Sopra Steria - 2018 Registration document

2018 CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated financial statements

❙ EQUITY AS AT 1 JANUARY 2017

Consolidated reserves and

Other compre- hensive income

Total attributable to Group

Non- controlling interests

Share capital

Share premium

Treasury shares

retained earnings

Total

(in millions of euros)

AT 01/01/2017 (before IFRS 15)

20.5 531.4 -38.9

701.6 -144.0

1,070.6

32.5 1,103.1

Impact

-

-

-

-2.8

-

-2.8

-1.9

-4.8

AT 01/01/2017 (AFTER IFRS 15) 20.5 531.4 -38.9

698.7 -144.0 1,067.7

30.6 1,098.3

The new accounting policies applicable to revenue recognition are described in Note 4.1.

The Group has chosen to apply the standard to all its leases identified as such under this standard retrospectively by recognising the cumulative effect of its initial application at 1 January 2019 in equity within Consolidated reserves . At that date, in balance sheet liabilities, it will recognise a lease liability corresponding to the present value of lease payments to be made, determined using the incremental borrowing rate at that date. To offset this liability, the Group will recognise a right-of-use asset, which for most leases will be equal to the lease liability. As an exception, for certain leases, the value of this asset will be reconstituted by discounting its original value using the incremental borrowing rate at 1 January 2019. In addition, the Group chose to use the exemptions provided by the standard and not to apply the recognition principles described above to the leases concerned, namely short-term leases (lease term of 12 months or less) and leases for which the underlying asset is of low value. To date, the Group estimates that the application of this new standard will give rise to the recognition at 1 January 2019 of a lease liability of around €300 million. This liability mainly comprises property leases (for around 85%), as well as vehicle leases (around 7%), and leases of IT and other equipment. This amount includes the value of finance lease liabilities existing at 31 December 2018, which came to €16.9 million. The application of IFRS 16 Leases should have a marginally positive impact on Operating profit on business activity due to the replacement of lease expenses with expenses related to the amortisation and depreciation of right-of-use assets. EBITDA , which is split out in the analysis of Change in net financial debt , would see a positive impact of around €90 million corresponding to restated lease expenses. Lastly, interest expenses on lease liabilities will be distinguished from the cost of net financial debt and will have an impact on Net profit . All things considered, the application of the standard should have a virtually neutral impact on Net profit . All the impact estimates presented in this note may still change depending on the final assessment of leases and key assumptions used in measuring this debt. In addition, the Group has chosen to exclude lease liabilities from Net financial debt , which will make it possible to compare Free cash flow determined within Change in net financial debt with this item in previous financial years. Lastly, the financial covenants described in Note 11.5.1 will not be affected by the application of IFRS 16 Leases , since they are calculated using a consistent method. The first financial statements published under IFRS 16 will be those for the first half of 2019.

In addition, IFRS 15 now requires entities to provide the value of transaction prices allocated to performance obligations not yet satisfied. This information is provided in Note 4.1. However, this “backlog” – as determined according to the rules and exemptions provided by IFRS 15 – is in no way comparable to a sales backlog, information which is not provided by the Group. 1.2.4. Application of IFRS 9 Financial Instruments The application of IFRS 9 Financial Instruments is mandatory for annual periods beginning on or after 1 January 2018. The Group analysed the new rules and assessed their impacts. The only changes involved are to the recognition method for the value of its foreign currency and interest rate hedges using option-based derivative instruments. Changes in time value are now recognised as follows: p for financial hedges: In Other comprehensive income . The time value at the date of designation of the hedging relationship is amortised over the period during which the instrument can impact profit or loss. This amortisation expense is recognised in Other financial income and expenses; p for commercial hedges: In Other comprehensive income . The time value at the date of designation of the hedging relationship is recognised in Other financial income and expenses on performance of the hedged purchase or sale. The Group considers that these changes had no material impact on its financial statements. They were applied prospectively as from 1 January 2018. The impact on the recognition method for the time value of hedges is recognised retrospectively by adjusting consolidated reserves as at 1 January 2018. The application of IFRS 9 generated an increase in Consolidated reserves of €1.0 million, through a decrease in Other comprehensive income . This adjustment is presented in Other movements in the consolidated statement of changes in equity. The comparative information was not restated. 1.2.5. Application of IFRS 16 Leases IFRS 16 Leases replaces IAS 17 Leases and related interpretations. The standard enters into force at 1 January 2019. It introduces a single lessee accounting model under which lessees recognise a non-current asset and a lease liability for most leases, no longer just finance leases. The Group launched a project comprising an initial phase that consisted of collecting all the information that may be required by the new standard and simulating the impacts of the various options it offers. This was followed by a second, more operational phase that involved rolling out and implementing changes in order to be able to apply the standard as from 1 January 2019.

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SOPRA STERIA REGISTRATION DOCUMENT 2018