31 DECEMBER 2021

-

119,035

Impact of changes in consolidation scope and method Impact of changes in foreign exchange rates

72,935

-284

Charge for impairment AT 31 DECEMBER 2022

-

191,686

The impact of changes in consolidation scope is linked to the acquisition of Répar’stores in 2021 and that of Teleco Automation in 2022 (see note 2.3.2). Impairment test Note 5.1.2 Accounting principle Note 5.1.2.1 IAS 36 defines the procedures to be applied by a company to ensure that the net book value of its assets does not exceed their recoverable amount, that is the amount to be recovered from the use or the disposal of the assets. Except for goodwill and intangible assets with an indefinite life, which require systematic annual impairment tests at year-end, the recoverable amount of an asset is estimated every time there is an indication that the asset may be impaired. A recoverable amount is estimated for each individual asset. If it is not possible to do so, assets are brought together in Cash Generating Units (CGUs), whose recoverable amount is subsequently measured. A Cash Generating Unit is the smallest group of assets to which the asset belongs, which generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. CGUs have been identified within the Group. They primarily comprise the Group’s legal entities that have been acquired through merger and acquisition transactions. An impairment test involves comparing the recoverable amount of the CGU with its book value. The recoverable amount of an asset is measured at the higher of its fair value, after deduction of disposal costs, and its value in use.

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SOMFY – ANNUAL REPORT 2022