ANNEX 1 27 Because of the risks and uncertainties related to regulatory Receivables and payables in foreign currencies are converted authorizations and to the research and development process, the into euros based on exchange rate at the closing of year-end, the Company considers that the six criteria would be deemed fulfilled gap being carried over in an adjustment account for the asset or as from the grant of market authorization. a liability depending on whether a loss or profit potential. In the Intangible assets consist of patents, costs related to the acquisition case of a potential loss, a provision for foreign exchange loss is of software licenses. They are depreciated using the straight-line recognized. method over their expected period of use. Short-term investments items Depreciation period Marketable securities are held in order to meet short-term cash Patents 20 years commitments rather than an investment objective or for other purposes. They are immediately convertible into a known amount Software 1 year of cash and subject to insignificant risk of changes in value. Short- Tangible assets term investments are stated at acquisition cost and consist of immediately mobilized term investments without penalty. Tangible assets are recorded at their acquisition cost or, if applicable, at their production cost. Provisions for risks and expenses Tangible assets are depreciated using the straight-line method The Company establishes provisions for risks and expenses in over the estimated useful period of the property. Rented fixtures accordance with the definition given in the notice CRC 00-06 on are depreciated over the term of their lifetime or over the term of liabilities, namely: the rental agreement, whichever is shorter. • A provision for risk and expenses corresponds to the The depreciation periods used are the following: commitments whose due dates and amounts are uncertain; • A provision is recognized in the financial statement when items Depreciation period the company has a legal or implicit obligation to a third party Fixtures and improvement 9 years resulting from a past event, which is likely or certain to cause an in structures outflow of resources to that third party, and provided that the Research and development equipments 5 to 10 years future outflows of liquid assets can be estimated reliably. Computer equipment 3 years Conditional advances Office equipment and furniture 5 years The company has benefited from a financial assistance in the form of non-refundable subsidies and conditional advances. Financial assets Investments Subsidies are recognized in the financial statements where there exists reasonable assurance that: These items are recognized in the balance sheet at purchase cost excluding incidental expenses. • The company will comply with the conditions attached to the subsidies; and Their value is assessed annually by reference to their value in use • The subsidies will be received. which is mainly based on the current and forecast profitability of the subsidiary concerned and the share of equity owned. If A public subsidy that is to be received either as a compensation the value in use falls below the net book value, a depreciation is for expenses or for losses already incurred or for immediate recognized. financial support of the company without associated future costs, is recognized in the financial statements as other income for the Security deposit period in which the grant is classified as a receivable. They are recorded at their original value. Funds received in the form of conditional advances are recognized Receivables and payables as financial liabilities, as long as accrued interests, whose interest rate, as the company has to reimburse the funder. The obligation Receivables and payables are measured at their nominal value to repay totally or partially the advance is based on the technical and are depreciated as a provision in order to take into account and commercial success of the funded program. potential losses due to recovery difficulties. Details related to the conditional advances are provided in Note 7. 248 – GENSIGHT BIOLOGICS – 2017 Registration Document