Sopra Steria - 2018 Registration document

2018 CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated financial statements

1.3. Material estimates

Operating profit is then obtained by taking Profit from recurring operations and subtracting Other operating income and expenses . The latter contains any material items of operating income and expenses that are unusual, abnormal, infrequent or unpredictable, presented separately in order to give a clearer picture of performance based on ordinary activities. Lastly, in the analysis of Change in net financial debt , the Group splits out EBITDA . This figure corresponds to Operating profit on business activity , after adding back in the depreciation, amortisation and provisions included in the latter indicator. 1.4.2. Foreign currency translation a. Functional and presentation currencies Items included in the financial statements of each Group entity are measured using the currency of the primary economic environment in which that entity operates, i.e. its “functional currency”. The consolidated financial statements are presented in euros, the functional and presentation currency of the Sopra Steria Group parent company. The accounts of all Group entities whose functional currency differs from the Group’s presentation currency are translated into euros as follows: p assets and liabilities are translated at the end-of-period exchange rate; p income, expenses and cash flows are translated at the average exchange rate for the period; p all resulting foreign exchange differences are recognised as a distinct equity component under Other comprehensive income and included in Accumulated translation reserves within equity (see Note 13.1.4). In accordance with IAS 21 The Effects of Changes in Foreign Exchange Rates , translation gains and losses arising from the translation of net investments in foreign operations are recognised as a distinct component of equity. Translation gains and losses in respect of intercompany loans are considered an integral part of the Group’s net investment in the foreign subsidiaries in question. When a foreign operation is divested, the cumulative translation difference is recycled to profit or loss as part of the gain or loss arising on disposal. Goodwill and fair value adjustments arising on the acquisition of foreign operations are treated as assets and liabilities of the operation and, as such, are translated at the end-of-period exchange rate. The Group does not own any consolidated entities operating in a hyperinflationary economy. b. Translation of the financial statements of foreign subsidiaries

and accounting judgments The preparation of financial statements entails the use of estimates and assumptions in measuring certain consolidated assets and liabilities as well as certain income statement items. Group management is also required to exercise judgment in the application of its accounting policies. Such estimates and judgments, which are continually updated, are based both on historical information and on a reasonable anticipation of future events according to the circumstances. However, given the uncertainty implicit in assumptions as to future events, the related accounting estimates may differ from the ultimate actual results. The main assumptions and estimates that may leave scope for material adjustments to the carrying amounts of assets and liabilities in the subsequent period are as follows: p measurement of the recoverable amount of property, plant and equipment and intangible assets, and of goodwill in particular (see Note 8.1); p measurement of the recoverable amount of investments in associates reported in the balance sheet (see Note 9.2); p measurement of retirement benefit obligations (see Note 5.3); p measurement of deferred tax assets (see Note 6.3); p amounts payable to non-controlling interests (see Note 7.4); p provisions for contingencies (see Note 10.1). 1.4. Format of the financial statements and foreign currency translation 1.4.1. Format of the financial statements With regard to the presentation of its consolidated financial statements, Sopra Steria Group applies Recommendation 2013-03 of the French Accounting Standards Authority ( Autorité des Normes Comptables – ANC) of 7 November 2013 on the format of the income statement, the cash flow statement and the statement of changes in equity. The format of the income statement was adapted several years ago to improve the presentation of the Company’s performance. A financial aggregate known as Operating profit on business activity was added before Profit from recurring operations . This indicator is used internally by management to assess performance. It corresponds to Profit from recurring operations before: p the expense relating to the costs and benefits granted to the recipients of stock option, free share and employee share ownership plans; p revenue recognition (see Note 4.1);

p the amortisation of allocated intangible assets.

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SOPRA STERIA REGISTRATION DOCUMENT 2018