EURAZEO_REGISTRATION_DOCUMENT_2017

CONSOLIDATED FINANCIAL STATEMENTS Statutory Auditors' report on the consolidated financial statements

Measurement of main components of goodwill and intangible assets with indefinite useful lives – See Note 6.1 "Goodwill", Note 6.2 "Intangible assets", Note 6.4 "Impairment losses on fixed assets", and Note 16.7 "Impairment of non-financial assets" to the financial statements

Description of risk

How our audit addressed this risk

At December 31, 2017, goodwill represented €3,256 million, equivalent to 28% of total assets, broken down as follows: €1,101 million attributable to WorldStrides, €632 million attributable to Eurazeo PME, €558 million attributable to Fintrax, €347 million attributable to Novacap, €234 million attributable to Iberchem, €206 million attributable to Sommet Education and €134 million attributable to Asmodee. Other intangible assets with indefinite useful lives amounted to €667 million, most of which corresponded to trademarks (€475 million), including €232 million attributable to Eurazeo PME, €121 million attributable to Sommet Education, €72 million attributable to CPK, €50 million attributable to Fintrax, and €192 million to publishing and distribution rights. At each year-end, management conducts impairment tests for all assets with indefinite useful lives to verify that their net carrying amount is lower than their recoverable amount (the higher of fair value less costs of disposal and value in use). These tests require a significant amount of judgment and assumptions, particularly in determining the cash-generating units (CGU), future cash flows based on business plans drawn up by management for each CGU, and the discount rates and perpetual growth rates used to project for these flows. At December 31, 2017, we focused our attention on the Sommet Education CGU. An analysis of the sensitivity of the recoverable amount of the goodwill allocated to this CGU to the assumptions made was performed by the Company's management and is disclosed in Note 6.4.3 to the consolidated financial statements, "Sensitivity of impairment tests". Given the materiality of goodwill and trademarks in the consolidated financial statements and the fact that the determination of their recoverable amount is based on the use of assumptions, estimates and assessments and is subject to uncertainty, particularly relating to the probability of achieving the projected future cash flow used to measure their recoverable amount, and the sensitivity of the recoverable amount to changes in the financial data and assumptions made, we deemed the measurement of goodwill and trademarks relating to these investments to be a key audit matter.

For the main components of goodwill and trademarks, our work consisted primarily of: verifying the appropriateness of the determination of CGUs; • verifying the consistency of the methods used for impairment • testing; assessing the reasonableness and the consistency of the key • assumptions used to determine cash flows (business plans) in relation to the underlying operational data; assessing, in association with our evaluation experts, the discount • rates and long-term growth rates employed. Lastly, we examined the appropriateness of the disclosures provided in the notes to the consolidated financial statements, particularly Note 6.

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2017 Registration document