TransactionsRestructuringOperational solutions Accounting Manual Draft Working Document Strictly private and confidential Version x.x Date:

Sommaire Accounting Manual p.1 Sommaire p Introduction p.4 2. Definitions p.5 3. Accounts checklist p.6 4. Group Accounting Policies p Profit and loss account p Income p Products p Non-Recurring Engineering p Expenses p Balance sheet p Assets p Fixed assets p General definition p Goodwill p R&D p General definition p Inventory p Initial recognition p Provision levels – by category p Receivables p Method of calculation of reserves p Liabilities p Corporation tax p Warranties p Claims and litigation p Pension liabilities p General reserves p XX p.48 2

3 Profit and loss accountBalance sheet Revenue Cost of sales Operating expenses Exceptional items Taxes Intangible fixed assets Tangible fixed assets Working capital Provisions Tax assets and liabilities 0. Navigator HomeBS Make these boxes link to the relevant sub-sections Cash and net debt AP P&L

1. Introduction 4 HomeBSAP P&L

2. Definitions 5 HomeBSAP P&L

3. Accounts checklist CheckFrequency MonthlyQuarterlyHalf yearYearly xxx       6 Frequency HomeBSAP P&L

7 4. Group Accounting Policies

Comment ➔ Comments on Policy 1 4. Group Accounting Policies 8 Accounting principles HomeBS Policy ➔ Comments on Policy 2 etc AP P&L

4. Group Accounting Policies Group accounting principles 9 Accounting principles HomeAC BSAP P&L

Group accounting principles 4. Group Accounting Policies 10 Accounting principles HomeBSAP P&L

4. Group Accounting Policies Group accounting principles 11 Accounting principles HomeBSAP P&L

4. Group Accounting Policies Group accounting principles 12 Accounting principles HomeBSAP P&L

4. Group Accounting Policies Group accounting principles 13 Accounting principles HomeBSAP P&L

4. Group Accounting Policies Group accounting principles 14 Accounting principles HomeBSAP P&L

4. Group Accounting Policies Group accounting principles. 15 Accounting principles HomeBSAP P&L

4. Group Accounting Policies Group accounting principles 16 Accounting principles HomeBSAP P&L

5. Profit and loss account 17

5.1 Income 18

5.1.1 Revenue recognition Products 19 Profit and loss Risk area BackgroundExemple Home P&L BSAP

4.1.1 Revenue recognition 20 Profit and loss Non-Recurring Engineering Home P&L BS ➔ xx Risk area ➔ xx BackgroundExemple AP

4.1.1 Revenue recognition Expedite fees Home P&L BS Company approach ➔ xx Risk area ➔ xx Background ➔ IAS 18, Revenue, defines the term “revenue”. Revenue is income that arises in the course of ordinary activities of an entity. It is recognized when it is probable that future economic benefits will flow to the entity and these benefits can be measured reliably. ➔ Revenue is made of all the components of the transaction: customer rebates, trade :discounts, early payment discounts, being part of the negotiation with the customer to achieve the transaction, these items must be deducted from revenue. Exemple 21 Profit and loss AP

4.1.1 Revenue recognition 22 Profit and loss Freight charges invoiced Home P&L BS Company approach ➔ xx Risk area ➔ xx Background ➔ IAS 18, Revenue, defines the term “revenue”. Revenue is income that arises in the course of ordinary activities of an entity. It is recognized when it is probable that future economic benefits will flow to the entity and these benefits can be measured reliably. ➔ Revenue is made of all the components of the transaction: customer rebates, trade :discounts, early payment discounts, being part of the negotiation with the customer to achieve the transaction, these items must be deducted from revenue. Exemple AP

4.1.2 Other P&L items 23 Profit and loss Non-recurring income/expense Home P&L BS Company approach ➔ xx Risk area ➔ xx Background ➔ IAS 18, Revenue, defines the term “revenue”. Revenue is income that arises in the course of ordinary activities of an entity. It is recognized when it is probable that future economic benefits will flow to the entity and these benefits can be measured reliably. ➔ Revenue is made of all the components of the transaction: customer rebates, trade :discounts, early payment discounts, being part of the negotiation with the customer to achieve the transaction, these items must be deducted from revenue. Exemple AP

4.2 Expenses 24

4.2.1 Pensions 25 Profit and loss Pensions and other employee benefit obligations Home P&L BS Company approach ➔ Payments made under defined contribution plans are recorded in the Schneider Group’s income statement in the year of payment and represent full settlement of the liability ➔ Defined benefit plans are measured using the projected unit credit method. Expenses recognized in the income statement are split between operating income (for current service costs) & net financial income/(expense) (for financial costs & expected return on plan assets ➔ Actuarial variations are booked through reserves in the balance sheet. Risk area ➔ xx Background ➔ xx Exemple AP

5. Balance sheet 26

5.1 Assets 27

5.1.1 Fixed assets 28

Intangible fixed assets General definition 29 Balance sheet HomeBS Company approach ➔ Intangible assets acquired separately are measured at cost ➔ Intangible assets acquired under a business combination are measured at fair value ➔ All intangibles are amortized on a straight-line basis over their useful economic life ➔ Trademarks acquired as part of a business combination are not amortized when they are considered to have an indefinite life. Risk area ➔ Recognition criteria ➔ Costs to be capitalized ➔ Costs to be expensed ➔ Amortization and impairment losses Background ➔ Accounting for intangible assets is based on IAS 38, Intangible assets, in terms of their definition, measurement and amortization, and on IAS 36, Impairment, for loss of value issues. ➔ An intangible asset is an identifiable non-monetary asset without physical substance. It is a resource controlled by an enterprise as a result of past events, and from which future economic benefits are expected to flow to the enterprise. Exemple AP P&L

Intangible fixed assets Goodwill 30 Balance sheet HomeBS Company approach ➔ Goodwill is recognized as the difference between the cost of acquisition and the fair value of the share of assets and liabilities acquired ➔ Goodwill is not amortized but is subject to annual impairment testing. Risk area ➔ Amortization and impairment losses Background ➔ xx Exemple AP P&L

Intangible fixed assets R&D 31 Balance sheet HomeBS Company approach ➔ Research costs are expensed to the income statement when incurred ➔ Development costs are capitalized if, and only if, (i) the project is clearly identified and the related costs can be separately tracked (ii) the technical feasibility of the project has been demonstrated and the Group has demonstrated the intention and financial resources to complete the project through to commercialization (iii) the Group has allocated the necessary technical, financial and other resources to complete the development (iv) it is probable that the future economic benefits will flow to the Group. Development costs that meet these criteria are amortized over 3-10 years ➔ Software implementation: Internal and external costs are capitalized when they relate to the programming, coding and testing phase. Risk area ➔ Recognition criteria ➔ When does development start / is completed ➔ Costs to be capitalized ➔ Costs to be expensed ➔ Amortization and impairment losses Background ➔ The capitalization of development is covered by IAS 38 Intangible Assets. ➔ The recognition criteria, which are similar between IFRS & US Gaap are: That the costs can be reliably measured That technical feasibility has been established That it is probable that future economic benefits will flow from the development. Exemple AP P&L

Intangible fixed assets Initial recognition Customer relationships 32 Balance sheet HomeBS Company approach ➔ xx Risk area ➔ xx Background ➔ xx Exemple AP P&L

Intangible fixed assets Impairment testing Customer relationships 33 Balance sheet HomeBS Company approach ➔ xx Risk area ➔ xx Background ➔ An impairment test should be performed when there is an indication that an asset (or group of assets) may be impaired. An impairment must be recognized when the carrying value of an asset exceeds its recoverable amount. The recoverable amount is the greater of the net selling price of the asset (or the best estimate available) and its value in use. Exemple ➔ Example: an asset is depreciated over 10 years on a straight- line basis (no residual value is anticipated). On year 5, the carrying amount of the asset happens to be greater than its recoverable amount. An impairment loss must therefore be recognized. Gross value (year 0):1 000 Carrying amount at the end of year 5:500 Recoverable amount at the end of year 5:400 Impairment loss:(100) Revised carrying amount at the end of year 5:400 Yearly depreciation from year 6 to 10:(80) ➔ An impairment loss recognized in prior years should be reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. ➔ The increased carrying amount of an asset due to a reversal of an impairment loss should not exceed the carrying amount that would have been determined (net of amortization or depreciation) had no impairment loss been recognized for the asset in prior years. AP P&L

Tangible fixed assets General definition 34 Balance sheet HomeBS Company approach ➔ Property, plant and equipment is primarily comprised of land, buildings and production equipment and is carried at cost less accumulated depreciation as follows Buildings – 25 to 50 years Machinery & equipment – 3 to 18 years Other – 3 to 12 years ➔ Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalized. ➔ Assets held under leases agreements are recognized in the balance sheet, offset by a financial debt when the lease transfers substantially all of the risks and rewards to the Company Group. Risk area ➔ xx Background ➔ xx Exemple AP P&L

5.1.2 Inventory 35

Inventory valuation Initial recognition 36 Balance sheet HomeBS Company approach ➔ Inventories and work in progress are stated at the lower of cost and estimated net realizable value. Acquisition cost for internally manufactured inventory is determined using the weighted average price. ➔ The cost of WIP, semi-finished and finished products includes the cost of: Materials Direct labor Sub-contracting costs All production overheads based on normal capacity utilization The portion of R&D related to the production process. Risk area ➔ Acquisition Cost ➔ Adjustments to the acquisition cost ➔ Internal Production ➔ Inventory Provision Background ➔ xx Exemple AP P&L

Inventory valuation Provision levels – by category 37 Balance sheet HomeBS Company approach ➔ 1. Identification of Defective / Displayed / Obsolete / Discontinued / Consignment Quantities and application of specific rates ➔ 2. Identification of New Item and exclusion from the calculation basis ➔ 3. On remaining quantities, application of slow moving depreciation rates based on historical sales ➔ 4. Application of Net Realizable Value write-downs where appropriate Risk area ➔ xx Background ➔ xx Exemple AP P&L

5.1.3 Receivables 38

Account receivable valuation Method of calculation of reserves 39 Balance sheet HomeBS Company approach ➔ Provisions for doubtful accounts are recorded when it is probable that receivables will not be collected and the amount of the loss can be reasonably estimated. Risk area ➔ xx Background ➔ xx Exemple AP P&L

5.2 Liabilities 40

5.2.1 Corporate taxes Corporation tax 41 Balance sheet HomeBS Company approach ➔ xx Risk area ➔ xx Background ➔ xx Exemple AP P&L

5.2.1 Corporate taxes Assets Deferred tax 42 Balance sheet HomeBS Company approach ➔ Recognized as non-current assets & liabilities ➔ Deferred tax assets are recognized for the probable utilizable amount. Risk area ➔ xx Background ➔ xx Exemple AP P&L

5.2.1 Corporate taxes Liabilities Deferred tax 43 Balance sheet HomeBS Company approach ➔ xx Risk area ➔ xx Background ➔ xx Exemple AP P&L

5.2.2 Provisioning Warranties 44 Balance sheet HomeBS Company approach ➔ xx Risk area ➔ xx Background ➔ xx Exemple AP P&L

5.2.2 Provisioning Claims and litigation 45 Balance sheet HomeBS Company approach ➔ xx Risk area ➔ xx Background ➔ xx Exemple AP P&L

5.2.2 Provisioning Pension liabilities 46 Balance sheet HomeBS Company approach ➔ Actuarial gains and losses ondefined benefit pension liabilities can berecognized through other comprehensive income ➔ IFRS allows the separation of different items of pension cost in different lines of the income statement (service cost above operating income/finance cost below operating income). Risk area ➔ xx Background ➔ xx Exemple AP P&L

5.2.2 Provisioning General reserves 47 Balance sheet HomeBS Company approach ➔ xx Risk area ➔ xx Background ➔ xx Exemple AP P&L

5.2.3 Financial liabilities XX 48 Balance sheet HomeBS Company approach ➔ Financial liabilities primarily comprise bonds and short and long-term bank borrowings which are recorded at fair value taking into account any direct transaction costs ➔ They are subsequently amortized based on their effective interest rate Risk area ➔ xx Background ➔ xx Exemple AP P&L

Xxx xxx 49 Profit and loss Home P&L BS XX AP

Xxx 50 Profit and loss xxx Home P&L BS XX AP