SAINT_GOBAIN_REGISTRATION_DOCUMENT_2017

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Financial and accounting information 2017 Consolidated financial statements

Transactions carried out in 2016 2.2.2. In 2016, Saint-Gobain continued to actively manage its portfolio of businesses, fully in line with its strategy. Various operations were completed in order to strengthen the Group’s profile in high added-value businesses and growing markets.

With the support of its Board of Directors, Saint-Gobain is determined to successfully complete its plan to acquire a controlling stake in Sika, an industrial project that will create value for all stakeholders. Pending the decision of the Zug Supreme Court, which is expected early 2018, Saint-Gobain is confident that the Swiss justice system will restore SWH’s ownership rights.

Changes in the number of consolidated companies 2.3. At December 31, 2017, the number of consolidated companies was as follows: b France

OutsideFrance

Total

Fully consolidated companies AT JANUARYb1, 2017 Newly consolidated companies

141

603

744

7

59

66

Merged companies

(5)

(18) (16)

(23) (16)

Deconsolidated companies Change in consolidation method

0 0

0

0

AT DECEMBERb31, 2017

143

628

771

Equity-accounted companies and joint arrangements AT JANUARY 1, 2017

4 0 0 0 0 4

91

95

Newly consolidated companies

7

7

Merged companies

(1) (2)

(1) (2)

Deconsolidated companies Change in consolidation method AT DECEMBER 31, 2017 TOTAL AT JANUARYb1, 2017 TOTAL AT DECEMBERb31, 2017

0

0

95

99

145 147

694 723

839 870

Off-balance sheet commitments related to companies within the scope 2.4. of consolidation At December 31, 2017, non-cancelable purchase commitments include the commitment on equity holdings in the Sika group totaling €2,369 million.

NOTE 3

INFORMATION CONCERNING THE GROUP’S OPERATING

ACTIVITIES

Income statement items 3.1. Revenue recognition 3.1.1.

revenue, the expected loss is recognized as an expense immediately. Construction contract revenues are not material in relation to total consolidated net sales. Operating income 3.1.2. Operating income is a measure of the performance of the different sectors and has been used by the Group as its key external and internal management indicator for many years. Foreign exchange gains and losses are included in operating income, as are changes in the fair value of financial instruments that do not qualify for hedge accounting when they relate to operating items. The share of income of core business equity-accounted companies is also posted under operating income. Discounts granted by suppliers to the Building Distribution Sector are included in operating income. Contractual supplier discounts are customary practice in the industrial goods distribution sector. These discounts are mostly calculated by applying a contractually guaranteed rate by product type to volumes purchased. The calculation is made automatically,

Revenue generated by the sale of goods or services is recognized net of rebates, discounts and sales taxes (i) when the risks and rewards of ownership have been transferred to the customer, or (ii) when the service has been rendered, or (iii) by reference to the stage of completion of the services to be provided. Construction contracts are accounted for by the Group’s companies using the percentage-of-completion method, as explained below. When the outcome of a construction contract can be estimated reliably, contract revenue and costs are recognized as revenue and expenses, respectively, by reference to the stage of completion of the contract activity at the end of the reporting period. When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognized only to the extent of contract costs incurred that it is probable will be recovered. When it is probable that total contract costs will exceed total contract

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