CAPGEMINI_REGISTRATION_DOCUMENT_2017

FINANCIAL INFORMATION

4.2 Consolidated Financial Statements

Consolidated income statement Note{5

Profit for the year attributable to owners of the Company is then obtained by taking into account the following items: net finance costs, including net interest on borrowings X calculated using the effective interest rate, less income from cash, cash equivalents and cash management assets; other financial income and expense, which primarily X correspond to the impact of remeasuring financial instruments to fair value when these relate to items of a financial nature, disposal gains and losses and the impairment of investments in non-consolidated companies, net interest costs on defined benefit pension plans, exchange gains and losses on financial items, and other financial income and expense on miscellaneous financial assets and liabilities calculated using the effective interest rate; current and deferred income tax expense; X share of profit of associates; X share of non-controlling interests. X Operating margin, an alternative performance measure monitored by the (*) Group, is defined in Note{3 - Alternative performance measures.

Income and expenses are presented in the Consolidated Income Statement by function. Operating expenses are broken down into the cost of services rendered (corresponding to costs incurred for the execution of client projects), selling expenses, and general and administrative expenses. These three{captions represent ordinary operating expenses which are deducted from revenues to obtain operating margin{*, one of the main Group business performance indicators. Operating profit is obtained by deducting other operating income and expenses from operating margin. Other operating income and expenses include amortization of intangible assets recognized in business combinations, the charge resulting from the deferred recognition of the fair value of shares granted to employees (including social security contributions and employer contributions), and non-recurring revenues and expenses, notably impairment of goodwill, negative goodwill, capital gains or losses on disposals of consolidated companies or businesses, restructuring costs incurred under a detailed formal plan approved by the Group’s management, the cost of acquiring and integrating companies acquired by the Group, including earn-outs comprising conditions of presence and the effects of curtailments, settlements and transfers of defined benefit pension plans.

4

Revenues Note{6

The related costs are recognized as they are incurred. However, a portion of costs incurred in the initial phase of outsourcing contracts (transition and/or transformation costs) may be deferred when they are specific to a given contract, relate to future activity on the contract and/or will generate future economic benefits, and are recoverable. These costs are allocated to work-in-progress and any reimbursement by the customer is recorded as a deduction from the costs incurred. When the projected cost of the contract exceeds contract revenues, a loss to completion is recognized in the amount of the difference. Revenues receivable from these contracts are recognized in the Consolidated Statement of Financial Position under “Accounts and notes receivable” when invoiced to customers and “Accrued income” when they are not yet invoiced. Advances from customers and billed in advance are included in current liabilities. As disclosed in Note{1 - Accounting basis, the main impact of the application of IFRS{15 concerns the principal/agent distinction and is assessed at €270{million, or 2.1% of 2017{revenues. Under the new standard, 2017{revenues would therefore be €12,522{million. The operating margin would remain unchanged in value terms, while the operating margin rate would increase from{11.7% to{11.9%.

The method for recognizing revenues and costs depends on the nature of the services rendered:

Time and materials contracts a. Revenues and cost of services are recognized as services are rendered. Long-term fixed-price contracts b. Revenues, including systems development and integration contracts, are recognized using the “percentage-of-completion” method. Costs are recognized as they are incurred. Outsourcing contracts c. Revenues from outsourcing agreements are recognized over the term of the contract as the services are rendered.

In{2017, revenues grew 2.0% year-on-year at current Group scope and exchange rates. Excluding the Brazilian equipment resale business, revenues grew 4.0% at constant exchange rates{ (1) , while organic growth{ (1) was 3.6%.

Organic growth and growth at constant exchange rates, alternative performance measures monitored by the Group, are defined in Note{3 - Alternative performance (1) measures.

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REGISTRATION DOCUMENT 2017 — CAPGEMINI