(1)In the reconciliation schedule above, (i) all adjustments to IFRS revenue data reflect the exclusion of the deferred revenue adjustment of acquired companies; (ii) adjustments to IFRS operating expense data reflect the exclusion of the amortization of acquired intangibles, share-based compensation expense and related social charges, and other operating income and expense, (iii) adjustments to IFRS financial revenue and other, net reflect the exclusion of certain one-time items included in financial revenue and other, net, and (iv) all adjustments to IFRS income data reflect the combined effect of these adjustments, plus for net income and diluted net income per share, certain one-time tax effects and the income tax effect of the non-IFRS adjustments.

In millions of Euros		Nine months ended September 30,												Change
		2018 IFRS		Adjustment		2018 Non-IFRS		2017 IFRS		Adjustment		2017 Non-IFRS		IFRS		Non-IFRS
Cost of revenue		(366.4)		3.4		(363.0)		(350.9)		3.4		(347.6)		4%		4%
Research and development		(467.8)		35.1		(432.7)		(446.5)		35.5		(411.0)		5%		5%
Marketing and sales		(772.3)		22.3		(750.0)		(750.4)		29.0		(721.4)		3%		4%
General and administrative		(209.6)		30.9		(178.8)		(182.3)		18.2		(164.1)		15%		9%
Total share-based compensation expense				€ 91.6						€ 86.1

(2) The non-IFRS percentage increase (decrease) compares non-IFRS measures for the two different periods. In the event there is non-IFRS adjustment to the relevant measure for only one of the periods under comparison, the non-IFRS increase (decrease) compares the non-IFRS measure to the relevant IFRS measure.
(3) Based on a weighted average 260.1 million diluted shares for YTD 2018 and 258.0 million diluted shares for YTD 2017.

Summary of Principal Differences of IFRS 15 Compared to IAS 18

The Company has adopted IFRS 15 as of January 1, 2018 using the modified retrospective transition method (also called the cumulative effect method). Under this method, the transition effect is accounted for within the consolidated equity at the date of initial application, i.e. January 1, 2018, without any adjustment to the prior year comparative information. See also the Company’s 2017 Document de Référence (Annual Report) for further information.

• Recurring software: Recurring software is comprised of subscription and support revenue. IFRS 15 has an impact on the timing of the quarterly recognition of subscription revenue but on a full year basis there is essentially no difference between IFRS 15 and the prior IAS 18 standard for subscription contracts of one year in length. For the 2018 3^rd quarter, IFRS recurring software revenue was €523.2 million under IFRS 15 and was €22.1 million less compared to the prior IAS 18 standard. Previously, under IAS 18, we showed a ratable quarterly amount based upon the annual contract level of our on-premise subscription software. Under IFRS 15, for new contracts entered into or for contracts renewing, we have assigned an upfront value as required which is recognized in the first quarter of the contract, and the remainder which is recognized ratably during the four quarters. We continue to report both of these amounts within recurring revenue, specifically as subscription revenue (previously called periodic revenue).
• Operating expenses and sales commissions: The Company continues to expense sales commissions under the IFRS 15 standard as was done under IAS 18. Therefore, there are no capitalized sales commissions. As a result, the Company’s operating expenses are identical under IFRS 15 and the prior IAS 18 standard.
• One-time permanent difference: The implementation of IFRS 15 on January 1, 2018 resulted in a one-time permanent difference between IFRS 15 and IAS 18, where the deferred portion of subscription agreements concluded in prior years will not be recognized into revenue. As a result, the corresponding amount of €80 million, net of taxes (€110 million before) was recorded in stockholders’ equity as of January 1, 2018.
• Initial impact on unearned revenue : At September 30, 2018 unearned revenue on the Balance Sheet under IFRS 15 is not directly comparable to the December 31, 2017 balance sheet under the prior standard IAS 18. This is due to the fact that the September 30, 2018 balance sheet line item unearned revenue has been reduced by €110 million, reflecting mainly (i) the one-time permanent difference of €94 million, and (ii) the higher amount of revenue recognized in the first nine months under IFRS 15 compared to IAS 18 in the amount of €17 million.
• Contract Assets: Under IFRS 15, the Company classifies the right to consideration in exchange for products or services transferred to a client as either a receivable or a contract asset. Contract assets amounted to €32 million as at January 1, 2018 (1 ^st application impact) and to €38 million as at September 30, 2018.

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