CAPGEMINI_REGISTRATION_DOCUMENT_2017

FINANCIAL INFORMATION

4.2 Consolidated Financial Statements

Financial instruments Note{17

Financial instruments consist of: financial assets, including other non-current assets, accounts X receivable, other current assets, cash management assets and cash and cash equivalents; financial liabilities, including long- and short-term X borrowings and bank overdrafts, accounts payable and other current and non-current liabilities; derivative instruments. X Recognition of financial instruments a) Financial instruments (assets and liabilities) are initially recognized in the Consolidated Statement of Financial Position at their initial fair value. The subsequent measurement of financial assets and liabilities is based on either their fair value or amortized cost depending on their classification in the Consolidated Statement of Financial Position. The fair value of a financial instrument is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. Amortized cost corresponds to the initial carrying amount (net of transaction costs), plus interest calculated using the effective interest rate, less cash outflows (coupon interest payments and repayments of principal and redemption premiums where applicable). Accrued interest (income and expense) is not recorded on the basis of the financial instrument’s nominal interest rate, but on the basis of its effective interest rate. Financial assets measured at amortized cost are subject to impairment tests as soon as there are indicators of a loss in value. Any loss in value is recognized in the Income Statement. Financial instruments are recognized at inception and on subsequent dates in accordance with the methods described below. These methods draw on the following interest rate definitions: the coupon interest rate or coupon, which is the nominal X interest rate on borrowings; the effective interest rate, which is the rate that exactly X discounts the estimated cash flows through the expected term of the instrument, or, where appropriate, a shorter period to the net carrying amount of the financial asset or liability at initial recognition. The effective interest rate takes into account all fees paid or received, transaction costs, and, where applicable, premiums to be paid and received;

the market interest rate, which reflects the effective X interest rate recalculated at the measurement date based on current market parameters. Financial instruments (assets and liabilities) are derecognized when the related risks and rewards of ownership have been transferred, and when the Group no longer exercises control over the instruments. Derivative instruments b) Derivative instruments mainly comprise forward foreign exchange purchase and sale contracts (in the form of tunnels, where applicable), interest rate swaps and call options on own shares. Other derivative instruments Other derivative instruments are initially recognized at fair value. Except as described below in the case of instruments designated as cash flow hedges, changes in the fair value of derivative instruments, estimated based on market rates or data provided by bank counterparties, are recognized in the Income Statement at the period end. When operating or financial cash flow hedges are eligible for hedge accounting, the fair value of the hedging instruments are recognized firstly in “Income and expense recognized in equity” and subsequently taken to operating profit when the hedged item itself impacts the Income Statement. Fair value measurement c) Fair value measurement methods for financial and non-financial assets and liabilities as defined above are classified according to the following three{fair value levels: Level{1: fair value measured based on quoted prices X (unadjusted) observed in active markets for identical assets or liabilities; Level{2: fair value measured using inputs other than quoted X prices in active markets, that are observable either directly ( i.e. as prices) or indirectly ( i.e. derived from prices); Level{3: fair value of assets or liabilities measured using X inputs that are not based on observable market data (unobservable inputs). As far as possible, the Group applies Level{1 measurement methods.

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REGISTRATION DOCUMENT 2017 — CAPGEMINI