WORLDLINE_REGISTRATION_DOCUMENT_2017

Financials Consolidated financial statements

Capitalization of development costs Note ‘Accounting rules and policies – Intangible assets other than goodwill‘ and note 13 ‘Intangible assets’ of consolidated financial statements Key Audit Matter Our audit approach

The Group capitalizes development costs corresponding to technical solutions developed specifically for the use of customers or made available to a group of customers. As of December 31, 2017, development costs capitalized in accordance with IAS 38 “Intangible assets” are recorded on the company’s balance sheet for a total net book value of 172.7 million euros. An intangible asset arising from internal developments shall be recognized only if certain criteria are met and, in particular, the demonstration of the probability of future economic benefit from the use of the asset. These capitalized costs are amortized on a straight-line basis over the average useful life and are subject to an impairment test if there is any indication that those assets have suffered a loss in value. We considered the capitalization of development costs and their valuation as a key audit matter as Management’s judgment is used to apply the recognition criteria for booking those assets, determine the amortization period and to identify impairment indicators which, if present, could lead the Group to depreciate a portion of its value.

We examined the principles for capitalization of development costs implemented by the Group and assessed the recognition criteria applied against the accounting standards. For the projects on which the capitalized costs are the most significant, we performed the following procedures: We reconciled the capitalized costs for the period with the ● direct time incurred and charged on the development project of the asset concerned; We analyzed the methods for calculating standard hourly ● rates; For these projects, we assessed the amortization period applied to the intangible asset against the nature of the technical solution developed and the expected average life of the solution. We also analyzed the consistency of the revenue forecasts associated with the use of this asset included in the underlying business plans, and in particular: We compared the consistency of revenue forecasts in the ● business plan related to the use of this asset with in-progress and future contracts related to the technical solution developed; We corroborated these forecast assumptions with the ● perspectives of development of the solution and the contracts identified in the order backlog. We assessed whether any indication of impairment loss not taken into account by Management occurred during the year (obsolescence of the solution, loss of business, etc.). Any impairment losses are then estimated on the basis of expected revenues related to the use of the asset as documented by the Management in the business plans.

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Worldline 2017 Registration Document