TELEPERFORMANCE_Registration_document_2017

CONSOLIDATED FINANCIAL STATEMENTS

7

7.6 Notes to the consolidated financial statements

NOTE D.5 Sensitivity analysis In order to identify CGUs at risk of impairment, the Group performs sensitivity analyses on all CGUs incorporating an increase in the discount rates selected or a reduction of 200bbase points in the EBITA rates used in the calculation of the terminal values. In the event that a CGU is identified under this test, additional sensitivity analyses are performed using further changes in operational assumptions e.g. revenue growth. At the end of 2017, the goodwill allocated to the Europe Central and FSM CGUs was subject to impairment write-downs. These CGUs were alone in being identified as at risk of impairment as of Decemberb31 st , 2017. The carrying amount of the related goodwill as of that date was €49bmillion and €30bmillion, respectively. As disclosed in notebD.3 Determination of the recoverable amount of CGUs , the assumptions used in the impairment testing of these CGUs were applied to forecasts with three-year horizons. The profitability rates used in computing the terminal values were NOTE E.1 Income tax expense Income tax expense reported in the income statement comprises current and deferred tax except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity. The French levy on the added value of companies (CVAE) and certain foreign taxes such as the Italian IRAP come within the scope of IASb12band are therefore recognized as a tax expense. E. Income tax

represented by ROCEs which were substantially less than the discount rate (WACC) and it is therefore highly unlikely that the former could reduce further without being compensated by a reduction in the WACC (and this, on calculations to infinity). The most pertinent operational assumption for the sensitivity analysis was therefore considered to be that for revenue growth. The following table shows the impact of reductions of 100band 200bbasis points in revenue growth over the three forecast years, with a starting point for the revenue growth used in the terminal value calculations represented by the inflation rate of 2%. The amounts in the table show the difference between the CGU’s recoverable and carrying amounts. A negative amount therefore indicates a further potential impairment loss.

Sensitivity analysis Central Europe CGU

-100 pt

-200 pt

-3 -2

-5 -5

FSM CGU

As a result, current tax comprises:

■ the expected amount of tax payable on the taxable income of the period (determined using tax rates that have been enacted or substantively enacted at the reporting date); ■ any adjustment of the amount of tax payable in respect of previous years;

CVAE, IRAP etc.

■

In 2017, the Group recognized an income tax credit of €9.3bmillion, compared with income tax expense of €82.8bmillion in 2016. This change is due principally to the effect of the US tax reform on the measurement of deferred tax liabilities, as disclosed in the following schedule.

2017 314 160 -169 305

b

2016

Consolidated net profit

217

Current tax expense

97

Deferred tax expense (credit)

-14 300

Profit before tax

Standard rate of tax in France

34.43%

34.43%

Expected tax expense

-105

-103

CVAE

-2 -1

-2 -1 -2

IRES/IRAP

Tax on dividends

3

Effect of foreign jurisdictions’ tax rates

25

24

US tax on retained earnings

-15 147 -23 -17

b b b

Change in US tax rate

Impairment loss on goodwill

Other permanent differences, other items Change in unrecognized deferred tax assets

-1

-3

2

TOTAL

9

-83

188

Teleperformance bb - bb Registration documentbb 2017