Sopra Steria - 2020 Universal registration document

5 2020 CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated financial statements

Revenue mainly comprises revenue from services recognised on a percentage-of-completion basis, around 98.5% of which consists of Implementation, consulting and assistance services provided on a time-and-materials basis; outsourcing; infrastructure management; third-party application maintenance; and development. The transaction price allocated to performance obligations not yet satisfied at 31 December 2020 is determined by applying the exemptions provided by the standard, which enable the following performance obligations to be excluded in determining this value: those performed on the basis of the actual use of billable services: p implementation, consulting and assistance services provided on a time-and-materials basis; outsourcing; infrastructure management; and third-party application maintenance (corrective maintenance); Revenue recognition Revenue recognition should reflect the transfer of control of goods or services promised to the customer for the amount of the consideration the Group expects in return. General principles a. Identifying the contract with the customer i. Revenue recognition for a contract or a group of contracts must meet five criteria: the contract must have commercial substance (generation of future cash flows for the Group), the parties must have approved the contract and have pledged to meet their respective obligations, the rights and obligations of each party are identified, the payment conditions are identifiable, and the customer has the ability and intention to pay that amount of consideration in exchange for the goods and services provided. Identifying the performance obligations in the contract ii. The contract or group of contracts may include one or more performance obligations: single-service or multi-component arrangements. A performance obligation is distinct if it meets two conditions. First, the underlying good or service must be distinct in absolute terms: the customer can benefit from the good or service either on its own or through readily available market resources. The good or service must also be distinct with respect to the contract, necessitating an analysis of the transformation relationship between the various goods and services comprising the contract. This relationship does not exist if the good or service is not used to produce other goods or services covered in the contract; it does not significantly modify or customise another good or service promised in the contract; or it is not highly dependent on, or highly interrelated with, other goods or services promised in the contract. Determining the transaction price iii. Once the contract’s existence is validated and the various performance obligations identified, the contract’s transaction price must be determined and allocated to the various completed performance obligations. The contract’s transaction price may include variable consideration, generally in the form of discounts, reductions, or penalties or, conversely, bonuses, and may be subject to the

those included in a contract for which the initial expected term p does not exceed one year: the Group only applies this exemption to software maintenance royalty-type services, for which the fixed term of the majority of contracts does not exceed one year. On this basis, within the limits set by the standard, revenue not yet recognised that is allocated to performance obligations not yet fulfilled is only attributable to services under fixed-price contracts and, to a lesser extent, sales of licences for which control has not yet been transferred to customers. It amounted at least €816.1 million at 31 December 2020. Most of it will be recognised in revenue in the following financial year. completion of project milestones. It can also include a financial component or a consideration payable to the client. At the contract’s inception, variable consideration is only taken into account in the amount for which the Group deems it highly probable that there will not be a material decrease in revenue in subsequent periods, and provided it is not subject to factors outside the Company’s influence. This variable consideration is allocated to the performance obligations pro rata to their respective standalone selling price if it cannot be otherwise allocated. A financial component included in the transaction price is identified if it is material and if the period between completion and payment exceeds twelve months or if the timing to fulfil the services diverges substantially from that of the payments. This material financial component results in an adjustment to revenue and is recorded as financial income in Other financial income , where the Group finances the customer or as a financial expense in Other financial expenses , where the customer finances the Group through the payment of advances. A consideration payable to the customer is deducted from the contract’s transaction price if it does not correspond to a separate service provided by the customer. Otherwise, it is recognised as an operating expense. Allocating the transaction price to the various iv. performance obligations identified The transaction price is allocated to each performance obligation identified in the contract pro rata to the standalone selling prices of each underlying good or service. The standalone selling price is the price of the performance obligation as if it were sold separately. It is generally based on list prices, similar past transaction prices and observable market prices. With certain multi-component arrangements, essentially relating to software solutions, the Group may need to estimate the licence’s standalone selling price using a residual approach; this corresponds to the contract’s transaction price less the standalone selling prices of the other performance obligations. The amount allocated to each performance obligation identified in the contract is recognised in revenue when control of the underlying goods or services promised in the contract is transferred to the customer.



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