Sopra Steria - 2019 Universal registration document

5 2019 CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated financial statements

With regard to the “Sopra Banking Software” CGU, an increase of

assets in the event of a 3.7-point decrease in the operating margin,

more than 1.7 points in the discount rate combined with a all other things being equal. simultaneous 0.6-point decrease in the perpetual growth rate might require the Group to write down its assets, all other things being equal. In addition, the Group might be required to write down its

For the other CGUs, additional tests run to measure sensitivity to key assumptions would not lead to the recognition of any impairment.

IAS 36 "Impairment of Assets" requires that an entity assess at each reporting date whether there is any indication that an asset may be impaired. If any such indication exists, the entity must estimate the asset’s recoverable amount. Irrespective of whether there is any indication of impairment, an entity must also: test intangible assets with indefinite useful lives annually; p test the impairment of goodwill acquired in a business p combination. In practice, impairment testing is above all relevant to goodwill, which constitutes the majority of Sopra Steria Group’s consolidated non-current assets. Impairment testing is performed at the level of the cash-generating units (CGUs) to which assets are allocated. A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The Group’s segmentation into CGUs is consistent with the operating structure of its businesses, its management and reporting system, and its segment reporting (see Note 3). Impairment testing involves comparing CGUs’ carrying amounts with their recoverable amounts. A CGU’s recoverable amount is the higher of its fair value (generally market value) less costs of disposal and its value in use. Due to the application of IFRS 16 "Leases" starting 1 January 2019, the carrying amount of assets includes right-of-use assets less lease liabilities.

The value in use of a CGU is determined using the discounted cash flow (DCF) method: cash flows for an explicit forecast period of five years, with the p first year of the period based on the budget; cash flows beyond the five-year explicit period are calculated p using a perpetual growth rate reflecting the anticipated rate of real long-term economic growth adjusted for long-term inflation forecasts. Cash flows include lease payments despite the application of IFRS 16 "Leases" since 1 January 2019. The discount rate is based on the weighted average cost of capital. This is compared with the estimates produced by financial analysts. The final discount rate used for each CGU is derived from this comparison and falls between the weighted average cost of capital and the average of analyst estimates. Perpetual growth rates are based on an average of analyst estimates. Impairment losses are recognised to the extent of any excess of a CGU’s carrying amount over its recoverable amount. Impairment losses are first allocated against goodwill and are charged to profit or loss as part of Other operating income and expenses. Reversal of impairment losses for goodwill arising on fully consolidated investments is prohibited.

Other intangible assets 8.2.

Gross value

Amortisation

31/12/2019

31/12/2018

(in millions of euros)

Enterprise software/Technology

91.5

39.2 91.6

52.2

44.6

Customer relationships Favourable contracts

203.9

112.2

120.6

0.9

0.7 2.4

0.2

0.3

Brands

19.2

16.8 91.4

17.6 70.5

Software acquired and other intangible assets

318.1 633.5

226.7 360.6

TOTAL

272.9

253.5

Other intangible assets comprise technologies, customer relationships, favourable contracts, order backlogs and brands allocated as part of the purchase price allocation process for a

business combination. Expenses relating to the amortisation of allocated intangible assets enter into the calculation of Profit from

recurring operations.

187

SOPRA STERIA UNIVERSAL REGISTRATION DOCUMENT 2019