Constellation Software Inc.

FINANCIAL REPORT
Fourth Quarter Fiscal Year 2016

For the three months and fiscal year ended

December 31, 2016
 CON TELLATION OFT ARE INC
ANA E ENT I C ION AN ANAL I A

he followin discussion and analysis should be read in con unction with the nnual Consolidated
Financial Statements for the year ended December 31, 2016, which we re ared in accordance with International
Financial e ortin Standards IF S . Certain information included herein is forward loo in and based u on
assum tions and antici ated results that are sub ect to uncertainties. Should one or more of these uncertainties
materiali e or should the underlyin assum tions ro e incorrect, actual results may ary si nificantly from those
e ected. See Forward oo in Statements and is s and ncertainties .

nless otherwise indicated, all dollar amounts are e ressed in .S. dollars. ll references to are to
.S. dollars and all references to C are to Canadian dollars. Certain totals, subtotals and ercenta es may not
reconcile due to roundin .

dditional information about Constellation Software Inc. the Com any or Constellation , includin
our most recently filed nnual Information Form IF , is a ailable on S D at www.sedar.com.

F L

Certain statements in this re ort may contain forward loo in statements that in ol e ris s, uncertainties
and other factors that may cause the actual results, erformance or achie ements of the Com any or industry to be
materially different from any future results, erformance or achie ements e ressed or im lied by such forward
loo in statements. ords such as may , will , e ect , belie e , lan , intend , should , antici ate and
other similar terminolo y are intended to identify forward loo in statements. hese statements reflect current
assum tions and e ectations re ardin future e ents and o eratin erformance as of the date of this D ,
February 1 , 201 . Forward loo in statements in ol e si nificant ris s and uncertainties, should not be read as
uarantees of future erformance or results, and will not necessarily be accurate indications of whether or not such
results will be achie ed. number of factors could cause actual results to ary si nificantly from the results
discussed in the forward loo in statements, includin , but not limited to, the factors discussed under is s and
ncertainties . lthou h the forward loo in statements contained in this D are based u on what
mana ement of the Com any belie es are reasonable assum tions, the Com any cannot assure in estors that actual
results will be consistent with these forward loo in statements. hese forward loo in statements are made as of
the date of this D and the Com any assumes no obli ation, e ce t as re uired by law, to u date any forward
loo in statements to reflect new e ents or circumstances. his re ort should be iewed in con unction with the
Com any s other ublicly a ailable filin s, co ies of which can be obtained electronically on S D at
www.sedar.com.

N IFR

his D includes certain measures which ha e not been re ared in accordance with IF S such as
d usted I , d usted I mar in, d usted net income, d usted net income mar in, et e enue,
era e In ested Ca ital, and IC.

he term d usted I refers to net income before ad ustin for finance and other e ense income ,
bar ain urchase ain, finance costs, income ta es, share in net income or loss of e uity in estees, im airment of
non financial assets, amorti ation, SS membershi liability re aluation char e, and forei n e chan e ain or loss.
he Com any belie es that d usted I is useful su lemental information as it ro ides an indication of the
results enerated by the Com any s main business acti ities rior to ta in into consideration how those acti ities

1
are financed and ta ed and also rior to ta in into consideration intan ible asset amorti ation and the other items
listed abo e. d usted I mar in refers to the ercenta e that d usted I for any eriod re resents
as a ortion of total re enue for that eriod.

d usted net income means net income ad usted for non cash e enses income such as amorti ation
of intan ible assets, deferred income ta es, the SS membershi liability re aluation char e, and certain other
e enses income , and e cludes the ortion of the ad usted net income of otal S ecific Solutions SS . .
SS attributable to the minority owners of SS see Ca ital esources and Commitments section . he
Com any belie es that d usted net income is useful su lemental information as it ro ides an indication of the
results enerated by the Com any s main business acti ities rior to ta in into consideration amorti ation of
intan ible assets, deferred income ta es, the SS membershi liability re aluation char e, and certain other non
cash e enses income incurred or reco ni ed by the Com any from time to time, and ad usts for the ortion of
SS d usted net income not attributable to shareholders of Constellation. d usted net income mar in refers
to the ercenta e that d usted net income for any eriod re resents as a ortion of total re enue for that eriod.

et e enue . et e enue is re enue for IF S ur oses less any third arty and flow throu h e enses.
he Com any belie es et e enue is a useful measure since it ca tures 100 of the license, maintenance and
ser ices re enues associated with Constellation s own roducts, and only the mar in on the lower alue added
re enues such as commodity hardware or third arty software.

d usted I , d usted net income, and et e enue are not reco ni ed measures under IF S and,
accordin ly, readers are cautioned that d usted I , d usted net income and et e enue should not be
construed as alternati es to net income and re enue determined in accordance with IF S. he Com any s method
of calculatin d usted I , d usted net income and et e enue may differ from other issuers and,
accordin ly, d usted I , d usted net income, and et e enue may not be com arable to similar measures
resented by other issuers. See esults of erations d usted I and d usted net income , for a
reconciliation of d usted I and d usted net income to et income, and IC lus r anic rowth for a
reconciliation of et e enue to e enue. d usted I includes 100 of the d usted I of SS, and
et e enue includes 100 of the et e enue of SS.

era e In ested Ca ital re resents the a era e e uity ca ital of the Com any, and is based on the
Com any s estimate of the amount of money that its common shareholders had in ested in CSI. Subse uent to that
estimate, each eriod the Com any has e t a runnin tally, addin d usted net income, subtractin any di idends,
addin any amounts related to share issuances and ma in some minor ad ustments, includin ad ustments relatin
to our use of certain incenti e ro rams and the amorti ation of im aired intan ibles. he Com any belie es that
era e In ested Ca ital is a useful measure as it a ro imates the retained earnin s of the Com any rior to
ta in into consideration amorti ation of intan ible assets, deferred income ta es, and certain other non cash
e enses income incurred or reco ni ed by the Com any from time to time.

IC means eturn on In ested Ca ital and re resents a ratio of d usted net income to era e
In ested Ca ital. he Com any belie es this is a useful rofitability measure as it e cludes certain non cash
e enses income from both the numerator and denominator.

2
O

e ac uire, mana e and build ertical mar et software S businesses. enerally, these businesses
ro ide mission critical software solutions that address the s ecific needs of our customers in articular mar ets.
ur focus on ac uirin businesses with rowth otential, mana in them well and then buildin them, has allowed
us to enerate si nificant cash flows and re enue rowth durin the ast se eral years.

ur re enue consists rimarily of software license fees, maintenance and other recurrin fees, rofessional
ser ice fees and hardware sales. Software license re enue is com rised of license fees char ed for the use of our
software roducts enerally licensed under multi le year or er etual arran ements in which the fair alue of
maintenance and or rofessional ser ice fees are determinable, where a licable. aintenance and other recurrin
re enue rimarily consists of fees char ed for customer su ort on our software roducts ost deli ery and also
includes, to a lesser e tent, recurrin fees deri ed from software as a ser ice, subscri tions, combined
software su ort contracts, transaction related re enues, and hosted roducts. aintenance and other recurrin fee
arran ements enerally include on oin customer su ort and ri hts to certain roduct u dates when and if
a ailable and roducts sold on a subscri tion basis. rofessional ser ice re enue consists of fees char ed for
im lementation and inte ration ser ices, customi ed ro rammin , roduct trainin and consultin . ardware
sales include the resale of third arty hardware that forms art of our customer solutions, as well as sales of
customi ed hardware assembled internally. ur customers ty ically urchase a combination of software,
maintenance, rofessional ser ices and hardware, althou h the ty e, mi and uantity of each ary by customer and
by roduct.

enses consist rimarily of staff costs, the cost of hardware, third arty licenses, maintenance and
rofessional ser ices to fulfill our customer arran ements, tra el and occu ancy costs and other eneral o eratin
e enses.

3
R O
In millions of dollars, e ce t ercenta es and er share amounts
naudited

Three months ended Period-Over- Year ended Period-Over- Year ended

December 31, Period Change December 31, Period Change December 31,
2016 2015 $ % 2016 2015 $ % 2014
(Unaudited) (Unaudited)

Revenue 563.8 511.6 52.2 10% 2,125.1 1,838.3 286.8 16% 1,669.3

Expenses 412.4 378.7 33.7 9% 1,595.1 1,392.8 202.3 15% 1,321.3

Adjusted EBITA 151.4 132.8 18.6 14% 530.0 445.5 84.5 19% 348.1
Adjusted EBITA margin 27% 26% 25% 24% 21%

Amortization of intangible assets 58.6 47.9 10.7 22% 190.6 180.5 10.1 6% 173.2
Foreign exchange (gain) loss 1.2 (7.3) 8.5 NM 26.0 (15.7) 41.7 NM 10.5
TSS membership liability revaluation
charge 7.7 7.1 0.6 9% 21.6 22.2 (0.6) -3% -
Share in net (income) loss of equity investees 0.4 (0.2) 0.6 NM (5.3) (1.1) (4.2) 397% (0.8)
Finance and other income (7.6) (1.5) (6.1) 395% (10.8) (4.8) (6.1) 127% (4.1)
Finance costs 5.2 5.1 0.1 1% 21.6 20.1 1.5 7% 16.7
Income before income taxes 85.9 81.7 4.2 5% 286.4 244.3 42.1 17% 154.9

Income taxes expense (recovery)

Current income tax expense (recovery) 25.0 15.9 9.2 58% 84.9 63.5 21.5 34% 51.5
Deferred income tax expense (recovery) (4.8) (0.1) (4.7) NM (5.3) 3.6 (8.9) NM 0.2
Income tax expense (recovery) 20.3 15.8 4.5 28% 79.6 67.1 12.6 19% 51.8

Net income 65.7 66.0 (0.3) 0% 206.8 177.2 29.5 17% 103.1

Adjusted net income 121.8 117.7 4.1 3% 395.0 371.0 24.0 6% 274.3
Adjusted net income margin 22% 23% 19% 20% 16%

Weighted average number of shares

outstanding (000's)
Basic and diluted 21,192 21,192 21,192 21,192 21,192

Net income per share

Basic and diluted $ 3.10 $ 3.11 $ (0.01) 0% $ 9.76 $ 8.36 $ 1.39 17% $ 4.87

Adjusted EBITA per share

Basic and diluted $ 7.14 $ 6.27 $ 0.88 14% $ 25.01 $ 21.02 $ 3.99 19% $ 16.43

Adjusted net income per share

Basic and diluted $ 5.75 $ 5.55 $ 0.19 3% $ 18.64 $ 17.51 $ 1.13 6% $ 12.94

Cash dividends declared per share

Basic and diluted $ 1.00 $ 1.00 $ - 0% $ 4.00 $ 4.00 $ - 0% $ 4.00

Total assets 1,883.5 1,639.3 244.1 15% 1,433.1

Total long-term liabilities 552.8 532.3 20.5 4% 414.4

NM - Not meaningful
C

Revenue:

otal re enue for the uarter ended December 31, 2016 was 63. million, an increase of 10 , or 2.2 million,
com ared to 11.6 million for the com arable eriod in 201 . For the 2016 fiscal year total re enues were
2,12 .1 million, an increase of 16 , or 2 6. million, com ared to 1, 3 .3 million for the com arable eriod
in 201 . he increase for both the three and twel e month eriods com ared to the same eriods in the rior year
is rimarily attributable to rowth from ac uisitions as the Com any e erienced or anic rowth of ne ati e 1
and ositi e 1 res ecti ely, ositi e 1 and 2 res ecti ely after ad ustin for the im act of the net a reciation
of the S dollar a ainst most ma or currencies in which the Com any transacts business. For ac uired com anies,
or anic rowth is calculated as the difference between actual re enues achie ed by each com any in the financial
eriod followin ac uisition com ared to the estimated re enues they achie ed in the corres ondin financial
eriod recedin the date of ac uisition by Constellation. he Com any s Q 2016 or anic rowth rate was
ne ati ely im acted as a result of hi her than a era e hardware sales recorded in the uarter ended December 31,
201 in our ublic sector relatin to deli eries on arious lar e ro ects in our transit ertical durin that uarter.
ardware re enue is rimarily reco ni ed on deli ery and as such can result in tem orary s i es in re enue.
r anic rowth for the three and twel e month eriods ended December 31, 2016 was ositi e and 3
res ecti ely after ad ustin for both forei n e chan e and hardware sales.

he followin table dis lays the brea down of our re enue accordin to re enue ty e

Three months ended Period-Over-Period Organic Year ended Period-Over-Period Organic

Q415 2015
December 31, Change Growth December 31, Change Growth
Proforma Proforma
Adjustment Adjustment
2016 2015 $ % (Note 1) % 2016 2015 $ % (Note 2) %
($M, except percentages) ($M, except percentages)

Licenses 39.4 34.4 5.1 15% 5.6 -1% 142.5 131.0 11.5 9% 27.7 -10%
Professional services 117.0 103.5 13.5 13% 12.9 1% 434.5 384.6 49.9 13% 49.6 0%
Hardware and other 38.7 53.3 (14.6) -27% 1.1 -29% 147.7 152.9 (5.2) -3% 8.2 -8%
Maintenance and other recurring 368.6 320.4 48.2 15% 36.7 3% 1,400.3 1,169.8 230.5 20% 187.6 3%
563.8 511.6 52.2 10% 56.4 -1% 2,125.1 1,838.3 286.8 16% 273.2 1%
$M - Millions of dollars
Note 1: Estimated pre-acquisition revenues from companies acquired after September 30, 2015. (Obtained from unaudited vendor financial information.)
Note 2: Estimated pre-acquisition revenues from companies acquired since the beginning of 2015. (Obtained from unaudited vendor financial information.)

e a re ate our business into two distinct se ments for financial re ortin ur oses i the ublic sector
re ortable se ment, which includes business units focused rimarily on o ernment and o ernment related
customers, and ii the ri ate sector re ortable se ment, which includes business units focused rimarily on
commercial customers.

he followin table dis lays our re enue by re ortable se ment and the ercenta e chan e for the three
and twel e months ended December 31, 2016 com ared to the same eriods in 201
 Q415 2015
Three months ended Period-Over-Period Proforma Organic Year ended Period-Over-Period Proforma Organic
December 31, Change Adjustment Growth December 31, Change Adjustment Growth
2016 2015 $ % (Note 1) % 2016 2015 $ % (Note 2) %
($M, except percentages) ($M, except percentages)
Public Sector
Licenses 25.0 22.0 3.0 14% 3.9 -3% 87.6 86.0 1.6 2% 16.6 -15%
Professional services 93.9 83.3 10.7 13% 10.1 1% 344.4 311.5 32.9 11% 35.1 -1%
Hardware and other 32.3 46.4 (14.1) -30% 0.4 -31% 120.4 126.4 (5.9) -5% 2.2 -6%
Maintenance and other recurring 232.4 197.6 34.8 18% 26.4 4% 875.9 744.6 131.2 18% 101.1 4%
383.6 349.3 34.4 10% 40.8 -2% 1,428.3 1,268.5 159.8 13% 155.1 0%

Private Sector
Licenses 14.4 12.3 2.1 17% 1.8 2% 55.0 45.0 9.9 22% 11.2 -2%
Professional services 23.1 20.2 2.9 14% 2.8 0% 90.1 73.1 17.0 23% 14.5 3%
Hardware and other 6.5 6.9 (0.5) -7% 0.7 -16% 27.3 26.6 0.8 3% 5.9 -16%
Maintenance and other recurring 136.2 122.8 13.4 11% 10.3 2% 524.5 425.2 99.3 23% 86.5 3%
180.2 162.3 17.9 11% 15.6 1% 696.8 569.8 127.0 22% 118.1 1%

Note 1: Estimated pre-acquisition revenues from companies acquired after September 30, 2015. (Obtained from unaudited vendor financial information.)
Note 2: Estimated pre-acquisition revenues from companies acquired since the beginning of 2015. (Obtained from unaudited vendor financial information.)

For the uarter ended December 31, 2016, total re enue in the ublic sector re ortable se ment increased
10 , or 3 . million to 3 3.6 million, com ared to 3 .3 million for the uarter ended December 31, 201 . For
the fiscal year ended December 31, 2016, total re enue increased by 13 , or 1 . million to 1, 2 .3 million,
com ared to 1,26 . million for the com arable eriod in 201 . For ur oses of calculatin or anic rowth,
estimated re ac uisition re enues included from the rele ant com anies ac uired in 201 and 2016 were 0.
million and 1 .1 million for the three and twel e month eriods ended December 31, 201 , res ecti ely. r anic
re enue rowth was ne ati e 2 and 0 res ecti ely for the three and twel e months ended December 31, 2016
com ared to the same eriods in 201 , and 0 and 1 res ecti ely after ad ustin for the im act of the net
a reciation of the S dollar a ainst most ma or currencies in which the Com any transacts business. he ublic
sector s Q 2016 or anic rowth rate was ne ati ely im acted as a result of hi her than a era e hardware sales
recorded in the uarter ended December 31, 201 in our ublic sector relatin to deli eries on arious lar e ro ects
in our transit ertical durin that uarter. ardware re enue is rimarily reco ni ed on deli ery and as such can
result in tem orary s i es in re enue. r anic rowth for the ublic sector for the three and twel e month eriods
ended December 31, 2016 was and 2 res ecti ely after ad ustin for both forei n e chan e and hardware
sales.

For the uarter ended December 31, 2016, total re enue in the ri ate sector re ortable se ment increased
11 , or 1 . million to 1 0.2 million, com ared to 162.3 million for the uarter ended December 31, 201 . For
the fiscal year ended December 31, 2016, total re enue increased by 22 , or 12 .0 million to 6 6. million,
com ared to 6 . million for the com arable eriod in 201 . For ur oses of calculatin or anic rowth,
estimated re ac uisition re enues included from the rele ant com anies ac uired in 201 and 2016 were 1 .6
million and 11 .1 million for the three and twel e month eriods ended December 31, 201 , res ecti ely. r anic
re enue rowth was 1 for both the three and twel e months ended December 31, 2016 com ared to the same
eriods in 201 , and 3 in each case after ad ustin for the im act of the net a reciation of the S dollar a ainst
most ma or currencies in which the Com any transacts business.

6
Expenses:

he followin table dis lays the brea down of our e enses

Three months ended Period-Over- Year ended Period-Over-

December 31, Period Change December 31, Period Change
2016 2015 $ % 2016 2015 $ %
($M, except percentages) ($M, except percentages)
Expenses
Staff 277.2 241.3 35.9 15% 1,059.0 912.4 146.6 16%
Hardware 20.6 32.1 (11.6) -36% 82.3 90.3 (8.0) -9%
Third party license, maintenance
and professional services 49.9 46.5 3.4 7% 192.7 163.7 29.0 18%
Occupancy 14.1 11.8 2.3 20% 51.7 43.2 8.5 20%
Travel, Telecommunications,
Supplies & Software and equipment 34.4 33.0 1.4 4% 129.8 114.5 15.3 13%
Professional fees 8.3 6.7 1.7 25% 28.2 22.6 5.6 25%
Other, net 0.9 2.4 (1.5) -61% 29.0 29.0 (0.1) 0%
Depreciation 6.9 5.0 2.0 40% 22.4 17.0 5.3 31%
412.4 378.7 33.7 9% 1,595.1 1,392.8 202.3 15%

erall e enses for the uarter ended December 31, 2016 increased , or 33. million to 12.
million, com ared to 3 . million durin the same eriod in 201 . s a ercenta e of total re enue, e enses
decreased to 3 for the uarter ended December 31, 2016 from for the same eriod in 201 . Durin the
fiscal year ended December 31, 2016, e enses increased 1 , or 202.3 million to 1, .1 million, com ared to
1,3 2. million durin the same eriod in 201 . s a ercenta e of total re enue, e enses decreased to for
the fiscal year ended December 31, 2016 from 6 for the same eriod in 201 . ur a era e em loyee headcount
rew 16 in 2016 from 10, 20 for the uarter ended December 31, 201 to 12,12 for the uarter ended December
31, 2016 rimarily due to ac uisitions. For both the three and twel e months ended December 31, 2016 the
a reciation of the S dollar a ainst most other ma or currencies in which the Com any transacts business resulted
in an a ro imate 2 reduction in e enses com ared to the com arable eriods of 201 .

Staff e enses increased 1 or 3 . million for the uarter ended December 31, 2016
and 16 or 1 6.6 million for the fiscal year ended December 31, 2016 o er the same eriods in 201 . Staff
e ense can be bro en down into fi e ey o eratin de artments rofessional Ser ices, aintenance, esearch
and De elo ment, Sales and ar etin , and eneral and dministrati e. Included within staff e enses for each
of the abo e fi e de artments are ersonnel and related costs associated with ro idin the necessary ser ices. he
table below com ares the eriod o er eriod ariances.

Three months ended Period-Over- Year ended Period-Over-

December 31, Period Change December 31, Period Change
2016 2015 $ % 2016 2015 $ %
($M, except percentages) ($M, except percentages)

Professional services 61.5 54.4 7.1 13% 237.9 213.6 24.2 11%
Maintenance 57.1 48.6 8.4 17% 213.8 176.5 37.3 21%
Research and development 76.3 69.0 7.3 11% 294.1 259.2 34.9 13%
Sales and marketing 38.7 32.5 6.2 19% 147.9 124.4 23.5 19%
General and administrative 43.7 36.8 6.9 19% 165.3 138.6 26.6 19%
277.2 241.3 35.9 15% 1,059.0 912.4 146.6 16%
 he increase in staff e enses for both the three and twel e month eriods ended December 31, 2016 was
rimarily due to the rowth in the number of em loyees com ared to the same eriods in 201 rimarily due to
ac uisitions.

ardware e enses decreased 36 or 11.6 million for the uarter ended December
31, 2016 and or .0 million for the fiscal year ended December 31, 2016 o er the same eriods in 201 , in
con unction with the decline in hardware re enue. ardware mar ins for the three and twel e months ended
December 31, 2016 were and res ecti ely as com ared to 0 and 1 for the com arable eriods in
201 .

T hird arty license, maintenance

and rofessional ser ices e enses increased or 3. million for the uarter ended December 31, 2016 and 1
or 2 .0 million for the fiscal year ended December 31, 2016 o er the same eriods in 201 . he increase is
rimarily due to third arty license, maintenance and rofessional ser ices e enses of ac uired businesses.

O ccu ancy e enses increased 20 or 2.3 million for the uarter ended December
31, 2016 and 20 or . million for the fiscal year ended December 31, 2016 o er the same eriods in 201 . he
increase in occu ancy e enses is rimarily due to the occu ancy e enses of ac uired businesses.

T T ra el,
elecommunications, Su lies Software and e ui ment e enses increased or 1. million for the uarter
ended December 31, 2016 and 13 or 1 .3 million for the fiscal year ended December 31, 2016 o er the same
eriods in 201 . he increase in these e enses is rimarily due to e enses incurred by ac uired businesses.

P rofessional fees increased 2 or 1. million for the uarter ended December 31,
2016 and 2 or .6 million for the fiscal year ended December 31, 2016 o er the same eriods in 201 . he
increase in rofessional fees is rimarily the result of an increase in bro er fees, due dili ence ser ices, and le al
fees associated with ac uisitions, and le al fees associated with the renewal of the Com any s credit facility.

O ther e enses decreased 61 or 1. million for the uarter ended December 31, 2016 and
0.3 or 0.1 million for the fiscal year ended December 31, 2016 o er the same eriods in 201 . he followin
table ro ides a further brea down of e enses within this cate ory.

Three months ended Period-Over-Period Year ended Period-Over-Period

December 31, Change December 31, Change
2016 2015 $ % 2016 2015 $ %
($M, except percentages) ($M, except percentages)

Advertising and promotion 6.9 5.6 1.3 23% 26.0 21.4 4.6 22%
Recruitment and training 3.9 2.7 1.3 47% 12.4 9.1 3.4 37%
Bad debt expense 0.2 0.2 0.0 22% 3.0 1.7 1.3 78%
R&D tax credits (8.4) (7.2) (1.1) 16% (19.0) (14.8) (4.2) 29%
Contingent consideration (1.2) (0.4) (0.8) NM 0.0 6.7 (6.7) -100%
Other expense, net (0.5) 1.6 (2.1) -134% 6.5 5.0 1.5 31%
0.9 2.4 (1.5) -61% 29.0 29.0 (0.1) 0%
NM - Not meaningful

he contin ent consideration e ense amounts recorded for the eriods abo e relate to an increase
decrease to ac uisition earnout ayments rimarily as a result of increases decreases to re enue forecasts for the
associated ac uisitions. e enue forecasts are u dated on a uarterly basis and related earnout ayments are
u dated accordin ly. he decrease in other e ense, net er the table abo e for the uarter ended December 31,
2016 is rimarily related to the 3.2 million termination fee recei ed from ed nee Solutions Inc. ed nee
after ed nee terminated a subscri tion a reement they had entered into with the Com any. For the fiscal year
ended December 31, 2016 other e ense, net er the table abo e includes a le al settlement e ense with no
similar e ense for the three or twel e months ended December 31, 201 , that artially offsets the benefit of the
ed nee termination fee. emainin e ense increases are rimarily due to e enses incurred by ac uired
businesses.

De reciation of ro erty and e ui ment increased 0 or 2.0 million for the uarter
ended December 31, 2016 and increased 31 or .3 million for the fiscal year ended December 31, 2016 o er the
same eriods in 201 .

Other Income and Expenses:

he followin table dis lays the brea down of our other income and e enses

Three months ended Period-Over- Year ended Period-Over-

December 31, Period Change December 31, Period Change
2016 2015 $ % 2016 2015 $ %
($M, except percentages) ($M, except percentages)

Amortization of intangible assets 58.6 47.9 10.7 22% 190.6 180.5 10.1 6%
Foreign exchange (gain) loss 1.2 (7.3) 8.5 NM 26.0 (15.7) 41.7 NM
TSS membership liability revaluation charge 7.7 7.1 0.6 9% 21.6 22.2 (0.6) -3%
Share in net (income) loss of
equity investees 0.4 (0.2) 0.6 NM (5.3) (1.1) (4.2) 397%
Finance and other expense (income) (7.6) (1.5) (6.1) 395% (10.8) (4.8) (6.1) 127%
Finance costs 5.2 5.1 0.1 1% 21.6 20.1 1.5 7%
Income tax expense (recovery) 20.3 15.8 4.5 28% 79.6 67.1 12.6 19%
85.7 66.9 18.9 28% 323.2 268.3 54.9 20%
NM - Not meaningful

A morti ation of intan ible assets increased 22 or 10. million for

the uarter ended December 31, 2016 and 6 or 10.1 million for the fiscal year ended December 31, 2016 o er
the same eriods in 201 . he increase in amorti ation e ense is attributable to an increase in the carryin amount
of our intan ible asset balance o er the twel e month eriod ended December 31, 2016 as a result of ac uisitions
com leted durin this eriod.

F ost of our businesses are or ani ed eo ra hically so many of our e enses are
incurred in the same currency as our re enues, which miti ates some of our e osure to currency fluctuations. For
the three and twel e months ended December 31, 2016, we reali ed forei n e chan e losses of 1.2 million and
26.0 million res ecti ely com ared to ains of .3 million and 1 . million for the same eriods in 201 . he
followin table ro ides a brea down of these amounts.
 Three months ended Period-Over-Period Year ended Period-Over-Period
December 31, Change December 31, Change
2016 2015 $ % 2016 2015 $ %
($M, except percentages) ($M, except percentages)
Unrealized foreign exchange (gain) loss related to:

revaluation of intercompany loans between

entities with differing functional currencies (1) 6.8 2.6 4.1 157% 17.7 4.9 12.8 261%

revaulation of the Company's unsecured

subordinated floating rate debentures as a
result of the appreciation (depreciation) of the
Canadian dollar against the US dollar. (5.2) (7.6) 2.4 -31% 7.0 (18.0) 25.0 NM

Remaining foreign exchange (gain) loss (0.4) (2.4) 2.0 -83% 1.3 (2.7) 4.0 NM
1.2 (7.3) 8.5 NM 26.0 (15.7) 41.7 NM
NM - Not meaningful
(1) Offsetting amounts recorded in other comprehensive income. Net impact to Total comprehensive income for each period is nil.

he remainin forei n e chan e ains and losses er the table abo e are rimarily related to the unreali ed
forei n e chan e translation ains and losses of certain net Canadian dollar denominated liability balances to S
dollars as a result of the Canadian dollar s de reciation or a reciation a ainst the S dollar.

T he aluation of the SS membershi liability increased

by a ro imately 12 or . million for the uarter ended December 31, 2016 and by a ro imately 0 or 21.6
million for the fiscal year ended December 31, 2016 rimarily as a result of the rowth in SS maintenance re enue
in the res ecti e eriods. aluation increases of .1 million and 22.2 million were recorded in the three and
twel e months ended December 31, 201 . he liability recorded on the balance sheet increased by 3 or 1 .
million o er the twel e month eriod as a result of a forei n e chan e ain that was recorded throu h other
com rehensi e income. he SS membershi liability is denominated in uros and the uro de reciated ersus
the S dollar durin 2016.

Share in the net income loss of e uity in estees was a

loss of 0. million and income of .3 million for the three and twel e months ended December 31, 2016
res ecti ely, com ared to income of 0.2 million and 1.1 million for the same eriods in 201 . he rimary reason
for the increase in net income for the twel e months ended December 31, 2016 was the ain on dis osal of assets
reali ed by an e uity in estee in the eriod.

F Finance and other income for the uarter ended December 31, 2016 was .6
million com ared to 1. million for the same eriod in 201 . Durin the fiscal year ended December 31, 2016,
finance and other income was 10. million com ared to . million for the same eriod in 201 . ains of 2.
million and .2 million relatin to the sale of e uity securities a ailable for sale were recorded durin the three
and twel e months ended December 31, 2016 and no similar ains were recorded in 201 . In addition, interest
earned on cash balances totallin 0. million and 0. million were recorded durin the three and twel e months
ended December 31, 2016 with immaterial amounts recorded in 201 , in line with the increase in cash balances in
2016 as com ared to 201 . he remainin other income amounts rimarily relate to ac uired net tan ible asset
ad ustments for ac uisitions recorded subse uent to the finali ation of urchase accountin .

F Finance costs for the uarter ended December 31, 2016 increased 0.1 million to .2
million, com ared to .1 million for the same eriod in 201 . Durin the fiscal year ended December 31, 2016,
finance costs increased 1. million to 21.6 million, from 20.1 million o er the same eriod in 201 . he increase
in finance costs for the fiscal year ended December 31, 2016 rimarily relates to interest aid on the Com any s
unsecured subordinated floatin rate debentures. n Se tember 30, 301 , the Com any issued an additional tranche
of debentures with a total rinci al alue of C 1 6.2 million for total roceeds of C 21 .2 million. he rinci al
amount outstandin durin the nine months ended Se tember 30, 201 was C 6.0 million, ersus C 2 2.2 million

10
durin the three months ended December 31, 201 and fiscal year ended December 31, 2016. he interest e ense
recorded on the debentures issued on Se tember 30, 201 is reduced by the amorti ation of the 1 remium that
was recei ed when issued. he remium is bein amorti ed o er fi e years from the date of issuance. he increase
in finance costs relatin to the debentures was artially offset by reduced interest e ense on our credit facilities
resultin from decreased a era e borrowin s and interest rates in the three and twel e month eriods ended
December 31, 2016 com ared to the same eriods in 201 .

I e o erate lobally and we calculate our ta ro ision in each of the urisdictions in which
we conduct business. ur effecti e ta rate on a consolidated basis is, therefore, affected by the reali ation and
antici ated relati e rofitability of our o erations in those arious urisdictions, as well as different ta rates that
a ly and our ability to utili e ta losses and other credits. For the uarter ended December 31, 2016, income ta
e ense increased . million to 20.3 million com ared to 1 . million for the same eriod in 201 . Durin the
fiscal year ended December 31, 2016, income ta e ense increased 12.6 million to .6 million com ared to
6 .1 million for the same eriod in 201 . Current ta e ense as a ercenta e of ad usted net income before ta
was 1 and 1 for the three and twel e months ended December 31, 2016 res ecti ely, ersus 12 and 1
for the same eriods in 201 . his rate has historically a ro imated our cash ta rate howe er the uarterly rate
can sometimes fall outside of the annual ran e due to out of eriod ad ustments. s a result of the de letion of ta
credits a ailable to certain of our Canadian entities and a ro ortionately hi her le el of rofitability in the S, the
annual rate has radually increased since 2013. Current ta e ense reflects ross ta es before the a lication of
D ta credits which are classified as art of other, net e enses in the statement of income. he deferred
income ta e ense decrease of . million and . million for the three and twel e months ended December 31,
2016 res ecti ely, relates to arious items includin chan es in reco nition of certain deferred income ta assets.

Net Income and Earnings per Share:

et income for the uarter ended December 31, 2016 was 6 . million com ared to net income of 66.0
million for the same eriod in 201 re resentin a decrease of 0. . n a er share basis this translated into a net
income er diluted share of 3.10 in the uarter ended December 31, 2016 com ared to net income er diluted share
of 3.11 for the same eriod in 201 . For the fiscal year ended December 31, 2016, net income was 206. million
or . 6 er diluted share com ared to 1 .2 million or .36 er diluted share for the same eriod in 201 ,
re resentin an increase of 1 .

here were no chan es in the number of shares outstandin .

Adjusted EBITA

For the uarter ended December 31, 2016, d usted I increased to 1 1. million com ared to 132.
million for the same eriod in 201 re resentin an increase of 1 . d usted I mar in was 2 for the
uarter ended December 31, 2016 and 26 for the same eriod in 201 . For the 2016 fiscal year, d usted I
increased to 30.0 million com ared to . million durin the same eriod in 201 , re resentin an increase
of 1 . d usted I mar in was 2 in the 2016 fiscal year and 2 for the same eriod in 201 . See on
IF S easures for a descri tion of d usted I and d usted I mar in.

11
 he followin table reconciles d usted I to net income

Three months ended Year ended

December 31, December 31,
2016 2015 2016 2015
($M, except percentages) ($M, except percentages)

Total revenue 563.8 511.6 2,125.1 1,838.3

Net income 65.7 66.0 206.8 177.2

Adjusted for:
Income tax expense (recovery) 20.3 15.8 79.6 67.1
Foreign exchange (gain) loss 1.2 (7.3) 26.0 (15.7)
TSS membership liability revaluation charge 7.7 7.1 21.6 22.2
Share in net (income) loss of equity investees 0.4 (0.2) (5.3) (1.1)
Finance and other income (7.6) (1.5) (10.8) (4.8)
Finance costs 5.2 5.1 21.6 20.1
Amortization of intangible assets 58.6 47.9 190.6 180.5

Adjusted EBITA 151.4 132.8 530.0 445.5

Adjusted EBITA margin 27% 26% 25% 24%

Adjusted net income

For the uarter ended December 31, 2016, d usted net income increased to 121. million from 11 .
million for the same eriod in 201 , re resentin an increase of 3 . d usted net income mar in was 22 for the
uarter ended December 31, 2016 and 23 for the same eriod in 201 . For the 2016 fiscal year, d usted net
income increased to 3 .0 million from 3 1.0 million durin the same eriod in 201 , re resentin an increase
of 6 . d usted net income mar in was 1 in the 2016 fiscal year and 20 for the same eriod in 201 . See
on IF S easures for a descri tion of d usted net income and d usted net income mar in.

N A T s e lained in the Ca ital esources

and Commitments section below, in Q 201 33.2 of the otin interests in SS were sold by us, howe er no
ad ustment has been made in the Com any s Consolidated Financial Statements to reflect the 33.2 of earnin s
that are not attributable to Constellation shareholders. Instead, due to an o tion a ailable to the minority owners to
e ercise a ut o tion to sell all or a ortion of their interests bac to Constellation, the minority interest is accounted
for as a liability on the Com any s balance sheet. he liability is re alued at each eriod end in accordance with
an a reed u on aluation methodolo y with the chan e bein included in net income. he non controllin interest
in the d usted net income of SS for the three and twel e months ended December 31, 2016 was . million and
1 . million res ecti ely, as com ared to 3.1 million and 12.6 million for the same eriods in 201 .

12
 he followin table reconciles d usted net income to et income

Three months ended Year ended

December 31, December 31,
2016 2015 2016 2015
($M, except percentages) ($M, except percentages)

Total revenue 563.8 511.6 2,125.1 1,838.3

Net income 65.7 66.0 206.8 177.2

Adjusted for:
Amortization of intangible assets 58.6 47.9 190.6 180.5
TSS membership liability revaluation charge 7.7 7.1 21.6 22.2
Less non-controlling interest in the Adjusted
net income of TSS (5.4) (3.1) (18.7) (12.6)
Deferred income tax expense (recovery) (4.8) (0.1) (5.3) 3.6

Adjusted net income 121.8 117.7 395.0 371.0

Adjusted net income margin 22% 23% 19% 20%

Quarter Ended
Dec. 31 Mar. 31 Jun. 30 Sep. 30 Dec. 31 Mar. 31 Jun. 30 Sep. 30 Dec. 31
2014 2015 2015 2015 2015 2016 2016 2016 2016
($M, except per share amounts)

Revenue 439.8 422.9 443.5 460.4 511.6 487.0 528.7 545.6 563.8
Net income 39.3 32.9 32.7 45.7 66.0 18.7 55.0 67.5 65.7
Adjusted net income 86.6 74.7 79.7 98.9 117.7 62.5 89.9 120.7 121.8
Adjusted net income margin 20% 18% 18% 21% 23% 13% 17% 22% 22%

Net income per share

Basic & diluted 1.86 1.55 1.54 2.16 3.11 0.88 2.60 3.18 3.10

Adjusted net income per share

Basic & diluted 4.09 3.52 3.76 4.67 5.55 2.95 4.24 5.70 5.75

e e erience seasonality in our o eratin results in that d usted net income mar ins in the first uarter
of e ery year are ty ically lower than mar ins achie ed in the second, third and fourth uarters. he ey dri ers
for the lower mar ins are increased ayroll ta costs associated with our annual bonus ayments that are made in
the month of arch, and the fact that historically there has been a consistent focus at year end to com lete sales
im lementation ro ects which enerally translates into increased rofessional ser ices re enue in the fourth uarter
and decreased rofessional ser ices re enue in the first uarter. ur uarterly results may also fluctuate as a result
of the arious ac uisitions which may be com leted by the Com any in any i en uarter. e may e erience
ariations in our net income on a uarterly basis de endin u on the timin of certain e enses or ains, which
may include chan es in ro isions, ac uired contract liabilities, bar ain urchase ains and ains or losses on the
sale of financial and other assets.

13
ROIC O

e belie e the metric of IC lus or anic et e enue rowth is a ro y for the annual increase in
shareholder alue. he table below summari es this metric for 201 and 2016. Further discussion on this metric
is included in the Com any s annual letters to shareholders a ailable on S D at www.sedar.com. For ac uired
com anies, or anic et e enue rowth is calculated as the difference between actual et e enues achie ed by
each com any in the financial eriod followin ac uisition com ared to the estimated et e enues they achie ed
in the corres ondin financial eriod recedin the date of ac uisition by Constellation.

Fiscal Year ended

December 31,
2016 2015
($M, except percentages)

Adjusted Net Income 395 371

Average Invested Capital 1,261 965
ROIC 31% 38%
OrganicNetRevenuegrowth(YoY) 1% 3%
ROIC+organicNetRevenuegrowth 32% 35%

r anic et e enue rowth e cludes any ad ustment for forei n e chan e.

See on IF S easures for a descri tion of d usted et Income, era e In ested Ca ital, IC and et
e enue.

he followin table reconciles et e enue to e enue

Fiscal Year ended

December 31,
2016 2015
($M)

Revenue 2,125.1 1,838.3

Adjusted for:
Hardware expenses (82.3) (90.3)
Third party license, maintenance
and professional services expenses (192.7) (163.7)
Flow through expenses (18.9) (18.1)

Net Revenue 1,831.2 1,566.2

1
 Fiscal Year ended
December 31,
2016 2015
($M, except percentages)

Net Revenue 1,831.2 1,566.2

Prior year's Net Revenue 1,566.2 1,420.1

Proforma Adjustment. (Note 1) 238.5 187.6
1,804.7 1,607.7

Organic Net Revenue Growth 1% -3%

Note 1: Estimated pre-acquisition Net Revenues from companies acquired since the beginning
of 2015 and 2014 respectively. (Obtained from unaudited vendor financial information.)

ur net cash osition cash less ban indebtedness e cludin ca itali ed transaction costs increased by
1 . million to 22 .3 million in the uarter ended December 31, 2016 resultin from cash flows from o erations
e ceedin ca ital de loyed on ac uisitions. re ayment of million a ro imately million was made in
2016 on our uro denominated credit facility howe er the im act of forei n e chan e on this facility resulted in a
net decrease in the fair alue of 13. million to 126.2 million at December 31, 2016 com ared to 13 .6 million
at December 31, 201 . In addition, cash increased by 1 .0 million to 3 3. million at December 31, 2016
com ared to 1 . million at December 31, 201 .

otal assets increased 2 .2 million, from 1,63 .3 million at December 31, 201 to 1, 3. million at
December 31, 2016. he increase is rimarily due to an increase in cash of 1 .0 million, and an increase in
intan ible assets of 1.6 million rimarily relatin to ac uisitions made since December 31, 201 . t December
31, 2016 SS held a cash balance of .0 million. s e lained in the Ca ital esources and Commitments
section below, there are limitations on SS ability to distribute funds to Constellation.

Current liabilities increased 103. million, from 6 . million at December 31, 201 to 3.2 million
at December 31, 2016. he increase is rimarily due to an increase in deferred re enue of 3 . million mainly due
to ac uisitions made since December 31, 201 and the timin of maintenance and other billin s ersus erformance
and deli ery under those customer arran ements, and an increase in income ta es ayable of 3 .1 million.

1
 Net Changes in Cash Flows
(in $M's)

Year ended Year ended

December 31, December 31,
2016 2015

Net cash provided by operating activities 490.9 395.9

Net cash from (used in) financing activities (117.6) (20.2)

Net cash from (used in) acquisition activities (178.1) (248.8)

Net cash from (used in) other investing activities (16.6) (12.3)
Net cash from (used in) investing activities (194.7) (261.1)

Effect of foreign currency (3.6) (6.9)

Net increase (decrease) in cash and cash equivalents 175.0 107.8

he net cash flows from o eratin acti ities were 0. million for the fiscal year ended December 31,
2016. he 0. million ro ided by o eratin acti ities resulted from 206. million in net income lus 3 .6
million of non cash ad ustments to net income, offset by 16. million of cash utili ed from non cash o eratin
wor in ca ital and .0 million in ta es aid.

he net cash flows used in financin acti ities in the fiscal year ended December 31, 2016 were 11 .6
million, which is mainly a result of di idends aid of . million, and interest aid on ban indebtedness and the
Com any s unsecured subordinated floatin rate debentures in the eriod of 22. million.

he net cash flows used in in estin acti ities in the fiscal year ended December 31, 2016 were 1 .
million. he cash used in in estin acti ities was rimarily due to ac uisitions for an a re ate of 1 .1 million
includin ayments for holdbac s relatin to rior ac uisitions .

e belie e we ha e sufficient cash and a ailable credit ca acity to continue to o erate for the foreseeable
future. enerally our S businesses o erate with ne ati e wor in ca ital as a result of the collection of
maintenance ayments and other re enues in ad ance of the erformance of the related ser ices. s such,
mana ement antici ates that it can continue to row the business or anically without any additional fundin . If we
continue to ac uire S businesses we may need additional e ternal fundin de endin u on the si e and timin
of the otential ac uisitions.

C R C

an Indebtedness

n February 2 , 2016, we com leted an amendment and restatement of our re ol in credit facility
a reement the CSI Facility , e tendin its maturity date to u ust 11, 2020. he CSI Facility limit was
increased from 300 million to million with a syndicate of new and e istin Canadian chartered ban s and
.S. ban s. he CSI Facility bears a ariable interest rate with no fi ed re ayments re uired o er the term to
maturity. Interest rates are calculated at standard .S. and Canadian reference rates lus interest rate s reads based
on a le era e table. he CSI Facility is currently collaterali ed by the ma ority of our assets includin the assets of
certain material subsidiaries. he CSI Facility contains standard e ents of default which if not remedied within a
cure eriod would tri er the re ayment of any outstandin balance. he CSI Facility is a ailable for ac uisitions,
distributions, wor in ca ital needs, and other eneral cor orate ur oses and for the needs of our subsidiaries. s
at December 31, 2016, no amounts were drawn on the CSI Facility, and letters of credit totallin 1 . million were
issued, which limits the borrowin ca acity on a dollar for dollar basis. ransaction costs associated with this CSI

16
Facility are bein amorti ed throu h rofit or loss usin the effecti e interest rate method. s at December 31,
2016, the carryin amount of such costs totallin 1.0 million has been classified as art of other non current assets
in the statement of financial osition.

n une 2 , 201 Constellation Software etherlands oldin Coo eratief . . C , a subsidiary of

Constellation and the indirect owner of 100 of SS, entered into a 1 0 million a ro imately 16 million
term and 10 million a ro imately 11 million multicurrency re ol in credit facility the C Facility with
a number of uro ean and orth merican financial institutions. he C Facility bears interest at a rate
calculated at I lus interest rate s reads based on a le era e table. he C Facility is collaterali ed by
substantially all of the assets owned by C and its subsidiaries which includes substantially all of the assets of
SS and its subsidiaries. he C Facility contains standard e ents of default which if not remedied within a cure
eriod would tri er the re ayment of any outstandin balance. t December 31, 2016, 120 million
a ro imately 126 million remains outstandin on the term com onent of the C Facility. 20 million must
be re aid in instalments rior to une 2 , 2020, and 100 million is non amorti in and due on une 2 , 2021. he
remainin 20 million term com onent of the C Facility remains undrawn. If drawn, rinci al must be re aid
in fi e e ual instalments startin on une 2 , 201 . s at December 31, 2016 no amounts had been drawn on the
10 million multicurrency re ol in com onent of the C Facility. he re ol in com onent of the C Facility
is a ailable for ac uisitions, wor in ca ital needs, and other eneral cor orate ur oses until une 2 , 2020.
ransaction costs associated with the C Facility ha e been included as art of the carryin amount of the liability
and are bein amorti ed throu h rofit or loss usin the effecti e interest rate method. s at December 31, 2016,
the carryin amount of such costs relatin to this C Facility totallin 3. million 3.3 million has been
classified as art of non current C Facility in the statement of financial osition.

he CSI Facility and C Facility are inde endent of each other. he C Facility is not uaranteed by
Constellation or its subsidiaries nor is Constellation or any subsidiary sub ect to the terms of the C Facility other
than, in each case, C and its subsidiaries. Similarly, C and its subsidiaries did not uarantee the CSI Facility
and are not sub ect to the ro isions thereof. he CSI Facility im oses limitations on the a re ate amount of
in estment that Constellation may ma e in C and its subsidiaries and the financial results of C and its
subsidiaries are not included for the ur oses of determinin com liance by Constellation with the financial
co enants in the CSI Facility. he C Facility im oses limitations on the amount of distributions that C and
its subsidiaries may ma e to Constellation.

Debentures

n ctober 1, 201 and o ember 1 , 201 , the Com any issued unsecured subordinated debentures the
Debentures with a total rinci al alue of C 6.0 million for total roceeds of C 1.2 million. he roceeds
were used by the Com any to ay down 1.2 million of outstandin ban indebtedness.

n Se tember 30, 301 , the Com any issued an additional tranche of Debentures with a total rinci al
alue of C 1 6.2 million for total roceeds of C 21 .2 million. he roceeds were used by the Com any to ay
down 130. million of outstandin ban indebtedness. he Se tember 30, 201 issuance formed a sin le series
with the outstandin C 6.0 million a re ate rinci al amount of Debentures, Series 1 of the Com any. he
Debentures ha e a maturity date of arch 31, 20 0.

SS embershi iability

n December 23, 201 , in accordance with the terms of the urchase and sale a reement for the SS
ac uisition, and on the basis of the term sheets attached thereto, Constellation and the sellers of SS alon with
members of SS e ecuti e mana ement team collecti ely, the minority owners entered into a embers
reement ursuant to which the minority owners ac uired 33.2 of the otin interests in C . roceeds from
this transaction in the amount of 3 . million . million were utili ed to re ay, in art, outstandin ban
indebtedness of Constellation. In accordance with IF S, 100 of the financial results for SS are included in the
consolidated financial results of the Com any.

1
 ach of the minority owners may, at any time, e ercise a ut o tion to sell all or a ortion of their interests
in C bac to Constellation for an amount calculated in accordance with a aluation methodolo y described
within the embers reement. ccordin ly, the Com any classified the roceeds from the embers reement
as a liability. he main aluation dri er in such calculation is the maintenance and other recurrin re enue of
C . on the e ercise of a ut o tion, Constellation would be obli ated to redeem u to 33.33 of the minority
owners interests ut, no later than 30 business days from the date notice is recei ed classified as a current liability ,
and u to 33.33 on each of the first and second anni ersary of the date the first redem tion ayment is made.

he seller of SS also has an o tion a ailable to it to sell a ro imately 6 of its interests in C , for
an amount calculated in accordance with a aluation methodolo y described within the embers reement, in the
e ent that obin an oel e, SS C , is no lon er em loyed by SS. he a ro imately 32 remainin interest
can be sold ia the ut o tion described abo e.

In the e ent of a chan e of control in Constellation, the minority owners would ha e the o tion to sell 100
of their interests in C for an amount calculated in accordance with a aluation methodolo y described within
the embers reement. Constellation would be obli ated to remit ayment in res ect thereof no later than 30
business days from the date notice is i en.

Commencin at any time after December 31, 2023, Constellation may e ercise a call o tion to urchase all
of the minority owners interests in C , for an amount calculated in accordance with a aluation methodolo y
described within the embers reement. on e ercise of the call o tion, the full urchase rice will be aid
within 30 business days of the notice date, followin which the minority owners membershi in C will be
terminated. here is a aluation remium if the call o tion is e ercised ersus the ut o tion.

If any of SS e ecuti e mana ement team that artici ate in the embers reement are terminated for
ur ent cause as defined in Section 6 of the Dutch Ci il Code, Constellation shall ha e the ri ht to urchase all
of the interests beneficially owned by the terminated e ecuti e for an amount calculated in accordance with the
aluation methodolo y described within the embers reement. he full urchase rice will be aid within 30
business days from the date notice is i en, followin which the terminated e ecuti e s membershi in C will
be terminated. n o tion does e ist for the terminated e ecuti e to elect to be aid in annual installments of 33.33
of his interests in C o er a 3 year eriod. he aluation of the interests bein urchased will be calculated at
each annual ayment date.

ther commitments

Commitments include o eratin leases for office e ui ment and facilities, letters of credit and erformance
bonds issued on our behalf by financial institutions in connection with facility leases and contracts with ublic
sector customers. lso, occasionally we structure some of our ac uisitions with contin ent consideration based on
the future erformance of the ac uired business. he fair alue of contin ent consideration recorded in our
statement of financial osition was 1 . million at December 31, 2016. side from the aforementioned, we do
not ha e any other business arran ements, deri ati e financial instruments, or any e uity interests in non
consolidated entities that would ha e a si nificant effect on our assets and liabilities as at December 31, 2016.

(in millions of dollars)

Total < 1 yr 1-5 yrs > 5 yrs
Operating and capital leases 203.4 59.5 113.5 30.3
Holdbacks 17.9 17.1 0.9 -
TSS membership liability 72.9 26.4 46.5 -
Debentures 209.9 - - 209.9
Bank indebtedness 126.2 7.4 118.8 -
Total outstanding commitments 630.3 110.4 279.7 240.3

1
 he SS membershi liability commitment assumes that the minority owners ha e e ercised their ut
o tion to sell 100 of their interests bac to Constellation. his o tion howe er has not been e ercised as at
February 1 , 201 . See the Critical ccountin stimate section of the Com any s 2016 nnual Consolidated
Financial Statements for a discussion on the aluation methodolo y utili ed.

F C E

e o erate internationally and ha e forei n currency ris s related to our re enue, o eratin e enses,
assets and liabilities denominated in currencies other than the .S. dollar. Conse uently, we belie e mo ements in
the forei n currencies in which we transact will im act future re enue and net earnin s. ur analysis related to the
chan e in a era e e chan e rates from 201 to 2016 su ests that the im act to d usted I mar ins for both
the three and twel e months ended December 31, 2016 was less than 1 . he im act to or anic re enue rowth
for both the three and twel e months ended December 31, 2016 was a ro imately ne ati e 2 and ne ati e 1
res ecti ely. e cannot redict the effect of forei n e chan e ains or losses in the future howe er, if si nificant
forei n e chan e losses are e erienced, they could ha e a material ad erse effect on our business, re enues, results
of o erations, and financial condition. he Com any enters into forward forei n e chan e contracts from time to
time with the ob ecti e of miti atin olatility in rofit or loss in res ect of financial liabilities. In enterin into
these forward e chan e contracts, the Com any is e osed to the credit ris of the counter arties to such contracts
and the ossibility that the counter arties will default on their ayment obli ations under these contracts. owe er,
i en that the counter arties are Schedule 1 ban s or affiliates thereof, the Com any belie es these ris s are not
material. Durin the fiscal year ended December 31, 2016, the Com any did not urchase any contracts of this
nature.

he followin table ro ides an a ro imate brea down of our re enue and e enses by currency,
e ressed as a ercenta e of total re enue and e enses, as a licable, for the three and twel e months ended
December 31, 2016

Three Months Ended December 31, 2016 Fiscal Year Ended December 31, 2016
Currencies % of Revenue % of Expenses % of Revenue % of Expenses
USD 58% 50% 59% 51%
CAD 6% 11% 6% 12%
GBP 6% 8% 8% 8%
EURO 21% 22% 19% 19%
CHF 0% 2% 1% 2%
Others 8% 7% 8% 7%
Total 100% 100% 100% 100%

O A

s a eneral ractice, we ha e not entered into off balance sheet financin arran ements. ce t for
o eratin leases and letters of credit, all of our liabilities and commitments are reflected as art of our statement of
financial osition.

P T

e see otential ac uisition tar ets on an on oin basis and may com lete se eral ac uisitions in any
i en fiscal year.

1
C A E

General

he re aration of our consolidated nancial statements re uires mana ement to ma e estimates and
assum tions that affect the re orted amounts of assets, liabilities, re enue and e enses, and related disclosure of
contin ent assets and liabilities. ur estimates are based on historical e erience and on arious other assum tions
that are belie ed to be reasonable under the circumstances. ur on oin e aluation of these estimates forms the
basis for ma in ud ments about the carryin alues of assets and liabilities and the re orted amount of re enues
and e enses, in cases where they are not readily ascertainable from other sources. ctual amounts may differ from
these estimates under different assum tions or conditions.

ur si ni cant accountin olicies are fully described in ote 3 to our annual consolidated financial
statements which are a ailable on S D www.sedar.com . Certain accountin olicies are articularly im ortant
to the re ortin of our nancial osition and results of o erations, and re uire the a lication of si ni cant ud ment
by our mana ement. n accountin olicy is deemed to be critical if it re uires an accountin estimate to be made
based on assum tions about matters that are hi hly uncertain at the time the estimate is made, and if different,
estimates that reasonably could ha e been used, or chan es in the accountin estimates that are reasonably li ely to
occur eriodically, could ha e a material im act on the nancial statements. ana ement belie es the followin
critical accountin olicies re ect the more si ni cant estimates and assum tions used in the re aration of our
consolidated nancial statements. e belie e that there ha e been no si ni cant chan es in our critical accountin
estimates for the years resented in our consolidated nancial statements.

Revenue Recognition

e enue re resents the fair alue of consideration recei ed or recei able from customers for oods and
ser ices ro ided by the Com any, net of discounts and sales ta es. he Com any re orts re enue under four
re enue cate ories bein , icense, ardware and other, rofessional ser ices, and aintenance and other recurrin
re enue.
y ically, the Com any s software license a reements are multi le element arran ements as they may also
include maintenance, rofessional ser ices, and hardware. ulti le element arran ements are reco ni ed as the
re enue for each unit of accountin is earned based on the relati e fair alue of each unit of accountin as
determined by an internal analysis of rices or by usin the residual method. deli ered element is considered a
se arate unit of accountin if it has alue to the customer on a standalone basis, and deli ery or erformance of the
undeli ered elements is considered robable and substantially under the Com any s control. If these criteria are
not met, re enue for the arran ement as a whole is accounted for as a sin le unit of accountin . here com any
s ecific ob ecti e e idence of fair alue cannot be determined for undeli ered elements, the Com any determines
fair alue of the res ecti e element by estimatin its stand alone sellin rice, which is also a lied for the
resentation as art of the re enue cate ories noted abo e when certain of those elements are deemed to be a sin le
unit of accountin .

he Com any ty ically sells or licenses software on a er etual basis, but also licenses software for a
s ecified eriod. e enue from short term time based licenses, which usually include su ort ser ices durin the
license eriod, is reco ni ed rateably o er the license term. e enue from multi year time based licenses that
include su ort ser ices, whether se arately riced or not, is reco ni ed rateably o er the license term unless a
substanti e su ort ser ice renewal rate e ists if this is the case, the amount allocated to the deli ered software is
reco ni ed as license re enue based on the residual a roach once the re enue criteria ha e been met. In those
instances where the customer is re uired to renew mandatory su ort and maintenance in order to maintain use of
the licensed software o er the license term, the Com any reco ni es the consideration attributable to the license
and su ort for the initial term of the arran ement o er the initial term and reco ni es re enue for the su ort
renewal fees in subse uent years o er the res ecti e renewal eriods.

20
 e enue from the license of software in ol in si nificant im lementation or customi ation essential to
the functionality of the Com any s roduct, or from the sales of hardware where software is essential to its
functionality, is reco ni ed under the ercenta e of com letion method of contract accountin based either on the
achie ement of contractually defined milestones or based on labour hours. ny robable losses are reco ni ed
immediately in rofit or loss. In certain situations where the outcome of an arran ement cannot be estimated
reliably, costs associated with the arran ement are reco ni ed as incurred. In this situation, re enues are reco ni ed
only to the e tent of the costs incurred that are robable of reco ery.

ortion of the Com any s sales, cate ori ed as hardware and other re enue, are accounted for as roduct
re enue. roduct re enue is reco ni ed when the Com any has an e ecuted a reement, the roduct has been
deli ered and costs can be measured reliably, the amount of the fee to be aid by the customer is fi ed and
determinable, and the collection of the related recei able is deemed robable from the outset of the arran ement.
If for any of the roduct or ser ice offerin s, the Com any determines at the outset of an arran ement that the
amount of re enue cannot be measured reliably, and the Com any concludes that the inflow of economic benefits
associated with the transaction is not robable, then the re enue is deferred until the arran ement fee becomes due
and ayable by the customer. If, at the outset of an arran ement, the Com any determines that collectability is not
robable, and the Com any concludes that the inflow of economic benefits associated with the transaction is not
robable, then re enue reco nition is deferred until the earlier of when collectability becomes robable or ayment
is recei ed. If collectability becomes unli ely before all re enue from an arran ement is reco ni ed, the Com any
reco ni es re enue only to the e tent of the fees that are successfully collected unless collectability becomes
reasonably assured a ain. If a customer is s ecifically identified as a collection ris , the Com any does not
reco ni e re enue e ce t to the e tent of the fees that ha e already been collected.

e enue related to the customer reimbursement of tra el related e enses incurred durin a ro ect
im lementation is included in the hardware and other re enue cate ory. e enue is reco ni ed as costs are incurred
which is consistent with the eriod in which the costs are in oiced. eimbursable tra el e enses incurred for
which an in oice has not been issued, are recorded as art of wor in ro ress on the statement of financial osition.

aintenance and other recurrin re enue rimarily consists of fees char ed for customer su ort on
software roducts ost deli ery and also includes, to a lesser e tent, recurrin fees deri ed from combined
software su ort contracts, transaction re enues, mana ed ser ices, and hosted roducts. he com any s ecific
fair alue of maintenance is ty ically deri ed from rates char ed to renew these ser ices after an initial eriod.
aintenance re enue remainin to be reco ni ed in rofit or loss is reco ni ed as deferred re enue in the statements
of financial osition when amounts ha e been billed in ad ance and the term of the ser ice eriod has commenced.

rofessional Ser ices re enue includin im lementation, trainin and customi ation of software is
reco ni ed by the sta e of com letion of the arran ement determined usin the ercenta e of com letion method
noted abo e or as such ser ices are erformed as a ro riate in the circumstances. he re enue and rofit of fi ed
rice contracts is reco ni ed on a ercenta e of com letion basis when the outcome of a contract can be estimated
reliably. hen the outcome of the contract cannot be estimated reliably, the amount of re enue reco ni ed is
limited to the cost incurred in the eriod. osses on contracts are reco ni ed as soon as a loss is foreseen by
reference to the estimated costs of com letion.

ana ement e ercises ud ement in determinin whether a contract s outcome can be estimated reliably.
ana ement also a lies estimates in the calculation of future contract costs and related rofitability as it relates
to labour hours and other considerations, which are used in determinin the alue of amounts reco erable on
contracts and timin of re enue reco nition. stimates are continually and routinely re ised based on chan es in
the facts relatin to each contract. ud ement is also needed in assessin the ability to collect the corres ondin
recei ables.

he timin of re enue reco nition often differs from contract ayment schedules, resultin in re enue that
has been earned but not billed. hese amounts are included in wor in ro ress. mounts billed in accordance
with customer contracts, but not yet earned, are recorded and resented as art of deferred re enue.

21
Valuation of Identifiable Goodwill and Other Intangible Assets

c uisitions ha e been accounted for usin the ac uisition method re uired by IF S 3. oodwill arisin
on ac uisitions is measured as the fair alue of the consideration transferred includin the reco ni ed amount of
any non controllin interest in the ac uiree, if any, less the net reco ni ed amount of the estimated fair alue of
identifiable assets ac uired and liabilities assumed sub ect to certain e em tions to fair alue measurement
rinci les such as deferred ta assets or liabilities , all measured as of the ac uisition date. hen the e cess of the
consideration transferred less the assets and liabilities ac uired is ne ati e, a bar ain urchase ain is reco ni ed
immediately in rofit or loss. ransaction costs that the Com any incurs in connection with a business combination
are e ensed as incurred.

e use the income a roach to alue ac uired technolo y and customer related intan ible assets, which
are the two material intan ible asset cate ories re orted in our financial statements.

he income a roach is a aluation techni ue that calculates the fair alue of an intan ible asset based on
the cash flows that the asset can be e ected to enerate o er its remainin useful life. e utili e the discounted
cash flow DCF methodolo y which is a form of the income a roach that be ins with a forecast of the annual
cash flows a mar et artici ant would e ect the sub ect intan ible asset to enerate o er a discrete ro ection
eriod. he forecasted cash flows for each of the years in the discrete ro ection eriod are then con erted to their
resent alue e ui alent usin a rate of return a ro riate for the ris of achie in the intan ible assets ro ected
cash flows, a ain, from a mar et artici ant ers ecti e. he resent alue of the forecasted cash flows are then
added to the resent alue of the residual alue of the intan ible asset if any at the end of the discrete ro ection
eriod to arri e at a conclusion with res ect to the estimated fair alue of the sub ect intan ible asset.

S ecifically, we rely on the relief from royalty method to alue the ac uired technolo y and the multi le
eriod e cess earnin s method to alue customer relationshi assets.

he underlyin remise of the relief from royalty method is that the fair alue of the technolo y is e ual
to the costs sa in s or the royalty a oided resultin from the ownershi of the asset by the a oidance of ayin
royalties to license the use of the technolo y from another owner. ccordin ly the income forecast reflects an
estimate of a fair royalty that a licensee would ay, on a ercenta e of re enue basis, to obtain a license to utili e
the technolo y.

he method isolates the cash flows attributable to the sub ect asset by utili in a forecast of
e ected cash flows less the returns attributable to other enablin assets, both tan ible and intan ible.

oodwill is initially recorded when the urchase rice aid for an ac uisition e ceeds the fair alue
assi ned to the net identi able tan ible and intan ible assets ac uired. oodwill is not amorti ed but rather it is
eriodically assessed for im airment. e erform an annual re iew in the fourth uarter of each scal year, or more
fre uently if indicators of otential im airment e ist, to determine if the recorded oodwill is im aired.

fter initial reco nition, oodwill is measured at cost less any accumulated im airment losses, with the
carryin alue bein re iewed for im airment at least annually and whene er e ents or chan es in circumstances
indicate that the carryin alue may be im aired. In res ect of e uity accounted in estees, the carryin amount
of oodwill is included in the carryin amount of the in estment, and an im airment loss on such an in estment is
not allocated to any asset, includin oodwill, that forms art of the carryin amount of the e uity accounted
in estee. o such losses ha e been reco ni ed durin the year.

he im airment test methodolo y is based on a com arison between the hi her of fair alue less costs to
sell and alue in use of each of the Com any s business units considered as the rou in of cash eneratin units
at which le el the im airment test is erformed and the net asset carryin alues includin oodwill of the
Com any s business units. ithin the Com any s re ortin structure, business units enerally reflect one le el

22
below the si o eratin se ments olaris, arris, otal S ecific Solutions, onas, erseus re iously nown as
omebuilder , and ela eratin rou s . In determinin the reco erable amount, the Com any a lies an
estimated mar et aluation multi le to the business unit s most recent annual recurrin re enues, which are deri ed
from combined software su ort contracts, transaction re enues, and hosted roducts. aluation multi les a lied
by mana ement for this ur ose reflect current conditions s ecific to the business unit and are assessed for
reasonability by com arison to the Com any s current and ast e erience of ran es of multi les re uired to ac uire
re resentati e software com anies. In addition, in certain instances, the reco erable amount is determined usin a
alue in use a roach which follows the same aluation rocess that is underta en for the Com any s business
ac uisitions. n im airment is reco ni ed if the carryin amount of a cash eneratin unit e ceeds its estimated
reco erable amount.

e also re iew the carryin alue of amorti able intan ible assets for im airment whene er e ents and
circumstances indicate that the carryin alue of an asset may not be reco erable from the estimated future cash
ows e ected to result from its use and e entual dis osition. ny chan e in estimate which causes the
undiscounted e ected future cash ows to be less than the carryin alue, would result in an im airment loss bein
reco ni ed e ual to the amount by which the carryin alue of the asset e ceeds the fair alue of the asset.

he critical accountin estimates described abo e affect both the ublic and ri ate se ments of the
business. he a roach ta en by mana ement in erformin these estimates is not si nificantly different between
se ments.

TSS Membership Liability

Commencin any time after December 31, 201 , each of the minority owners may e ercise a ut o tion to
sell all or a ortion of their interests in C bac to Constellation for an amount calculated in accordance with a
aluation methodolo y described within the embers reement. ccordin ly, the Com any classified the
roceeds from the membershi a reement as a liability. he main aluation dri er in such calculation is the
maintenance and other recurrin re enue of C . on the e ercise of a ut o tion, Constellation would be
obli ated to redeem u to 33.33 of the minority owners interests ut, no later than 30 business days from the date
notice is recei ed, and u to 33.33 on each of the first and second anni ersary of the date the first redem tion
ayment is made.

In determinin the aluation of the liability at December 31, 2016 we assumed the minority owners
e ercised their ut o tion on December 31, 2016, and redeemed 33.33 of their interests on e ercise, and will
redeem 33.33 on each of the first and second anni ersary dates. aintenance and recurrin re enue of C for
the fiscal year ended December 31, 2016 was used as the basis for aluin the interests at each redem tion date.
similar a roach will be utili ed to alue any interests that ha e not been ut or called at the end of each subse uent
re ortin eriod. owe er, the actual maintenance and recurrin re enue of C for the trailin twel e months
from the date of the related re ortin eriod end will be utili ed in the calculation. ny increase or decrease in the
alue of the membershi liability will be recorded as an e ense or income res ecti ely in the Consolidated
Statements of Income for the eriod.

Accounting for Income Taxes

Si ni cant mana ement ud ment is re uired in determinin our ro ision for income ta es, our income
ta assets and liabilities, and any aluation allowance recorded a ainst our net income ta assets. e o erate in
multi le eo ra hic urisdictions, and to the e tent that we ha e ro ts in each urisdiction, these ro ts are ta ed
ursuant to the ta laws of their urisdiction. ur effecti e ta rate may be affected by chan es in, or inter retations
of, ta laws in any i en urisdiction, the le el of ro tability, utili ation of net o eratin losses and ta credit carry
forwards, chan es in eo ra hical mi of income and e ense, and chan es in mana ement s assessment of matters,
such as the ability to reali e future ta assets. s a result of these considerations, we must estimate our income ta es
in each of the urisdictions in which we o erate on a uarterly basis. his rocess in ol es estimatin our actual

23
current ta e osures, to ether with assessin tem orary differences resultin from differin treatment of items for
ta and accountin ur oses. hese differences result in future ta assets and liabilities, which are included in our
consolidated balance sheet.

Current ta is the e ected ta es ayable or recei able on the ta able income or loss for the eriod, usin
ta rates enacted or substanti ely enacted at the re ortin date, and any ad ustment to ta es ayable in res ect of
re ious years.

Deferred ta is reco ni ed in res ect of tem orary differences between the carryin amounts of assets and
liabilities for financial re ortin ur oses and the amounts used for ta ation ur oses. Deferred ta is not reco ni ed
for tem orary differences relatin to in estments in subsidiaries to the e tent that it is robable that they will not
re erse in the foreseeable future. In addition, deferred ta is not reco ni ed for ta able tem orary differences arisin
on the initial reco nition of oodwill.

Deferred ta is measured at ta rates that are e ected to be a lied to tem orary differences when they
re erse, based on the laws that ha e been enacted or substanti ely enacted by the re ortin date. Deferred ta assets
and liabilities are offset if there is a le ally enforceable ri ht to offset current ta liabilities and assets, and they
relate to income ta es le ied by the same ta authority on the same ta able entity, or on different ta entities, but
we intend to settle current ta liabilities and assets on a net basis or their ta assets and liabilities will be reali ed
simultaneously.

deferred ta asset is reco ni ed for unused ta losses, ta credits, difference in ta bases in the urchaser s
ta urisdiction and its cost as re orted in the consolidated financial statements as a result of an intra rou transfer
of assets and deductible tem orary differences, to the e tent that it is robable that future ta able rofits will be
a ailable a ainst which they can be utili ed. Deferred ta assets are re iewed at each re ortin date and are reduced
to the e tent that it is no lon er robable that the related ta benefit will be reali ed.

e are sub ect to income ta audits by arious authorities in res ect of rior eriods that could result in
additional ta e ense in future eriods. hile the outcome of current outstandin actions and claims remains
uncertain, it is e ected that they will be resol ed without a material im act to our financial osition. owe er,
there can be no assurances as to the final resolution of these matters and, if the final outcome is ad erse to us, the
amounts we will be re uired to ay and the loss of certain future ta deductions could be material to our financial
statements.

Accounts Receivable

e e aluate the collectability of our trade recei ables based on a combination of factors. e re ularly
analy e our si ni cant customer accounts and when we become aware of a s eci c customer s inability to meet its
nancial obli ations to us, such as in the case of ban ru tcy lin s or deterioration in the customer s o eratin
results or nancial osition, we record s eci c bad debt reser es to reduce the related recei able to the amount
which we reasonably belie e is collectible. e also record reser es for bad debts on a small ortion of all other
customer balances based on a ariety of factors, includin the len th of time that the recei ables are ast due, the
nancial health of the customer, macroeconomic considerations and historical e erience. If circumstances related
to s eci c customers chan e, our estimates of the reco erability of recei ables could be further ad usted.

Work In Progress

For re enue arran ements that are accounted for under the ercenta e of com letion method as well as
other arran ements and contracts which limit our ability to in oice at certain milestones that do not match the timin
of the actual ro ision of the ser ices, we record such re enue and the related unbilled recei able in wor in rocess.
Similar to accounts recei able, we constantly ha e to e aluate our ability to bill and subse uently collect any
amounts contained in the wor in ro ress accounts. e re iew these balances on a eriodic basis to ensure
customer balances are rudent based u on a ariety of factors, such as the nancial health of the customer,

2
macroeconomic considerations and historical e erience. If circumstances related to s eci c customers chan e, our
estimates of the reco erability of wor in ro ress may be further ad usted.

Provisions

ro ision is reco ni ed if, as a result of a ast e ent, the Com any has a resent le al or constructi e
obli ation that can be estimated reliably, and it is robable that an outflow of economic benefits will be re uired to
settle the obli ation. ro isions are measured at the estimated future cash flows re uired to settle the resent
obli ation, based on the most reliable e idence a ailable at the re ortin date. he estimated cash flows are
discounted at a re ta rate that reflects current mar et assessments of the time alue of money and the ris s s ecific
to the liability. he amorti ation of the discount is reco ni ed as art of finance costs.

e are currently in ol ed in arious claims and le al roceedin s. Quarterly, we re iew the status of each
si ni cant matter and assess our otential nancial e osure. ecause of the uncertainties related to these matters,
ro isions are based only on the best information a ailable at the time. s additional information becomes a ailable,
we reassess the otential liability related to our endin claims and liti ation and, if necessary, re ise our ro isions.
Such re isions in the estimates of the otential liabilities could ha e a material im act on our results of o erations
and nancial osition.

R A P

number of new standards, and amendments to standards and inter retations, are not yet effecti e for the
uarter ended December 31, 2016, and ha e not been a lied in re arin our consolidated financial statements.
he rele ant standards are listed below.

IFRS 9 Financial Instruments

IF S re laces the uidance in I S 3 Financial Instruments eco nition and easurement, on the
classification and measurement of financial assets. he Standard eliminates the e istin I S 3 cate ories of held
to maturity, a ailable for sale and loans and recei able.

Financial assets will be classified into one of two cate ories on initial reco nition

financial assets measured at amorti ed cost or

financial assets measured at fair alue.

ains and losses on remeasurement of financial assets measured at fair alue will be reco ni ed in rofit
or loss, e ce t for an in estment in an e uity instrument which is not held for tradin , IF S ro ides, on initial
reco nition, an irre ocable election to resent all fair alue chan es from the in estment in an e uity instrument
that is not held for tradin in other com rehensi e income CI . he election is a ailable on an indi idual share
by share basis. mounts resented in CI will not be reclassified to rofit or loss at a later date. IF S also
includes a new eneral hed e accountin standard which will ali n hed e accountin more closely with ris
mana ement.

he standard has a mandatory effecti e date for annual eriods be innin on or after anuary 1, 201 with
early ado tion ermitted. he Com any is assessin the im act of this standard on its consolidated financial
statements.

2
IFRS 15 Revenue from Contracts with Customers

n ay 2 , 201 , the I S issued IF S 1 e enue from Contracts with Customers. he new standard
is effecti e for fiscal years be innin on or after anuary 1, 201 and is a ailable for early ado tion. he standard
contains a sin le model that a lies to contracts with customers. he model features a contract based fi e ste
analysis of transactions to determine whether, how much and when re enue is reco ni ed. ew estimates and
ud mental thresholds ha e been introduced, which may affect the amount and or timin of re enue reco ni ed.
he Com any intends to ado t IF S 1 in its financial statements for the annual eriod be innin on anuary 1,
201 . e ha e a team dedicated to ensurin our com liance with IF S 1 . his team is res onsible for determinin
e istin olicies, differences between e istin olicies and IF S 1 , ensurin our data collection is a ro riate,
and communicatin the u comin chan es with arious sta eholders. In addition, this team is assistin in the
de elo ment of rocesses and olicies that will hel ensure an effecti e transition and the related results are
accurate. s a result, we are continuin to assess the im act of this standard on our consolidated financial
statements.

IFRS 16 Leases

In anuary 2016, the I S issued the final ublication of the IF S 16 eases standard, which will su ersede the
current I S 1 , eases standard. nder IF S 16, a lease will e ist when a customer controls the ri ht to use an
identified asset as demonstrated by the customer ha in e clusi e use of the asset for a eriod of time. IF S 16
introduces a sin le accountin model for lessees and all leases will re uire an asset and liability to be reco ni ed
on the statement of financial osition at ince tion. he accountin treatment for lessors will remain lar ely the
same as under I S 1 .

he standard is effecti e for annual eriods be innin on or after anuary 1, 201 with early ado tion ermitted,
but only if the entity is also a lyin IF S 1 . he Com any is re uired to retros ecti ely a ly IF S 16 to all
e istin leases as of the date of transition and has the o tion to either

a ly IF S 16 with full retros ecti e effect or

reco ni e the cumulati e effect of initially a lyin IF S 16 as an ad ustment to o enin e uity at the
date of initial a lication.

s a ractical e edient, an entity is not re uired to reassess whether a contract is, or contains, a lease at the date
of initial a lication. he Com any is assessin the im act of this standard on its consolidated financial statements
howe er, we belie e that on ado tion of the standard there will be an increase to assets and liabilities, as we will be
re uired to record a ri ht of use asset and a corres ondin lease liability on our Consolidated Statements of
Financial osition, as well as a decrease to o eratin costs, an increase to finance costs due to accretion of the lease
liability and an increase to de reciation and amorti ation due to amorti ation of the ri ht of use asset .

s at February 1 , 201 , there were 21,1 1, 30 common shares outstandin .

he Com any s business is sub ect to a number of ris factors which are described in our most recently filed IF.
dditional ris s and uncertainties not resently nown to us or that we currently consider immaterial also may
im air our business and o erations and cause the rice of the common shares to decline. If any of the noted ris s
actually occur, our business may be harmed and the financial condition and results of o eration may suffer
si nificantly. In that e ent, the tradin rice of the common shares could decline, and shareholders may lose all or
art of their in estment.

26
C P

Evaluation of disclosure controls and procedures:

ana ement is res onsible for establishin and maintainin disclosure controls and rocedures as defined
under ational Instrument 2 10 . t December 31, 2016, the resident and Chief Financial fficer concluded
that the desi n and o eration of these disclosure controls and rocedures were effecti e and that material
information relatin to the Com any, includin its subsidiaries, was made nown to them and was recorded,
rocessed, summari ed and re orted within the time eriods s ecified under a licable securities le islation.

Internal controls over financial reporting:

he resident and Chief Financial fficer ha e desi ned or caused to be desi ned under their su er ision,
disclosure controls and rocedures which ro ide reasonable assurance that material information re ardin the
Com any is accumulated and communicated to the Com any s mana ement, includin its resident and Chief
Financial fficer in a timely manner.

In addition, the resident and Chief Financial fficer ha e desi ned or caused it to be desi ned under their
su er ision internal controls o er financial re ortin ICF to ro ide reasonable assurance re ardin the
reliability of financial re ortin and the re aration of financial statements. he resident and Chief Financial
fficer ha e been ad ised that the control framewor the resident and the Chief Financial fficer used to desi n
the Com any s ICF is reco ni ed by the Committee of S onsorin r ani ations of the readway Commission.

he resident and the Chief Financial fficer ha e e aluated, or caused to be e aluated under their
su er ision, whether or not there were chan es to its ICF durin the eriod ended December 31, 2016 that ha e
materially affected, or are reasonably li ely to materially affect the Com any s ICF . o such chan es were
identified throu h their e aluation.

control system, no matter how well concei ed and o erated, can ro ide only reasonable, not absolute,
assurance that its ob ecti es are met. Due to inherent limitations in all such systems, no e aluations of controls can
ro ide absolute assurance that all control issues, if any, within a com any ha e been detected. ccordin ly, our
disclosure controls and rocedures and our internal controls o er financial re ortin are effecti e in ro idin
reasonable, not absolute, assurance that the ob ecti es of our control systems ha e been met.

2
Consolidated Financial Statements
(In U.S. dollars)

C NSTE ATI N
S FT ARE INC.
For the years ended December 31, 2016 and 2015

ANA E ENT S RESP NSIBI ITY F R FINANCIA REP RTIN
December 31, 2016

The accompanying consolidated financial statements of Constellation Software Inc. ( Constellation ) and
its subsidiaries and all the information in Management's Discussion and Analysis are the responsibility of
management and have been approved by the Board of Directors.

The consolidated financial statements have been prepared by management in accordance with
International Financial Reporting Standards ( IFRS ). The consolidated financial statements include certain
amounts that are based on the best estimates and judgements of management and in their opinion present
fairly, in all material respects, Constellation's financial position, results of operations and cash flows, in
accordance with IFRS. Management has prepared the financial information presented elsewhere in the
Management's Discussion and Analysis and has ensured that it is consistent with the consolidated financial
statements, or has provided reconciliations where inconsistencies exist.

Management of Constellation has developed and maintains a system of internal controls, which is
supported by the internal audit function. Management believes the internal controls provide reasonable
assurance that material transactions are properly authorized and recorded, financial records are reliable
and form a basis for the preparation of consolidated financial statements and that Constellation's material
assets are properly accounted for and safeguarded.

The Board of Directors carries out its responsibility for the consolidated financial statements principally
through its Audit Committee. This committee meets with management and the Company s independent
auditors to review the Company s reported financial performance and to discuss audit, internal controls,
accounting policies, and financial reporting matters. The consolidated financial statements were reviewed
by the Audit Committee and approved by the Board of Directors.

The consolidated financial statements have been audited by PMG LLP, the external auditors, in
accordance with Canadian generally accepted auditing standards on behalf of the shareholders. PMG
LLP has full and free access to the Audit Committee.

February 15, 2017

Mark Leonard Jamal Baksh

President Chief Financial Officer

 KPMG LLP
Bay Adelaide Centre
Suite 4600
333 Bay Street
Toronto, Ontario
M5H 2S5
Telephone (416) 777-8500
Fax (416) 777-8818
www.kpmg.ca

INDEPENDENT AUDITORS REPORT

To the Shareholders of Constellation Software Inc.

We have audited the accompanying consolidated financial statements of Constellation Software Inc.,
which comprise the consolidated statements of financial position as at December 31, 2016 and December
31, 2015, the consolidated statements of income, comprehensive income, changes in equity and cash
flows for the years then ended, and notes, comprising a summary of significant accounting policies and
other explanatory information.

Managements Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with International Financial Reporting Standards, and for such internal control as
management determines is necessary to enable the preparation of consolidated financial statements that
are free from material misstatement, whether due to fraud or error.

Auditors Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing standards. Those
standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the consolidated financial statements. The procedures selected depend on our judgment, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due
to fraud or error. In making those risk assessments, we consider internal control relevant to the entitys
preparation and fair presentation of the consolidated financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entitys internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by management, as well
as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a
basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the
consolidated financial position of Constellation Software Inc. as at December 31, 2016 and December 31,
2015 and its consolidated financial performance and its consolidated cash flows for the years then ended
in accordance with International Financial Reporting Standards.

Chartered Professional Accountants, Licensed Public Accountants

February 15, 2017
Toronto, Canada
C NSTE ATI N S FT ARE INC.
Consolidated Statements of Financial Position
(In thousands of U.S. dollars)

December 31, 2016 December 31, 2015

Assets
Current assets:
Cash $ 353,499 $ 178,471
Equity securities available-for-sale (note 5) 4,236
Accounts receivable, net 243,554 226,771
Work in progress 56,541 59,483
Inventories (note 6) 19,667 24,332
Other assets (note 7) 96,181 67,246
773,678 556,303
Non-current assets:
Property and equipment (note 8) 46,395 42,072
Deferred income taxes (note 15) 49,863 56,650
Other assets (note 7) 19,782 32,186
Intangible assets (note 9) 993,743 952,109
1,109,783 1,083,017
Total assets $ 1,883,461 $ 1,639,320

Liabilities and Shareholders' Equity

Current liabilities:
CSI Facility (note 10) $ $
CNH Facility (note 10) 7,361 8,725

TSS membership liability (note 12) 26,435 19,602
Accounts payable and accrued liabilities 291,697 274,981
Dividends payable (note 16) 21,051 21,326
Deferred revenue 460,975 421,027
Provisions (note 13) 7,955 8,420

Acquisition holdback payments 17,056 9,116

Income taxes payable 40,634 6,561

873,164 769,758
Non-current liabilities:
CNH Facility (note 10) 115,336 126,407
TSS Membership Liability (note 12) 46,502 34,482
Debentures (note 11) 223,870 220,043
Deferred income taxes (note 15) 129,585 109,795
Acquisition holdback payments 855 6,987

Other liabilities (note 7 and 13) 36,640 34,566
552,788 532,280

Total liabilities 1,425,952 1,302,038

Shareholders' equity (note 16):

Capital stock 99,283 99,283
Accumulated other comprehensive income (loss) (36,108) (34,319)
Retained earnings 394,334 272,318
457,509 337,282

Subsequent events (notes 16 and 28)

Total liabilities and shareholders' equity $ 1,883,461 $ 1,639,320

See accompanying notes to the consolidated financial statements.

32
C NSTE ATI N S FT ARE INC.
Consolidated Statements of Income
(In thousands of U.S. dollars, except per share amounts)

Years ended December 31,

2016 2015

Revenue
License $ 142,534 $ 131,022
Professional services 434,488 384,583
Hardware and other 147,749 152,909
Maintenance and other recurring 1,400,315 1,169,795
2,125,086 1,838,309

Expenses
Staff 1,058,989 912,416
Hardware 82,304 90,308
Third party license, maintenance and professional services 192,703 163,684
Occupancy 51,696 43,218
Travel 61,745 54,643
Telecommunications 21,674 17,909
Supplies 9,820 10,951
Software and equipment 36,547 30,954
Professional fees 28,249 22,619
Other, net 28,963 29,042
Depreciation 22,376 17,028
Amortization of intangible assets 190,574 180,469
1,785,640 1,573,241

Foreign exchange loss (gain) 25,990 (15,743)

TSS membership liability revaluation charge (note 12) 21,635 22,244
Share in net (income) loss of equity investee (note 7) (5,317) (1,070)
Finance and other expense (income) (note 18) (10,834) (4,772)
Finance costs (note 18) 21,573 20,110
53,047 20,769

Income before income taxes 286,399 244,299

Current income tax expense (recovery) 84,943 63,450

Deferred income tax expense (recovery) (5,328) 3,601
Income tax expense (recovery) (note 14 and 15) 79,615 67,051

Net income 206,784 177,248

Earnings per share

Basic and diluted (note 19) $ 9.76 $ 8.36

See accompanying notes to the consolidated financial statements

33
C NSTE ATI N S FT ARE INC.
Consolidated Statements of Comprehensive Income
(In thousands of U.S. dollars, except per share amounts)

Years ended December 31,

2016 2015

Net income $ 206,784 $ 177,248

Items that are or may be reclassified subsequently to net income:

Net change in fair value

of available-for-sale financial
asset during the period 5,224 -

Net change in fair value

of derivatives designated as hedges
during the period 468 (423)

Amounts reclassified to profit during the period

related to realized gains on
available-for-sale financial assets (5,204) -

Foreign currency translation differences from foreign operations (2,134) (14,734)

Deferred income tax recovery (expense) (143) 128

Other comprehensive (loss) income for the period, net of income tax (1,789) (15,029)

Total comprehensive income (loss) for the period $ 204,995 $ 162,219

See accompanying notes to the consolidated financial statements.

34
C NSTE ATI N S FT ARE INC.
Consolidated Statements of Changes in Equity
(In thousands of U.S. dollars)

Year ended December 31, 2016

Capital stoc Accumulated other comprehensive Total accumulated other Retained Total
income (loss) comprehensive earnings
income (loss)

Cumulative Amounts Amounts

translation related to related to
account gains losses gains (losses)
on available- on derivatives
for-sale designed as
financial hedges
assets

Balance at anuary 1, 2016 99,283 (33,614) (705) (34,319) 272,318 337,282

Total comprehensive income for the period:

Net income - - - - - 206,784 206,784

Other comprehensive income (loss)

Net change in fair value

of available-for-sale financial
asset during the period - - 5,224 - 5,224 - 5,224

Net change in fair value

of derivatives designated as hedges
during the period - - - 468 468 - 468

Amounts reclassified to profit during the period

related to realized gains on
available-for-sale financial assets - - (5,204) - (5,204) - (5,204)

Foreign currency translation differences from

foreign operations - (2,134) - - (2,134) - (2,134)

Deferred tax recovery (expense) - - (3) (140) (143) - (143)

Total other comprehensive income (loss)

for the period (2,134) 17 328 (1,789) (1,789)

Total comprehensive income (loss) for the period (2,134) 17 328 (1,789) 206,784 204,995

Transactions with owners, recorded directly in equity

Dividends to shareholders of the Company (note 16) - - - - - (84,768) (84,768)

Balance at December 31, 2016 99,283 (35,748) 17 (377) (36,108) 394,334 457,509

See accompanying notes to the consolidated financial statements.

35
C NSTE ATI N S FT ARE INC.
Consolidated Statements of Changes in Equity
(In thousands of U.S. dollars)

Year ended December 31, 2015

Capital stoc Accumulated other comprehensive Total accumulated other Retained Total
income (loss) comprehensive earnings
income (loss)

Cumulative Amounts Amounts

translation related to related to
account gains losses gains (losses)
on available- on derivatives
for-sale designed as
financial hedges
assets

Balance at anuary 1, 2015 99,283 (18,880) (410) (19,290) 179,838 259,831

Total comprehensive income for the period:

Net income - - - - - 177,248 177,248

Other comprehensive income (loss)

Net change in fair value

of available-for-sale financial
asset during the period - - - - - - -

Net change in fair value

of derivatives designated as hedges
during the period - - - (423) (423) - (423)

Amounts reclassified to profit during the period

related to realized gains on
available-for-sale financial assets - - - - - - -

Foreign currency translation differences from

foreign operations - (14,734) - - (14,734) - (14,734)

Deferred tax recovery (expense) - - 128 128 - 128

Total other comprehensive income for the period (14,734) (295) (15,029) (15,029)

Total comprehensive income for the period (14,734) (295) (15,029) 177,248 162,219

Transactions with owners, recorded directly in equity

Dividends to shareholders of the Company (note 16) - - - - (84,768) (84,768)

Balance at December 31, 2015 99,283 (33,614) (705) (34,319) 272,318 337,282

See accompanying notes to the consolidated financial statements.

36
C NSTE ATI N S FT ARE INC.
Consolidated Statements of Cash Flows
(In thousands of U.S. dollars)

Years ended December 31,

2016 2015
Cash flows from operating activities:
Net income $ 206,784 $ 177,248
Adjustments for:
Depreciation 22,376 17,028
Amortization of intangible assets 190,574 180,469
TSS membership liability revaluation charge 21,635 22,244
Share in net (income) loss of equity investee (5,317) (1,070)
Finance and other income (10,834) (4,772)
Finance costs 21,573 20,110
Income tax expense (recovery) 79,615 67,051
Foreign exchange loss (gain) 25,990 (15,743)
Change in non-cash operating working capital
exclusive of effects of business combinations (note 26) (16,496) 3,080
Income taxes paid (45,019) (69,701)
Net cash flows from operating activities 490,881 395,944

Cash flows from (used in) financing activities:

Interest paid (22,867) (17,533)
Increase (decrease) in revolving credit facility, net - (64,500)
Repayments of CNH facility (8,709) (2,199)
Credit facility transaction costs (1,212) -
Proceeds from issuance of debentures (note 11) - 159,709
Distribution to TSS minority owners (note 12) - (10,879)
Dividends paid (84,768) (84,768)
Net cash flows from (used in) in financing activities (117,556) (20,170)
Cash flows from (used in) investing activities:
Acquisition of businesses, net of cash
acquired (note 4) (152,310) (210,299)
Post-acquisition settlement payments, net of receipts (25,791) (38,473)
Purchases of available-for-sale equity securities (27,707) -
Proceeds from sale of available-for-sale equity securities 28,491 -
Interest, dividends and other proceeds received 1,729 570
Property and equipment purchased (19,098) (12,894)
Net cash flows from (used in) investing activities (194,686) (261,096)
Effect of foreign currency on
cash and cash equivalents (3,611) (6,886)
Increase (decrease) in cash and cash equivalents 175,028 107,792
Cash, beginning of period 178,471 70,679

Cash, end of period $ 353,499 $ 178,471

See accompanying notes to the consolidated financial statements.

37
C NSTE ATI N S FT ARE INC.
Notes to Consolidated Financial Statements
(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)
Years ended December 31, 2016 and 2015

Notes to the consolidated financial statements

1. Reporting entity 15. Deferred tax assets and liabilities

2. Basis of presentation 16. Capital and other components of equity
3. Significant accounting policies 17. Revenue
4. Business acquisitions 18. Finance and other income and finance costs
5. Equity securities available-for-sale 19. Earnings per share
6. Inventories 20. Capital risk management
7. Other assets and liabilities 21. Financial risk management and financial instruments
8. Property and equipment 22. Operating leases
9. Intangible assets and goodwill 23. Operating segments
10. Bank indebtedness and CNH facility 24. Contingencies
11. Debentures 25. Guarantees
12. TSS membership liability 26. Changes in non-cash operating working capital
13. Provisions 27. Related parties
14. Income taxes 28. Subsequent events

38

C NSTE ATI N S FT ARE INC.

Notes to Consolidated Financial Statements
(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)
Years ended December 31, 2016 and 2015

1. Reporting entity

Constellation Software Inc. ( Constellation ) is a company domiciled in Canada. The address of Constellation's
registered office is 20 Adelaide Street East, Suite 1200, Toronto, Ontario, Canada. The consolidated financial
statements of Constellation as at and for the fiscal years ended December 31, 2016 and December 31, 2015
comprise Constellation and its subsidiaries (together referred to as the Company ) and the Company's interest in
associates. The Company is engaged principally in the development, installation and customization of software
relating to the markets listed below, and in the provision of related professional services and support.

Public Sector:

Public transit operators Asset management Municipal systems

Para transit operators Fleet and facility management School administration
School transportation District attorney Public safety
Non-emergency medical Taxi dispatch Healthcare
Ride share Benefits administration Rental
Local government Insurance Electric utilities
Agri-business Collections management Court
Marine asset management Water utilities School and special library
Communications Credit unions Drink distribution
Higher education Financial services Notaries
Fashion retail Pharmacies Long-term care
Home and community care County systems Research management
Retail management and distribution Public housing authorities Not-for-profit organizations

Private Sector:

Private clubs and daily fee golf courses Lease management Window manufacturers
Construction Winery management Cabinet manufacturers
Food services Buy here pay here dealers Made-to-order manufacturers
Health clubs R and marine dealers Window and other dealers
Moving and storage Pulp and paper manufacturers Multi-carrier shipping
Metal service centers Real estate brokers and agents Supply chain optimization
Attractions Outdoor equipment dealers Multi-channel distribution
Leisure centers Education Wholesale distribution
Retail management and distribution Healthcare electronic medical records Homebuilders
Radiology and laboratory information Pharmaceutical and biotech Third party logistics warehouse
systems manufacturers management systems
Product licensing Event management Financial services
Tire distribution Salons and spas Association management
Housing finance agencies Municipal treasury and debt systems Public housing authorities
Tour operators Auto clubs Real estate brokers and agents
Long-term care Textiles and apparel Home and community care
Hospitality Mining Ombudsman
Aerospace

39

C NSTE ATI N S FT ARE INC.

Notes to Consolidated Financial Statements
(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)
Years ended December 31, 2016 and 2015

2. Basis of presentation

(a) Statement of compliance

These consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRS), issued and outstanding as of February 15, 2017, the date the Board of Directors approved such
financial statements.

(b) Basis of measurement

The consolidated financial statements have been prepared on the historical cost basis except for certain assets and
liabilities initially recognized in connection with business combinations, and certain financial instruments and
derivative financial instruments, which are measured at fair value.

(c) Functional and presentation currency

The consolidated financial statements are presented in U.S. dollars, which is Constellation's functional currency.

(d) se of estimates and judgements

The preparation of the consolidated financial statements in conformity with IFRS requires management to make
judgements, estimates and assumptions that affect the application of accounting policies and reported amounts of
assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Estimates are based on historical
experience and other assumptions that are considered reasonable in the circumstances. The actual amount or
values may vary in certain instances from the assumptions and estimates made. Changes will be recorded, with
corresponding effect in profit or loss, when, and if, better information is obtained.

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material
adjustment within the next financial year are included in the following notes:

Note 3(k) Revenue recognition

Note 3(a)(i) - Business combinations
Note 3(m) - Income taxes
Note 3(i) - Impairment
Note 3(d) - Intangible assets
Note 24 Contingencies

Critical judgements that management has made in the process of applying accounting policies disclosed herein
and that have a significant effect on the amounts recognized in the consolidated financial statements relate to the
(i) determination of functional currencies for Constellation s subsidiaries and, most notably, in respect of
businesses acquired during the period (ii) assessment as to whether certain customer contract obligations and
deliverables related to multiple-element arrangements have stand-alone value to the customer (iii) recognition of
deferred tax assets and (iv) recognition of provisions.

Functional currency - management applies judgement in situations where primary and secondary indicators
are mixed. Primary indicators such as the currency that mainly influence sales prices are given priority
before considering secondary indicators.

40

C NSTE ATI N S FT ARE INC.

Notes to Consolidated Financial Statements
(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)
Years ended December 31, 2016 and 2015

Revenue recognition and separation of customer contract obligations and deliverables management
applies judgement when assessing whether certain deliverables in a customer arrangement should be
included or excluded from the unit of account to which contract accounting is applied. The judgement is
typically related to the sale and inclusion of third party hardware, professional services and licenses in a
customer arrangement and involves an assessment that principally addresses whether the deliverable has
stand-alone value to the customer that is not dependent upon other components of the arrangement.

Deferred tax assets - the recognition of deferred tax assets is based on forecasts of future taxable profit.
The measurement of future taxable profit for the purposes of determining whether or not to recognize
deferred tax assets depends on many factors, including the Company's ability to generate such profits and
the implementation of effective tax planning strategies. The occurrence or non-occurrence of such events
in the future may lead to significant changes in the measurement of deferred tax assets.

Provisions - in recognizing provisions, the Company evaluates the extent to which it is probable that it has
incurred a legal or constructive obligation in respect of past events and the probability that there will be an
outflow of benefits as a result. The judgements used to recognize provisions are based on currently known
factors which may vary over time, resulting in changes in the measurement of recorded amounts as
compared to initial estimates.

3. Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these consolidated
financial statements unless otherwise indicated.

The significant accounting policies have been applied consistently by the Company s subsidiaries.

(a) Basis of consolidation

(i) Business combinations

Acquisitions have been accounted for using the acquisition method required by IFRS 3 Business Combinations.
Goodwill arising on acquisitions is measured as the fair value of the consideration transferred including the
recognized amount of any non-controlling interest in the acquiree, if any, less the net recognized amount of the
estimated fair value of identifiable assets acquired and liabilities assumed (subject to certain exemptions to fair
value measurement principles such as deferred tax assets or liabilities), all measured as of the acquisition date.
When the consideration transferred is less than the estimated fair value of assets acquired and liabilities assumed,
a bargain purchase gain is recognized immediately in the consolidated statements of income. Transaction costs
that the Company incurs in connection with a business combination are expensed as incurred.

The Company uses its best estimates and assumptions to reasonably value assets and liabilities assumed at the
acquisition date as well as contingent consideration, where applicable, and these estimates are inherently uncertain
and subject to refinement. As a result, during the measurement period, which may be up to one year from the
acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with a
corresponding offset to goodwill. Upon conclusion of the measurement period or final determination of the values
of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to profit
or loss. For a given acquisition, the Company may identify certain pre-acquisition contingencies as of the acquisition
date and may extend its review and evaluation of these pre-acquisition contingencies throughout the measurement
period in order to obtain sufficient information to assess these contingencies as part of acquisition accounting, as
applicable.
41

C NSTE ATI N S FT ARE INC.

Notes to Consolidated Financial Statements
(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)
Years ended December 31, 2016 and 2015

(ii) Consolidation methods

Entities over which the Company has control are fully consolidated from the date that control commences until the
date that control ceases. Entities over which the Company has significant influence (investments in associates )
are accounted for under the equity method. Significant influence is assumed when the Company's interests are
20% or more, unless qualitative factors overcome this assumption.

Associates are those entities in which the Company has significant influence, but not control, over the financial and
operating policies. Investments in associates are recognized initially at cost, inclusive of transaction costs. The
Company's investment includes goodwill identified on acquisition, net of any accumulated impairment losses. The
consolidated financial statements include the Company's share of the income and expenses and equity changes of
equity accounted investees, from the date that significant influence commences until the date that significant
influence ceases.

(iii) Transactions eliminated on consolidation

Intra-company balances and transactions, and any unrealized income and expenses arising from intra-company
transactions, are eliminated in preparing the consolidated financial statements.

(b) Foreign currency translation

(i) Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of subsidiaries of the
Company at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign
currencies at the reporting date are re-measured to the functional currency at the exchange rate at that date. Foreign
currency differences arising on re-measurement are recognized through profit or loss, except for differences arising
on the retranslation of available-for-sale equity instruments, which are recognized in other comprehensive income.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the
exchange rate at the date of the transaction. Foreign currency gains and losses are reported in profit and loss on
a net basis. The effect of currency translation adjustments on cash and cash equivalents is presented separately
in the statements of cash flows and separated from investing and financing activities when deemed significant.

(ii) Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition,
are translated to U.S. dollars at exchange rates at the reporting date. The income and expenses of foreign
operations are translated to U.S. dollars using average exchange rates for the month during which the transactions
occurred. Foreign currency differences are recognized in other comprehensive income in the cumulative translation
account however, if the operation is a non-wholly owned subsidiary, then the relevant proportionate share of the
translation difference is allocated to the non-controlling interest when applicable.

Foreign exchange gains or losses arising from a monetary item receivable from or payable to a foreign operation,
the settlement of which is neither planned nor likely to occur in the foreseeable future and which its substance is
considered to form part of the net investment in the foreign operation, are recognized in other comprehensive
income in the cumulative amount of foreign currency translation differences. If, and when, settlement plans change
or deemed likely to occur, then the accounting process in (b)(i) above is applied. When a foreign operation payable
or receivable classified as a net investment is partially or fully disposed, the proportionate share of the cumulative
amount in the translation reserve related to that foreign operation is transferred to profit or loss as part of the profit

42

C NSTE ATI N S FT ARE INC.

Notes to Consolidated Financial Statements
(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)
Years ended December 31, 2016 and 2015

or loss on disposal. The Company has elected not to treat repayments of monetary items receivable or payable to
a foreign operation as a disposition.

(c) Financial Instruments

The Company's financial instruments comprise cash, equity securities, accounts receivable, derivatives in the form
of cash flow hedges, bank indebtedness, CNH facility, debentures, Total Specific Solutions B. . ( TSS )
membership liability, accounts payable and accrued liabilities, dividends payable, income taxes payable and
holdback liabilities on acquisitions.

Financial assets are recognized in the consolidated statement of financial position if we have a contractual right to
receive cash or other financial assets from another entity. Financial assets, including accounts receivable, are
derecognized when the rights to receive cash flows from the investments have expired or were transferred to
another party and the Company has transferred substantially all risks and rewards of ownership.

All financial liabilities are recognized initially on the date at which the Company becomes a party to the contractual
provisions of the instrument. The Company derecognizes a financial liability when its contractual obligations are
discharged, cancelled or expire.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when,
and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to
realize the asset and settle the liability simultaneously.

(i) Non derivative financial assets

Non-derivative financial assets are classified in the following categories at the time of initial recognition based on
the purpose for which the financial assets were acquired:

Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale and
that are not classified within loans and receivables or financial assets at fair value through profit or loss. The
Company s investments in equity securities are classified as available-for-sale financial assets and are recognized
initially at fair value inclusive of any directly attributable transaction costs. Subsequent to initial recognition, they are
measured at fair value and changes therein, other than impairment losses which are recognized in profit or loss,
are recognized in other comprehensive income and presented within shareholders equity. When an investment is
disposed of and derecognized, the cumulative gain or loss in other comprehensive income is transferred to profit
or loss for the period.

The fair value of the available-for-sale financial assets is determined by reference to their quoted closing bid price
at the reporting date.

Loans and receivables

Loans and receivables, which comprise accounts receivable, are financial assets with fixed or determinable
payments that are not quoted in an active market. Such assets are recognized initially at fair value inclusive of any
directly attributable transaction costs and subsequently carried at amortized cost using the effective interest method,
less any impairment losses. They are included in current assets, except for those with maturities greater than 12
months after the balance sheet date, which are classified as non-current assets.

43

C NSTE ATI N S FT ARE INC.

Notes to Consolidated Financial Statements
(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)
Years ended December 31, 2016 and 2015

(ii) Non derivative financial liabilities

Financial liabilities include bank indebtedness, CNH facility, TSS membership liability, debentures, accounts
payable and accrued liabilities, dividends payable, income taxes payable and holdbacks on acquisitions. Financial
liabilities are generally recognized initially at fair value, typically being transaction price, plus any directly attributable
transaction costs and subsequently measured at amortized cost using the effective interest method. The Company
derecognizes a financial liability when its contractual obligations are discharged, cancelled, or expired.

(iii) Capital Stoc

Common shares are classified as equity. Incremental costs directly attributable to the issue of common shares are
recognized as a deduction from equity, net of tax.

(iv) Derivatives

The Company s derivatives are carried at fair value and are reported as assets when they have a positive fair value
and as liabilities when they have a negative fair value.

Changes in the fair values of derivative financial instruments are reported in the consolidated statements of income,
except for cash flow hedges that meet the conditions for hedge accounting. The portion of the gain or loss on the
hedging instruments that are determined to be an effective hedge are recognized directly in other comprehensive
income, and the ineffective portion in the consolidated statements of income. The gains or losses deferred in other
comprehensive income in this way are subsequently recognized in the consolidated statements of income in the
same period in which the hedged underlying transaction or firm commitment is recognized in the statement of
income. In order to qualify for hedge accounting, the Company is required to document in advance the relationship
between the item being hedged and the hedging instrument. The Company is also required to document and
demonstrate an assessment of the relationship between the hedged item and the hedging instrument, which shows
that the hedge will be highly effective on an ongoing basis. This effectiveness testing is re-performed at the end of
each reporting period to ensure that the hedge remains highly effective.

(d) Intangible assets

(i) oodwill

Goodwill that arises upon the acquisition of subsidiaries is included in intangible assets. After initial recognition,
goodwill is measured at cost less any accumulated impairment losses, with the carrying value being reviewed for
impairment at least annually and whenever events or changes in circumstances indicate that the carrying value
may be impaired. In respect of equity accounted investees, the carrying amount of goodwill is included in the
carrying amount of the investment. No such losses relating to goodwill have been recognized during the year.

The impairment test methodology is based on a comparison between the higher of fair value less costs to sell and
value-in-use of each of the Company's business units (considered as the grouping of cash generating units at which
level the impairment test is performed) and the net asset carrying values (including goodwill) of the Company's
business units. Within the Company's reporting structure, business units generally reflect one level below the six
operating segments ( olaris, Harris, Total Specific Solutions, Jonas, Perseus, and ela Operating Groups). In
determining the recoverable amount, the Company applies an estimated market valuation multiple to the business
unit's most recent annual recurring revenues, which are derived from combined software support contracts
revenues, transactional revenues, and hosted products revenues. aluation multiples applied by management for
this purpose reflect current market conditions specific to the business unit and are assessed for reasonability by
comparison to the Company's current and past acquisition experience involving ranges of revenue-based multiples
44

C NSTE ATI N S FT ARE INC.

Notes to Consolidated Financial Statements
(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)
Years ended December 31, 2016 and 2015

required to acquire representative software companies and the Company s overall revenue based-trading multiple.
In addition, in certain instances, the recoverable amount is determined using a value-in-use approach which follows
the same valuation process that is undertaken for the Company s business acquisitions. An impairment is
recognized if the carrying amount of a cash generating unit ( CGU ) exceeds its estimated recoverable amount.
The recoverable amount of goodwill is estimated annually on December 31 of each year or when required.

(ii) Acquired intangible assets

The Company uses the income approach to value acquired technology and customer relationship intangible assets.
The income approach is a valuation technique that calculates the estimated fair value of an intangible asset based
on the estimated future cash flows that the asset can be expected to generate over its remaining useful life.

The Company utilizes the discounted cash flow ( DCF ) methodology which is a form of the income approach that
begins with a forecast of the annual cash flows that a market participant would expect the subject intangible asset
to generate over a discrete projection period. The forecasted cash flows for each of the years in the discrete
projection period are then converted to their present value equivalent using a rate of return appropriate for the risk
of achieving the intangible assets' projected cash flows, again, from a market participant perspective. The present
value of the forecasted cash flows are then added to the present value of the residual value of the intangible asset
(if any) at the end of the discrete projection period to arrive at a conclusion with respect to the estimated fair value
of the subject intangible assets.

Specifically, the Company relies on the relief-from-royalty method to value the acquired technology and the multiple-
period excess earnings ( MEEM ) method to value customer relationship assets.

The underlying premise of the relief-from-royalty method is that the fair value of the technology is equal to the cost
savings (or the royalty avoided ) resulting from the ownership of the asset by the avoidance of paying royalties to
license the use of the technology from another owner. Accordingly the income forecast reflects an estimate of a
fair royalty that a licensee would pay, on a percentage of revenue basis, to obtain a license to utilize the technology.

The MEEM method isolates the cash flows attributable to the subject asset by utilizing a forecast of expected cash
flows less the returns attributable to other enabling assets, both tangible and intangible.

Other intangible assets that are acquired by the Company and have finite useful lives are measured at cost, being
reflective of fair value, less accumulated amortization and impairment losses. Subsequent expenditures are
capitalized only when it increases the future economic benefits that form part of the specific asset to which it relates
and other criteria have been met. Otherwise all other expenditures are recognized in profit or loss as incurred.

Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible
assets, other than goodwill, from the date that they are acquired and available for use, since this most closely
reflects the expected usage and pattern of consumption of the future economic benefits embodied in the asset. To
determine the useful life of the technology assets, the Company considers the length of time over which it expects
to earn or recover the majority of the present value of the forecasted cash flows of the related intangible assets.
The estimated useful lives for the current and comparative periods are as follows:

Technology assets 2 to 12 years

Customer assets 5 to 20 years
Trademarks 20 years
Backlog Up to 1 year
Non-compete agreements Term of agreement

45

C NSTE ATI N S FT ARE INC.

Notes to Consolidated Financial Statements
(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)
Years ended December 31, 2016 and 2015

Amortization methods, useful lives and the residual values are reviewed at least annually (or when there has been
an indication of impairment) and are adjusted as appropriate.

(iii) Research and development

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge
and understanding, is recognized in profit or loss as an expense as incurred.

Expenditure on development activities, whereby research findings are applied to a plan or design for the production
of new or substantially improved products and processes, is capitalized only if the product or process is technically
and commercially feasible, if development costs can be measured reliably, if future economic benefits are probable,
if the Company intends to use or sell the asset and the Company intends and has sufficient resources to complete
development. To date, no material development expenditures have been capitalized.

For the year ended December 31, 2016, $294,735 (2015 $258,416) of research and development costs have
been expensed in profit or loss. These costs are net of estimated investment tax credits, recognized as part of
other, net expenses through profit or loss of $19,007 for the year ended December 31, 2016 (2015 $14,772).

(e) Property and equipment

(i) Recognition and measurement

Property and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.
Cost includes initial and subsequent expenditures that are directly attributable to the acquisition of the related asset.
When component parts of an item of property and equipment have different useful lives, they are accounted for as
separate items (major components) of property and equipment, where applicable.

(ii) Depreciation

Depreciation is recognized in profit or loss on a straight-line basis over the estimated useful lives of each part of an
item of property and equipment.

The estimated useful lives for the current and comparative periods are as follows:

Asset Rate
Computer hardware 3-5 years
Computer software 1 year
Furniture and equipment 5 years
Leasehold improvements Shorter of the estimated useful life and the term of the lease
Building 50 years

Depreciation methods, useful lives and residual values are reviewed at each financial year end or more frequently
as deemed relevant, and adjusted where appropriate.

(f) Inventories

Inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on the first-
in first-out principle, and includes expenditures incurred in acquiring the inventories, production and other costs
incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work
46

C NSTE ATI N S FT ARE INC.

Notes to Consolidated Financial Statements
(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)
Years ended December 31, 2016 and 2015

in progress, cost includes an appropriate share of production overheads based on normal operating capacity. Net
realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of
completion and selling expenses.

(g) or in progress

Work in progress represents the gross unbilled amount expected to be collected from customers for contract work
performed to date. It is measured at cost plus profit recognized to date less progress billings and recognized losses,
if any.

Work in progress is presented in the statement of financial position for all contracts in which costs incurred plus
recognized profits exceed progress billings. If progress billings exceed costs incurred plus recognized profits, then
the excess is presented as deferred revenue in the statement of financial position.

(h) ther non current liabilities

Other non-current liabilities consists principally of the non-current portion of lease incentives, non-compete
obligations, certain acquired contract liabilities, deferred revenue, provisions and contingent consideration
recognized in connection with business acquisitions to be settled in cash, which are discounted for measurement
purposes.

(i) Impairment

(i) Financial assets (including receivables)

A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine
whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates
that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect
on the estimated future cash flows of that asset that can be estimated reliably.

Objective evidence that financial assets are impaired can include default or delinquency by a debtor, restructuring
of an amount due to the Company on terms that the Company would not consider otherwise, or indications that a
debtor or issuer will enter bankruptcy.

The Company considers evidence of impairment for receivables at both a specific and collective level. All
individually significant receivables are assessed for specific impairment. All individually significant receivables found
not to be specifically impaired, together with receivables that are not individually significant are collectively assessed
for impairment by grouping together receivables with similar risk characteristics.

An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference
between its carrying amount and the present value of the estimated future cash flows discounted at the asset's
original effective interest rate. Losses are recognized in profit or loss and reflected in an allowance account against
receivables. When a subsequent event causes the amount of impairment loss to decrease, the decrease in
impairment loss is reversed through profit or loss.

(ii) Non financial assets

The carrying amounts of the Company s non-financial assets, other than inventories (which is addressed in note
3(f)) and deferred tax assets (which is addressed in note 3(m)), are reviewed at each reporting date (or more
47

C NSTE ATI N S FT ARE INC.

Notes to Consolidated Financial Statements
(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)
Years ended December 31, 2016 and 2015

frequently if required) to determine whether there is any indication of impairment. If any such indication exists, then
the asset s recoverable amount is estimated. For goodwill, the recoverable amount is estimated annually on
December 31 of each fiscal year or whenever required.

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In
assessing the value in use, the Company uses discounted cash flows which are determined using a pre-tax discount
rate specific to the asset or CGU. The discount rate used reflects current market conditions including risks specific
to the assets. Significant estimates within the cash flows include recurring revenue growth rates and operating
expenses. For the purpose of impairment testing, assets that cannot be tested individually are grouped together
into the smallest group of assets that generates cash inflows from continuing use that are largely independent of
the cash inflows of other assets or groups of assets, which for the Company s purposes is typically representative
of the business unit level within the corporate and management structure. For the purposes of goodwill impairment
testing, goodwill acquired in a business combination is allocated to the CGU, or the group of CGUs, that is expected
to benefit from the synergies of the combination.

An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its estimated recoverable
amount. Impairment losses are recognized in profit or loss. Impairment losses recognized in respect of CGUs are
allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying
amounts of the other assets (such as intangible assets and property and equipment) in the CGU (group of units) on
a pro rata basis.

Goodwill that forms part of the carrying amount of an investment in an associate is not recognized separately and,
therefore, is not tested for impairment separately. Instead, the entire amount of the investment in an associate is
tested for impairment as a single asset when there is objective evidence that the investment in an associate may
be impaired.

An impairment loss in respect of goodwill is not reversed. In respect of other non-financial assets, impairment
losses recognized in prior periods are assessed at each reporting date for any indications that the loss has
decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to
determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying
amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization,
if no impairment loss had been previously recognized.

(j) Provisions

A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation
that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the
obligation. Provisions are measured at the estimated future cash flows required to settle the present obligation,
based on the most reliable evidence available at the reporting date. The estimated cash flows are discounted at a
pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.
The amortization of the discount is recognized as part of finance costs.

( ) Revenue recognition

Revenue represents the fair value of consideration received or receivable from customers for goods and services
provided by the Company, net of discounts and sales taxes. The Company reports revenue under four revenue
categories being, License, Hardware and other, Professional services, and Maintenance and other recurring
revenue.

48

C NSTE ATI N S FT ARE INC.

Notes to Consolidated Financial Statements
(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)
Years ended December 31, 2016 and 2015

Typically, the Company's software license agreements are multiple-element arrangements as they may also include
maintenance, professional services, and hardware. Multiple-element arrangements are recognized as the revenue
for each unit of accounting is earned based on the relative fair value of each unit of accounting as determined by
an internal analysis of prices or by using the residual method. A delivered element is considered a separate unit of
accounting if it has value to the customer on a standalone basis, and delivery or performance of the undelivered
elements is considered probable and substantially under the Company's control. If these criteria are not met,
revenue for the arrangement as a whole is accounted for as a single unit of accounting. Where company-specific
objective evidence of fair value cannot be determined for undelivered elements, the Company determines fair value
of the respective element by estimating its stand-alone selling price, which is also applied for the presentation as
part of the revenue categories noted above when certain of those elements are deemed to be a single unit of
accounting.

The Company typically sells or licenses software on a perpetual basis, but also licenses software for a specified
period. Revenue from short-term time-based licenses, which usually include support services during the license
period, is recognized rateably over the license term. Revenue from multi-year time-based licenses that include
support services, whether separately priced or not, is recognized rateably over the license term unless a substantive
support service renewal rate exists if this is the case, the amount allocated to the delivered software is recognized
as license revenue based on the residual approach once the revenue criteria have been met. In those instances
where the customer is required to renew mandatory support and maintenance in order to maintain use of the
licensed software over the license term, the Company recognizes the consideration attributable to the license and
support for the initial term of the arrangement over the initial term and recognizes revenue for the support renewal
fees in subsequent years over the respective renewal periods.

Revenue from the license of software involving significant implementation or customization essential to the
functionality of the Company's product, or from the sales of hardware where software is essential to its functionality,
is recognized under the percentage-of-completion method of contract accounting based either on the achievement
of contractually defined milestones or based on labour hours. Any probable losses are recognized immediately in
profit or loss. In certain situations where the outcome of an arrangement cannot be estimated reliably, costs
associated with the arrangement are recognized as incurred. In this situation, revenues are recognized only to the
extent of the costs incurred that are probable of recovery.

A portion of the Company's sales, categorized as hardware and other revenue, are accounted for as product
revenue. Product revenue is recognized when the Company has an executed agreement, the product has been
delivered and costs can be measured reliably, the amount of the fee to be paid by the customer is fixed and
determinable, and the collection of the related receivable is deemed probable from the outset of the arrangement.
If for any of the product or service offerings, the Company determines at the outset of an arrangement that the
amount of revenue cannot be measured reliably, and the Company concludes that the inflow of economic benefits
associated with the transaction is not probable, then the revenue is deferred until the arrangement fee becomes
due and payable by the customer. If, at the outset of an arrangement, the Company determines that collectability
is not probable, and the Company concludes that the inflow of economic benefits associated with the transaction is
not probable, then revenue recognition is deferred until the earlier of when collectability becomes probable or
payment is received. If collectability becomes unlikely before all revenue from an arrangement is recognized, the
Company recognizes revenue only to the extent of the fees that are successfully collected unless collectability
becomes reasonably assured again. If a customer is specifically identified as a collection risk, the Company does
not recognize revenue except to the extent of the fees that have already been collected.

Revenue related to the customer reimbursement of travel related expenses incurred during a project implementation
is included in the hardware and other revenue category. Revenue is recognized as costs are incurred which is
consistent with the period in which the costs are invoiced. Reimbursable travel expenses incurred for which an
invoice has not been issued, are recorded as part of work in progress on the statement of financial position.

49

C NSTE ATI N S FT ARE INC.

Notes to Consolidated Financial Statements
(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)
Years ended December 31, 2016 and 2015

Maintenance and other recurring revenue primarily consists of fees charged for customer support on software
products post-delivery and also includes, to a lesser extent, recurring fees derived from combined software support
contracts, transaction revenues, managed services, and hosted products. The company-specific fair value of
maintenance is typically derived from rates charged to renew these services after an initial period. Maintenance
revenue remaining to be recognized in profit or loss is recognized as deferred revenue in the statements of financial
position when amounts have been billed in advance and the term of the service period has commenced.

Professional Services revenue including implementation, training and customization of software is recognized by
the stage of completion of the arrangement determined using the percentage of completion method noted above or
as such services are performed as appropriate in the circumstances. The revenue and profit of fixed price contracts
is recognized on a percentage of completion basis when the outcome of a contract can be estimated reliably. When
the outcome of the contract cannot be estimated reliably, the amount of revenue recognized is limited to the cost
incurred in the period. Losses on contracts are recognized as soon as a loss is foreseen by reference to the
estimated costs of completion.

Management exercises judgement in determining whether a contract's outcome can be estimated reliably.
Management also applies estimates in the calculation of future contract costs and related profitability as it relates
to labour hours and other considerations, which are used in determining the value of amounts recoverable on
contracts and timing of revenue recognition. Estimates are continually and routinely revised based on changes in
the facts relating to each contract. Judgement is also needed in assessing the ability to collect the corresponding
receivables.

The timing of revenue recognition often differs from contract payment schedules, resulting in revenue that has been
earned but not billed. These amounts are included in work in progress. Amounts billed in accordance with customer
contracts, but not yet earned, are recorded and presented as part of deferred revenue.

(l) Finance income and finance costs

Finance income comprises interest income, gains on the disposal of available-for-sale financial assets, and changes
in the fair value of financial assets at fair value through profit or loss. Interest income is recognized as it accrues
through profit or loss, using the effective interest method.

Finance costs comprise interest expense on borrowings, amortization of the discount on provisions, fair value losses
on financial assets at fair value through profit or loss, and impairment losses recognized on financial assets other
than trade receivables. Transaction costs attributable to the Company s bank indebtedness are recognized in
finance costs using the effective interest method.

(m) Income taxes

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or
loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other
comprehensive income.

Current tax is the expected taxes payable or receivable on the taxable income or loss for the period, using tax rates
enacted or substantively enacted at the reporting date, and any adjustment to taxes payable in respect of previous
years.

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for
temporary differences relating to investments in subsidiaries to the extent that it is probable that they will not reverse
50

C NSTE ATI N S FT ARE INC.

Notes to Consolidated Financial Statements
(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)
Years ended December 31, 2016 and 2015

in the foreseeable future. In addition, deferred tax is not recognized for taxable temporary differences arising on the
initial recognition of goodwill.

Deferred tax is measured at tax rates that are expected to be applied to temporary differences when they reverse,
based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and
liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to
income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but we intend
to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized
simultaneously.

A deferred tax asset is recognized for unused tax losses, tax credits, difference in tax bases in the purchaser's tax
jurisdiction and its cost as reported in the consolidated financial statements as a result of an intra-group transfer of
assets and deductible temporary differences, to the extent that it is probable that future taxable profits will be
available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are
reduced to the extent that it is no longer probable that the related tax benefit will be realized.

(n) Investment tax credits

The Company is entitled to both non-refundable and refundable investment tax credits for qualifying research and
development activities. Investment tax credits are accounted for as a reduction of the related expenditure for items
of a period expense nature or as a reduction of property and equipment for items of a capital nature when the
amount is reliably estimable and the Company has reasonable assurance regarding compliance with the relevant
objective conditions and that the credit will be realized.

(o) Segment reporting

An operating segment is a component of the Company that engages in business activities from which it may earn
revenues and incur expenses, including revenues and expenses that relate to transactions with any of the
Company s other components. The operating results of all operating segments are reviewed regularly by the
Company s President and Chairman of the Board of Directors to make decisions about resources to be allocated
to the segment and assessing their performance.

The Company has six operating segments, referred to as Operating Groups by the Company, being olaris, Harris,
Total Specific Solutions, Jonas, Perseus, and ela. The operating segments are aggregated by applying the
aggregation criteria in IFRS 8, Operating Segments, into two reportable segments Public ( olaris, Harris, TSS
Operating Groups) and Private (Jonas, Perseus, ela Operating Groups). To the extent there have been transfers
of business units between our Public and Private segments, we have restated the comparatives for these transfers.

Segment operating results, assets and liabilities include items directly attributable to a segment as well as those
that can be allocated on a reasonable basis. Unallocated items comprise mainly interest-bearing borrowings and
related expenses, and corporate assets and expenses and are included as part of the other segment when
reconciling to the Company s consolidated totals.

Segment capital expenditures are the total costs incurred during the period to acquire segment assets, being
property and equipment and intangible assets that are expected to be used for more than one year.

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C NSTE ATI N S FT ARE INC.

Notes to Consolidated Financial Statements
(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)
Years ended December 31, 2016 and 2015

(p) Earnings per share

The Company presents basic and diluted earnings per share data for its ordinary shares, being common shares.
Basic earnings per share is calculated by dividing the profit or loss attributable to ordinary shareholders of the
Company by the weighted average number of ordinary shares outstanding during the period, adjusted for treasury
shares held. Diluted earnings per share is determined by dividing the profit or loss attributable to shareholders of
ordinary shares by the weighted average number of shares outstanding, adjusted for the effects of all dilutive
potential ordinary shares.

(q) Short term employee benefits

Short-term employee benefit obligations, including wages, benefits, incentive compensation, and compensated
absences are measured on an undiscounted basis and are expensed as the related service is provided. A liability
is recognized for the amount expected to be paid and settled under the Company's employee incentive
compensation plan if the Company has legal or constructive obligation to pay this amount at the time bonuses are
paid as a result of past service provided by the employee, and the obligation can be estimated reliably.

(r) ease payments

Payments made under operating leases are recognized in profit or loss on a straight-line basis over the term of the
lease. Lease incentives received are recognized as an integral part of the total lease expense over the term of the
lease.

(s) New standards and interpretations not yet adopted

IFRS 9 Financial Instruments

IFRS 9 replaces the guidance in IAS 39 Financial Instruments: Recognition and Measurement, on the classification
and measurement of financial assets. IFRS 9 eliminates the existing IAS 39 categories of held to maturity, available-
for-sale and loans and receivable.

Financial assets will be classified into one of two categories on initial recognition:

financial assets measured at amortized cost or

financial assets measured at fair value.

Gains and losses on remeasurement of financial assets measured at fair value will be recognized in profit or loss,
except for an investment in an equity instrument which is not held-for-trading. IFRS 9 provides, on initial recognition,
an irrevocable election to present all fair value changes from the investment an equity instrument that is not held
for trading in other comprehensive income (OCI). The election is available on an individual investment-by-
investment basis. Amounts presented in OCI will not be reclassified to profit or loss at a later date. IFRS 9 also
includes a new general hedge accounting standard which will align hedge accounting more closely with risk
management.

The standard has a mandatory effective date for annual periods beginning on or after January 1, 2018 with early
adoption permitted. The Company is assessing the impact of this standard on its consolidated financial statements.

52

C NSTE ATI N S FT ARE INC.

Notes to Consolidated Financial Statements
(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)
Years ended December 31, 2016 and 2015

IFRS 15 Revenue from Contracts with Customers

On May 28, 2014, the IASB issued IFRS 15 Revenue from Contracts with Customers. The new standard is effective
for fiscal years beginning on or after January 1, 2018 and is available for early adoption. The standard contains a
single model that applies to contracts with customers. The model features a contract-based five-step analysis of
transactions to determine whether, how much and when revenue is recognized. New estimates and judgmental
thresholds have been introduced, which may affect the amount and or timing of revenue recognized. The Company
intends to adopt IFRS 15 in its financial statements for the annual period beginning on January 1, 2018.We have
a team dedicated to ensuring our compliance with IFRS 15. This team is responsible for determining existing
policies, differences between existing policies and IFRS 15, ensuring our data collection is appropriate, and
communicating the upcoming changes with various stakeholders. In addition, this team is assisting in the
development of processes and policies that will help ensure an effective transition and the related results are
accurate. As a result, we are continuing to assess the impact of this standard on our consolidated financial
statements.

IFRS 16 Leases

In January 2016, the IASB issued the final publication of the IFRS 16 Leases standard, which will supersede the
current IAS 17, Leases standard. Under IFRS 16, a lease will exist when a customer controls the right to use an
identified asset as demonstrated by the customer having exclusive use of the asset for a period of time. IFRS 16
introduces a single accounting model for lessees and all leases will require an asset and liability to be recognized
on the statement of financial position at inception. The accounting treatment for lessors will remain largely the same
as under IAS 17.

The standard is effective for annual periods beginning on or after January 1, 2019 with early adoption permitted,
but only if the entity is also applying IFRS 15. The Company is required to retrospectively apply IFRS 16 to all
existing leases as of the date of transition and has the option to either:

apply IFRS 16 with full retrospective effect or

recognize the cumulative effect of initially applying IFRS 16 as an adjustment to opening equity at the date
of initial application.

As a practical expedient, an entity is not required to reassess whether a contract is, or contains, a lease at the date
of initial application. The Company is assessing the impact of this standard on its consolidated financial statements
however, we believe that on adoption of the standard there will be an increase to assets and liabilities, as we will
be required to record a right-of-use asset and a corresponding lease liability on our Consolidated Statements of
Financial Position, as well as a decrease to operating costs, an increase to finance costs (due to accretion of the
lease liability) and an increase to depreciation and amortization (due to amortization of the right-of-use asset).

4. Business acquisitions

(a) During the year ended December 31, 2016, the Company completed forty acquisitions for aggregate cash
consideration of $188,068 plus cash holdbacks of $18,797 and contingent consideration with an estimated fair value
of $4,551 resulting in total consideration of $211,416. The contingent consideration is payable on the achievement
of certain financial targets in the post-acquisition periods. The obligation for contingent consideration for
acquisitions during the year ended December 31, 2016 has been recorded at its estimated fair value at the various
acquisition dates. The estimated fair value of the applicable contingent consideration is calculated using the
weighted probability of the expected contingent consideration to be paid and inclusion of a discount rate as
appropriate. For these arrangements, which include both maximum, or capped, and unlimited contingent
consideration amounts, the estimated increase to the initial consideration is not expected to exceed a maximum of
53

C NSTE ATI N S FT ARE INC.

Notes to Consolidated Financial Statements
(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)
Years ended December 31, 2016 and 2015

$15,529. Aggregate contingent consideration of $15,538 (December 31, 2015 - $21,494) has been reported in the
consolidated statement of financial position at its estimated fair value relating to applicable acquisitions completed
in the current and prior periods. Changes made to the estimated fair value of contingent consideration are included
in other expenses, net in the consolidated statements of income. An expense of $20 has been recorded for the
year ended December 31, 2016, as a result of such changes (expense of $6,729 for the year ended December 31,
2015).

There were no acquisitions during the period that were deemed to be individually significant. Of the forty
acquisitions, the Company acquired 100% of the shares of twenty-nine businesses and acquired the net assets of
the other eleven businesses. The cash holdbacks are generally payable over a 6-month to 24-month period and
are adjusted, as necessary, for such items as working capital or net tangible asset assessments, as defined in the
agreements, and claims under the respective representations and warranties of the purchase and sale agreements.

The acquisitions during the year ended December 31, 2016 include software companies catering to the following
markets notaries, mining, pharmacies, electric utility, ombudsman, healthcare, aerospace, local government,
communications, research management, agribusiness, public housing authorities, retail management and
distribution, event management, school administration, homebuilders, real estate brokers and agents, public safety,
marine asset management, moving and storage, not-for-profit organizations, and financial services, all of which are
software businesses similar to existing businesses operated by the Company. The acquisitions have been
accounted for using the acquisition method with the results of operations included in these consolidated financial
statements from the date of each acquisition. Twenty-eight of the acquisitions have been included in the Public
reportable segment and twelve have been included in the Private reportable segment.

The goodwill recognized in connection with these acquisitions is primarily attributable to the application of
Constellation s best practices to improve the operations of the companies acquired, synergies with existing
businesses of Constellation, and other intangibles that do not qualify for separate recognition including assembled
workforce. Goodwill in the amount of $43 (December 31, 2015 - $1,554) is expected to be deductible for income
tax purposes.

The gross contractual amounts of acquired receivables was $26,357 however the Company has recorded an
allowance of $1,078 as part of the acquisition accounting to reflect contractual cash flows that are not expected to
be collected.

Due to the complexity and timing of certain acquisitions made, the Company is in the process of determining and
finalizing the estimated fair value of the net assets acquired as part of the acquisitions closed during 2016. The
amounts determined on a provisional basis generally relate to net asset assessments and measurement of the
assumed liabilities, including acquired contract liabilities. The cash consideration associated with these provisional
estimates totals $188,068.

The aggregate impact of acquisition accounting applied in connection with business acquisitions in the year ended
December 31, 2016 is as follows:

54

C NSTE ATI N S FT ARE INC.

Notes to Consolidated Financial Statements
(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)
Years ended December 31, 2016 and 2015

P P C
ssets ac uired
Cash 30, 6 , 62 3 ,
ccounts recei able 20, 3 , 36 2 ,2
ther current assets 1 ,3 2 2,0 1 , 01
ro erty and e ui ment ,222 1,23 , 61
ther non current assets 6 2
Deferred income ta es ,0 00 ,
echnolo y assets 136,3 33, 1 0,331
Customer assets 60,62 12, 1 3,03
2 1, 6 , 2 3 1, 11

iabilities assumed
Current liabilities 2 , 6 6, 11 36, 0
Deferred re enue 3, , 02 61, 1
Deferred income ta es 1,1 3 2, 1 3,61
ther non current liabilities ,336 31 ,6 0
12 ,02 1 ,1 1 6,22

oodwill 13, 2, 32 16,130

(b) The 2016 business acquisitions did not have a material impact to either the consolidated revenue or the
consolidated net income for the year ended December 31, 2016. The materiality threshold is reviewed on an
annual basis taking into account the quantitative (contribution to revenue and net income) and qualitative (size and
comparability with other Constellation businesses) factors of current period acquisitions on both an individual and
aggregate basis.

5. Equity securities available for sale

During the year ended December 31, 2016, the Company made investments in two public companies listed in the
U.S. and Canada, both of which develop and sell software solutions. These investments have been designated as
available-for-sale. The unrealized gains losses related to the available-for-sale equity securities have been
recorded in Accumulated other comprehensive income. During the year, the Company fully disposed of one of
these investments. The realized gain or loss upon disposition was recorded in Finance and other expense (income)
in the Consolidated Statement of Income.

December 31, 2016 December 31, 2015

Cost Fair alue Cost Fair alue
Common shares $ 4,419 $ 4,236 $ - $ -

55

C NSTE ATI N S FT ARE INC.

Notes to Consolidated Financial Statements
(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)
Years ended December 31, 2016 and 2015

6. Inventories

December 31, December 31,

2016 201

aw materials 11, 2 13,

or in ro ress 6 2,123
Finished oods ,3 1 ,261

otal 1 ,66 2 ,332

No inventories were carried at fair value less cost to sell, and the carrying amount of inventories subject to retention
of title clauses was $nil as at December 31, 2016 and 2015.

Raw materials (which consists primarily of hardware components) and changes in finished goods and work in
progress recognized as hardware expenses in the statements of income amounted to $74,431 (2015: $84,359).
The write-downs of inventories to net realizable value amounted to $1,722 (2015: $1,061). The reversals of write-
downs amounted to $581 (2015: $593). Write-downs and reversals of write-downs are based on the Company s
projected sales. The write-downs and reversals are included in hardware expenses.

7. ther assets and liabilities

(a) ther assets

December 31, December 31,

2016 201
re aid and other current assets 6, 31 ,1 6
ther assets 1 ,
In estment ta credits reco erable 21,1 0 11,
Sales ta recei able 3, 1 2, 3
ther recei ables ,360 , 36
otal other current assets 6,1 1 6 ,2 6

In estment ta credits reco erable 10,6 0 12, 0

on current trade and other recei ables , 2 ,0
uity accounted in estees i 1,2 0 1 ,61
otal other non current assets 1 , 2 32,1 6

(i) Equity accounted investees

The Company s share of net income in its investments currently being accounted for as equity investees was
$5,317 (2015: $1,070). Dividends received for the year totalled $nil (2015: $509). The carrying value of the
Company s investments in equity accounted investees as at December 31, 2016 was $1,270 (December 31, 2015

56

C NSTE ATI N S FT ARE INC.

Notes to Consolidated Financial Statements
(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)
Years ended December 31, 2016 and 2015

- $15,617). As at December 31, 2016, one of our investments (which was historically classified as a non-current
asset) was classified as an other current asset as the Company substantially liquidated this investment in 2017.

(b) ther liabilities

December 31, December 31,

2016 201
Contin ent consideration , 3 10, 30
c uired contract liabilities ,0 6 ,3
ther non current liabilities 1 , 1 16,6
otal other non current liabilities 36,6 0 3 , 66

57

C NSTE ATI N S FT ARE INC.

Notes to Consolidated Financial Statements
(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)
Years ended December 31, 2016 and 2015

8. Property and equipment

Com uter Furniture and easehold

Com uter hardware software e ui ment im ro ements uildin otal
C

alance at anuary 1, 201 6, 20, 3 23,0 3 11,333 3,32 10 ,013

dditions 6, 1 2, 6 2,61 1,0 12,
c uisitions throu h business combinations 3, 2, 31 3, 0 22 11,01
Dis osals retirements , 1,10 2,0 1 13 0 12,6 6
ffect of mo ements in forei n e chan e and other 1,3 0 1,0 60 30 3,
alance at December 31, 201 6,1 0 22, 0 2 , 2 1 ,211 3,11 112,3 3

alance at anuary 1, 2016 6,1 0 22, 0 2 , 2 1 ,211 3,11 112,3 3

dditions , 63 2, 23 , 3, 36 2 1 ,0
c uisitions throu h business combinations ,1 2 1 1 2,10 33 ,2
Dis osals retirements 10,3 2,6 ,120 2, 0 3 20, 30
ffect of mo ements in forei n e chan e and other 1, 6 6 1 1,226 36 210 ,0
alance at December 31, 2016 ,131 21, 2 , 61 1 ,0 6 3, 0 11 , 62

alance at anuary 1, 201 31, 0 1 ,16 12, 6 , 2 1 3 6 , 6

De reciation char e for the year ,0 1 2, 1 3, 13 1, 12 1 ,02
Dis osals retirements , 1,102 1, 0 26 12,
ffect of mo ements in forei n e chan e and other 01 3 62 1 3 3 1, 1
alance at December 31, 201 30,331 1 ,223 13, , 0 2 0,321

alance at anuary 1, 2016 30,331 1 ,223 13, , 0 2 0,321

De reciation char e for the year 11,13 3,106 ,3 3,602 13 22,3 6
Dis osals retirements 10,120 2, 2 , 1 2,3 1 ,
ffect of mo ements in forei n e chan e and other 1, 3 61 3 2 23 3,1 1
alance at December 31, 2016 2 , 06 1 ,1 12,623 , 3 6 , 6

C
t anuary 1, 201 1 , 0 3,66 10,0 , 0 3,132 3 ,22
t December 31, 201 1 , ,22 11, 6 , 0 2, 33 2,0 2

t anuary 1, 2016 1 , ,22 11, 6 , 0 2, 33 2,0 2

t December 31, 2016 1 ,22 3, 13,33 ,632 3, 3 6,3

58

C NSTE ATI N S FT ARE INC.

Notes to Consolidated Financial Statements
(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)
Years ended December 31, 2016 and 2015

9. Intangible assets and goodwill

T C N
A A T T

alance at anuary 1, 201 6, 6 60, 10 16,3 2,63 ,660 21 , 20 1, 63,

c uisitions throu h business combinations 1 ,33 ,6 3 ,11 2 ,121
ffect of mo ements in forei n e chan e 2 ,1 2 23,63 121 6 11, 1 61,
alance at December 31, 201 1,02 ,661 2 , 6 16,22 2, 2 6, 2 216,263 1, , 21

alance at anuary 1, 2016 1,02 ,661 2 , 6 16,22 2, 2 6, 2 216,263 1, , 21

c uisitions throu h business combinations 1 1, 21 3, 16, 6 262,0 6
ffect of mo ements in forei n e chan e 2 ,23 1 ,66 6 1 20 6, 3 6,6
alance at December 31, 2016 1,1 6, ,0 6 16,1 1 2, 66 6,66 226, 02 2,012, 1

alance at anuary 1, 201 2,221 16 , 16,3 2,63 1 6 6, 10

morti ation for the year 136, 23 3, 3 1 0, 6
ffect of mo ements in forei n e chan e , 60 2, 136 6 11, 6
alance at December 31, 201 61 , 20 , 16,212 2, 2 66 ,312

alance at anuary 1, 2016 61 , 20 , 16,212 2, 2 66 ,312

morti ation for the year 13 , 0 1,31 3 1 0,
ffect of mo ements in forei n e chan e 12,031 ,6 31 1 16, 10
alance at December 31, 2016 6, 60 2 2, 33 16,1 1 2, 66 1,036 1,01 ,0 6

C
t anuary 1, 201 36 ,2 2 6,026 ,2 1 21 , 20 , 3
t December 31, 201 0 ,6 320,0 1 6,106 216,263 2,10

t anuary 1, 2016 0 ,6 320,0 1 6,106 216,263 2,10

t December 31, 2016 2 , 331,623 ,631 226, 02 3, 3

Impairment testing for cash-generating units containing goodwill

The annual impairment test of goodwill was performed as of December 31, 2016 and 2015 and did not result in any
impairment loss. For the purpose of impairment testing, goodwill is allocated to the Company s business units
included in each operating segment, which represent the lowest level within the Company at which goodwill is
monitored for internal management purposes. There was no goodwill reallocated to the Company s business units
that was deemed to be significant in comparison to the carrying amount of goodwill as at December 31, 2016.

The Company has three CGUs whereby the total goodwill allocated is significant in comparison to the Company s
total carrying amount of goodwill. The total goodwill allocated to each of these CGUs as at December 31, 2016 is
$22,912, $23,763 and $24,515. In determining the recoverable amount, the Company applied an estimated market
valuation multiple to the business unit's most recent annual recurring revenues, which are derived from combined

59

C NSTE ATI N S FT ARE INC.

Notes to Consolidated Financial Statements
(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)
Years ended December 31, 2016 and 2015

software support contracts, transaction revenues, and hosted products. aluation multiples, which are Level 3
inputs, applied by management for this purpose reflect current market conditions specific to the business unit and
are assessed for reasonability by comparison to the Company's current and past acquisition experience involving
ranges of revenue-based multiples required to acquire representative software companies.

10. Ban indebtedness and CN facility

On February 25, 2016, Constellation completed an amendment and restatement of the revolving credit facility
agreement (the CSI Facility ), extending its maturity date to August 11, 2020. The facility limit was increased from
$300,000 to $485,000 with a syndicate of new and existing Canadian chartered banks and U.S. banks. The CSI
Facility bears a variable interest rate and is due in full on August 11, 2020 with no fixed repayments required over
the term to maturity. Interest rates are calculated at standard U.S. and Canadian reference rates plus interest rate
spreads based on a leverage table. The CSI Facility is currently collateralized by the majority of our assets including
the assets of certain material subsidiaries. The CSI Facility contains standard events of default which if not remedied
within a cure period would trigger the repayment of any outstanding balance. As at December 31, 2016, $nil
(December 31, 2015 $nil) had been drawn from this credit facility, and letters of credit totaling $15,377 (December
31, 2015 - $17,130) were issued, which limits the borrowing capacity on a dollar-for-dollar basis. Transaction costs
associated with the CSI Facility in the amount of $1,212 have been capitalized and included in other non-current
assets in the consolidated statement of financial position and are being amortized through profit or loss using the
effective interest rate method. Amortized costs recognized in the year ended December 31, 2016 relating to this
line-of-credit amounted to $225. As at December 31, 2016 the carrying amount of such costs is $987.

On June 24, 2014 Constellation Software Netherlands Holding Cooperatief U.A. ( CNH ), a subsidiary of
Constellation and the indirect owner of 100% of TSS, entered into a 150,000 term and 10,000 multicurrency
revolving credit facility (the CNH Facility ) with a number of European and North American financial institutions.
The CNH Facility bears interest at a rate calculated at EURIBOR plus interest rate spreads based on a leverage
table. The CNH Facility is collateralized by substantially all of the assets owned by CNH and its subsidiaries which
includes substantially all of the assets of TSS and its subsidiaries. The CNH Facility contains standard events of
default which if not remedied within a cure period would trigger the repayment of any outstanding balance. As at
December 31, 2016, 120,000 ($126,183) (December 31, 2015 - 128,000 ($139,600)) had been drawn from this
credit facility. The terms of the CNH Facility require that 20,000 must be repaid in instalments between now and
June 2020, and 100,000 is non-amortizing and due in June 2021. The remaining 20,000 term component of the
CNH Facility is currently available and if drawn must be repaid in five equal instalments starting on June 24, 2018.
As at December 31, 2016 no amounts had been drawn on the 10,000 multicurrency revolving component of the
CNH Facility (December 31, 2015 - $nil). The revolving component of the CNH Facility is available for acquisitions,
working capital needs, and other general corporate purposes until June 24, 2020. Transaction costs associated
with the CNH Facility have been included as part of the carrying amount of the liability and are being amortized
through profit or loss using the effective interest rate method. Amortized costs recognized in the year ended
December 31, 2016 relating to this facility amounted to $865 (2015 - $866). As at December 31, 2016, the carrying
amount of such costs relating to this facility totaling approximately $3,486 ( 3,316) has been classified as part of
the CNH Facility in the consolidated statement of financial position (December 31, 2015 - $4,468 ( 4,097)).

The CNH Facility and CSI Facility are independent of each other. The CNH Facility is not guaranteed by
Constellation or its subsidiaries nor is Constellation or its subsidiaries subject to the terms of the CNH Facility other
than, in each case, CNH and its subsidiaries. Similarly, CNH and its subsidiaries did not guarantee Constellation s
other credit facilities and are not subject to the provisions thereof. Constellation s credit facilities impose limitations
on the aggregate amount of investment that Constellation may make in CNH and its subsidiaries and the financial
results of CNH and its subsidiaries are not included for the purposes of determining compliance by Constellation
with the financial covenants in Constellation s other credit facilities. The CNH Facility imposes limitations on the
amount of distributions that CNH and its subsidiaries may make to Constellation.

60

C NSTE ATI N S FT ARE INC.

Notes to Consolidated Financial Statements
(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)
Years ended December 31, 2016 and 2015

11. Debentures

On October 1, 2014 and November 19, 2014, the Company issued debentures with a total principal value of
C$96,038 for total proceeds of C$91,236. On September 30, 2015, the Company issued another tranche of
debentures (collectively with the 2014 issuances called the Debentures ) with a total principal value of C$186,249
for total proceeds of C$214,186.

The Debentures have a maturity date of March 31, 2040 (the Maturity Date ). From and including the date of issue
to but excluding March 31, 2015, the Debentures bore interest at a rate of 7.4% per annum, paid quarterly in arrears.
The rate from March 31, 2015 to March 30, 2016 was 8.5% per annum. The rate from March 31, 2016 to March
30, 2017 is 7.6%. From and including March 31, 2017 to but excluding the Maturity Date, the interest rate applicable
to the Debentures will be reset on an annual basis on March 31 of each year, at a rate equal to the annual average
percentage change in the All-items Consumer Price Index during the 12 month period ending on December 31 in
the prior year (which amount may be positive or negative) plus 6.5%. Notwithstanding the foregoing, the interest
rate applicable to the debentures will not be less than 0%. The Company may, subject to certain approvals, elect
the Payment in ind election ( PI Election ), in lieu of paying interest in cash, to satisfy all or any portion of its
interest obligation payable on an interest payment date by issuing to each Debenture holder PI Debentures equal
to the amount of the interest obligation to be satisfied. The PI Debentures will have the same terms and conditions
as the Debentures and will form part of the principal amount of the Debentures. If, on any interest payment date,
the Company fails to pay the amount of interest owing on the Debentures in full in cash, the Company will not (A)
declare or pay dividends of any kind on the Common Shares, nor (B) participate in any share buyback or redemption
involving the Common Shares, until the date on which the Company pays such interest (or the unpaid portion
thereof) in cash to holders of the Debentures however, where the Company has issued PI Debentures in respect
of all or a portion of the amount of interest owing on the Debentures on an interest payment date, the Company
may resume declaring or paying dividends of any kind on the Common Shares and participating in any share
buyback or redemption involving the Common Shares beginning on the next earlier of (i) the interest payment date
of which the Company pays the amount of interest owing on the Debentures in full in cash and (ii) the date on which
the Company repays all amounts owing under the PI Debenture. All payments in respect of the Debentures will
be subordinated in right of payment to the prior payment in full of all senior indebtedness of the Company.

The Debentures will be redeemable in certain circumstances at the option of the Company or the holder. During
the period beginning on March 16 and ending on March 31 of each year, the Company will have the right, at its
option, to give notice to holders of Debentures of its intention to redeem the Debentures, in whole or in part, on
March 31 in the year that is five years following the year in which notice is given, at a price equal to the principal
amount thereof plus accrued and unpaid interest up to but excluding the date fixed for redemption. During the
period beginning on March 1 and ending on March 15 of each year, holders of Debentures will also have the right,
at their option, to give notice to the Company of their intention to require the Company to repurchase (or to put )
the Debentures, in whole or in part, on March 31 in the year that is five years following the year in which notice is
given, at a price equal to the principal amount thereof plus accrued and unpaid interest up to but excluding the date
fixed for repurchase.

During the year ended December 31, 2016, no notices for redemption of the Debentures were received or given by
the Company.

12. TSS embership iability

On December 23, 2014, in accordance with the terms of the purchase and sale agreement for the TSS acquisition,
and on the basis of the term sheets attached thereto, Constellation and the sellers of TSS along with members of
TSS executive management team (collectively, the minority owners ) entered into a Members Agreement pursuant
to which the minority owners acquired 33.29% of the voting interests in CNH. Total proceeds from this transaction
was 39,375 ($48,503).
61

C NSTE ATI N S FT ARE INC.

Notes to Consolidated Financial Statements
(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)
Years ended December 31, 2016 and 2015

Commencing any time after December 31, 2014, each of the minority owners may exercise a put option to sell all
or a portion of their interests in CNH back to Constellation for an amount calculated in accordance with a valuation
methodology described within the Members Agreement. Accordingly, the Company classified the proceeds from
the Members Agreement as a liability. The main valuation driver in such calculation is the maintenance and other
recurring revenue of CNH. Upon the exercise of a put option, Constellation would be obligated to redeem up to
33.33% of the minority owners interests put, no later than 30 business days from the date notice is received, and
up to 33.33% on each of the first and second anniversary of the date the first redemption payment is made. In
determining the valuation of the liability at each reporting period, the Company assumes the minority owners
exercised their put option on the last day of the current reporting period, and redeemed 33.33% of their interests on
exercise (which is classified as a current liability), and will redeem 33.33% on each of the first and second
anniversary dates. Maintenance and recurring revenue of CNH for the trailing twelve months determined at the
end of the current reporting period was used as the basis for valuing the interests at each redemption date. Any
increase or decrease in the value of the membership liability is recorded as an expense or income in the
consolidated statements of income for the period.

The seller of TSS also has an option available to it to sell approximately 68% of its interests in CNH, for an amount
calculated in accordance with a valuation methodology described within the Members Agreement, in the event that
Robin an Poelje, TSS CEO, is no longer employed by TSS. The remaining interest of approximately 32% can be
sold via the put option described above.

In the event of a change of control in Constellation, the minority owners would have the option to sell 100% of their
interests in CNH for an amount calculated in accordance with a valuation methodology described within the
Members Agreement. Constellation would be obligated to remit payment in respect thereof no later than 30
business days from the date notice is given.

Commencing at any time after December 31, 2023, Constellation may exercise a call option to purchase all of the
minority owners interests in CNH, for an amount calculated in accordance with a valuation methodology described
within the Members Agreement. Upon exercise of the call option, the full purchase price will be paid within 30
business days of the notice date, following which the minority owners membership in CNH will be terminated.

If any of TSS executive management team that participate in the Members Agreement are terminated for urgent
cause as defined in Section 7:678 of the Dutch Civil Code, Constellation shall have the right to purchase all of the
interests beneficially owned by the terminated executive for an amount calculated in accordance with a valuation
methodology described with the Members Agreement. The full purchase price will be paid within 30 business days
from the date notice is given, following which the terminated executive s membership in CNH will be terminated.
An option does exist for the terminated executive to elect to be paid in annual installments of 33.33% of his interests
in CNH over a 3-year period. The valuation of the interests being purchased will be calculated at each reporting
period. During the year December 31, 2016, no options were exercised.

During the year ended December 31, 2015, TSS made a distribution of 30,000 to its shareholders (collectively
Constellation and the minority owners). The distribution to the minority owners totalled 9,986 ($10,879) and has
been reported in the consolidated statement of cash flows under financing activities. No distributions were made
for the year ended December 31, 2016.

62

C NSTE ATI N S FT ARE INC.

Notes to Consolidated Financial Statements
(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)
Years ended December 31, 2016 and 2015

13. Provisions

t anuary 1, 2016 ,
e ersal 2,6
ro isions recorded durin the eriod ,3
ro isions used durin the eriod , 30
ffect of mo ements in forei n e chan e and other 226
t December 31, 2016 ,03

ro isions classified as current liabilities ,

ro isions classified as other non current liabilities 1,0

The provisions balance is comprised of various individual provisions for severance costs and other estimated
liabilities of the Company of uncertain timing or amount.

14. Income taxes

(a) Tax recognized in profit or loss

2016 2015

Tax recogni ed in profit or loss

Current tax expense (recovery)

Current year $ 89,573 $ 61,197
Adjustment for prior years (4,630) 2,253
84,943 63,450

Deferred tax expense (recovery)

Origination and reversal of temporary differences (6,939) 9,440

Effect of change in future tax rates 60 (1,582)
Change in recognized temporary differences and unrecognized tax losses 1,574 (3,862)
Recognition of previously unrecognized losses (23) (395)
(5,328) 3,601

Total tax expense (recovery) 79,615 67,051

63

C NSTE ATI N S FT ARE INC.

Notes to Consolidated Financial Statements
(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)
Years ended December 31, 2016 and 2015

(b) Reconciliation of effective tax rate

2016 2015

Net income for the year $ 206,784 $ 177,248

Total tax expense 79,615 67,051
Net income before tax 286,399 244,299

Income tax expense using the Company's statutory tax rate of 26.5% (2015 - 26.5%) 75,895 64,739
Impact on taxes from:
Foreign tax rate differential 5,334 (363)
Other, including non deductible expenses and non taxable income 1,405 6,261
Change in recognized temporary differences and unrecognized tax losses 1,574 (3,862)
Effect of change in future tax rates 60 (1,582)
Recognition of prior year tax losses (23) (395)
Under (over) provisions in prior years (4,630) 2,253
79,615 67,051

15. Deferred tax assets and liabilities

(a) Unrecognized deferred tax liabilities

The aggregate amount of temporary differences associated with investments in subsidiaries for which we have not
recognized deferred tax liabilities is $627,262 (2015: $525,490) as the Company ultimately controls whether the
liability will be incurred and it is satisfied that it will not be incurred in the foreseeable future. The temporary
differences relate to undistributed earnings of that Company's subsidiaries. Dividends declared would be subject to
withholding tax in the range of 0-15% depending on the jurisdiction of the subsidiary.

(b) Unrecognized deferred tax assets

2016 2015

Deductible temporary differences, including capital losses $ 28,750 $ 27,662

Non capital tax losses $ 74,583 $ 72,699

Non-capital tax losses of $57,591 expire between 2017 and 2036 and $16,992 can be carried forward indefinitely.
Included in the non-capital tax losses expiring between 2017 and 2036 is $27,900 of losses that are not expected
to be used to offset future taxable profit as a result of legislative restrictions in the jurisdiction where those losses
exist. The deductible temporary differences and capital losses do not expire under current tax legislation. Deferred
tax assets have not been recognized in respect of those items because it is not probable that future taxable profit
will be available in those jurisdictions against which the Company can utilize these benefits.

64

C NSTE ATI N S FT ARE INC.

Notes to Consolidated Financial Statements
(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)
Years ended December 31, 2016 and 2015

(c) Recognized deferred tax assets and liabilities

Assets iabilities Net

2016 2015 2016 2015 2016 2015

Property, plant and equipment 2,831 2,218 (1,632) (1,140) 1,199 1,078
Intangible assets 117,317 120,586 (222,714) (191,225) (105,397) (70,639)
Reserves 16,188 16,792 (122) (77) 16,066 16,715
Non capital loss carryforwards 6,398 7,471 - - 6,398 7,471
SR&ED expenditure pool 755 1,100 (84) (6) 671 1,094
Deferred revenue 12,924 4,568 (950) (781) 11,974 3,787
Foreign and other tax credits 238 248 (3,168) (3,388) (2,930) (3,140)
Other, including capital losses, withholding tax and foreign exchange 5,374 6,486 (13,077) (15,997) (7,703) (9,511)

Tax assets (liabilities) 162,025 159,469 (241,747) (212,614) (79,722) (53,145)

Reclassification (112,162) (102,819) 112,162 102,819

Net tax assets (liabilities) 49,863 56,650 (129,585) (109,795) (79,722) (53,145)

This reclassification relates to the offsetting of deferred tax assets and deferred tax liabilities to the extent that
they relate to the same taxing authorities and there is a legally enforceable right to do so.

(d) Movement in deferred tax balances during the year

Recognized in
other Acquired in Balance
Balance January Recognized in comprehensive business December
1, 2016 profit or loss income combinations Other 31, 2016

Property, plant and equipment 1,078 146 - (25) - 1,199

Intangible assets (70,639) 8,418 - (43,176) - (105,397)
Reserves 16,715 (945) - 296 - 16,066
Non-capital loss carryforwards 7,471 (7,473) - 6,400 - 6,398
SR&ED expenditure pool 1,094 (423) - - - 671
Deferred revenue 3,787 7,697 - 490 - 11,974
Tax credits (3,140) 210 - - - (2,930)
Other, including capital losses, withholding tax and foreign exchange (9,511) (2,302) (143) (105) 4,358 (7,703)
(53,145) 5,328 (143) (36,120) 4,358 (79,722)

Recognized in
other Acquired in Balance
Balance January Recognized in comprehensive business December
1, 2015 profit or loss income combinations Other 31, 2015

Property, plant and equipment 898 253 - (73) - 1,078

Intangible assets (56,684) 7,602 - (21,557) - (70,639)
Reserves 9,785 6,481 - 449 - 16,715
Non-capital loss carryforwards 6,298 (424) - 1,597 - 7,471
SR&ED expenditure pool 1,044 (944) - 994 - 1,094
Deferred revenue 3,325 (6,757) - 7,219 - 3,787
Tax credits (4,044) 904 - - - (3,140)
Other, including capital losses, withholding tax and foreign exchange (7,134) (10,716) 128 (592) 8,803 (9,511)
(46,512) (3,601) 128 (11,963) 8,803 (53,145)

65

C NSTE ATI N S FT ARE INC.

Notes to Consolidated Financial Statements
(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)
Years ended December 31, 2016 and 2015

16. Capital and other components of equity

Capital Stock

At December 31, 2016 and December 31, 2015, the authorized share capital of Constellation consisted of an
unlimited number of voting common shares and a limited number of non-voting preferred shares (there are no
preferred shares outstanding).

CommonShares
Number Amount

December31,2016 21,191,530 $ 99,283

December31,2015 21,191,530 $99,283

Accumulated other comprehensive income (loss)

Accumulated other comprehensive income (loss) is comprised of the following separate components of equity:

Cumulative translation account

The cumulative translation account comprises all foreign currency differences arising from the translation of the
financial statements of foreign operations, as well as foreign exchange gains and losses arising from monetary
items that form part of the net investment in the foreign operation.

Amounts related to derivatives designated as hedges

The portion of the gain or loss on derivatives designated as hedges that are determined to be an effective hedge
are recognized directly in other comprehensive income, and the ineffective portion in the statement of income. The
gains or losses deferred in other comprehensive income in this way are subsequently recognized in the statement
of income in the same period in which the hedged underlying transaction or firm commitment is recognized in the
statement of income.

Amounts related to available-for-sale financial assets

Available-for-sale differences comprise the cumulative net change in the fair value of available-for-sale financial
assets until the investments are sold derecognized or impaired.

Dividends

During the year ended December 31, 2016 the Board of Directors approved and the Company declared dividends
of $4.00 per common share. The dividend declared in the quarter ended March 31, 2016 representing $21,192
was paid and settled on April 5, 2016. The dividend declared in the quarter ended June 30, 2016 representing
$21,192 was paid and settled on July 6, 2016. The dividend declared in the quarter ended September 30, 2016
representing $21,192 was paid and settled on October 5, 2016. The fourth dividend declared in the quarter ended
December 31, 2016 representing $21,192 was paid and settled on January 5, 2017.

66

C NSTE ATI N S FT ARE INC.

Notes to Consolidated Financial Statements
(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)
Years ended December 31, 2016 and 2015

17. Revenue

The Company sub-classifies revenue within the following components: license revenue, professional services
revenue, hardware and other revenue, and maintenance and other recurring revenue. Software license revenue is
comprised of license fees charged for the use of software products licensed under multiple-year or perpetual
arrangements in which the fair value of maintenance and or professional service fees are determinable.
Professional service revenue consists of fees charged for implementation services, custom programming, product
training and consulting. Hardware and other revenue includes the resale of third party hardware as part of
customized solutions, as well as sales of hardware assembled internally and the reimbursement of travel costs.
Maintenance and other recurring revenue primarily consists of fees charged for customer support on software
products post-delivery and also includes recurring fees derived from combined software support contracts,
transaction revenues, managed services, and hosted products.

Revenues from the application of contract accounting are typically allocated to license revenue, professional service
revenue and hardware and other revenue based on their relative fair values when the amount recognized in the
period is determined using the percentage of completion method under contract accounting. During the year ended
December 31, 2016 $315,143 (December 31, 2015 - $283,180) of contract revenue was recognized.

18. Finance and other income and finance costs

Year ended December 31,

2016 201

ains on sale of a ailable for sale financial

assets transferred from other com rehensi e income ,20
Interest income on cash 2 1
Finance and other income , 06 ,

Finance and other income 10, 3 , 2

Interest e ense on ban indebtedness and debentures 22, 61 1 , 3

morti ation of debt related transaction costs 1,0 1,
morti ation of debenture discount remium and associated ri hts offerin , net ,0 1,0 0
ther finance costs 1,6 2 2,2 1

Finance costs 21, 3 20,110

Included in finance and other income is a $4,210 adjustment which was made during 2016 relating to the acquired
net tangible assets of an acquisition which closed in March 2015 (December 31, 2015 - $3,000 adjustment relating
to the acquired net tangible assets of an acquisition which closed in May 2013).

During 2014, the Company entered into a three year floating-to-fixed interest rate swap to manage its cash-flow
interest rate risk associated with the CNH Facility. The Company applied hedge accounting and determined that
this is an effective hedge. Payments under the interest rate swap are made quarterly. The notional principal amount
of the outstanding floating to fixed interest rate swap contract at December 31, 2016 was 120,000 (December 31,

67

C NSTE ATI N S FT ARE INC.

Notes to Consolidated Financial Statements
(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)
Years ended December 31, 2016 and 2015

2015 - 130,000). The fair value of the interest rate swap contract at December 31, 2016 was $503 (December 31,
2015 - $907).

19. Earnings per share

Basic and diluted earnings per share

Year ended December 31,

2016 201
N
et income 206, 1 ,2

asic and diluted shares outstandin 21,1 2 21,1 2

E
asic and diluted . 6 .36

20. Capital ris management

The Company's objectives in managing capital are to ensure sufficient liquidity to pursue its strategy of organic
growth combined with strategic acquisitions and to provide returns to its shareholders. The Company manages its
capital with the objective of ensuring that there are adequate capital resources while maximizing the return to
shareholders through the optimization of the debt and equity balance. The capital structure of the Company consists
of cash, revolving credit facility, CNH facility, Debentures, TSS membership liability and components of
shareholders' equity including retained earnings and capital stock.

The Company is subject to certain covenants on its revolving credit facility. The covenants include a leverage ratio
and an interest coverage ratio. The CNH facility is also subject to certain covenants. The covenants include a
leverage ratio, debt service coverage ratio and an interest coverage ratio. The Company monitors the ratios on a
quarterly basis. As at December 31, 2016, the Company is in compliance with its debt covenants. Other than the
covenants required for the revolving credit facility and the CNH facility, the Company is not subject to any externally
imposed capital requirements.

The Board of Directors determine if and when dividends should be declared and paid based on all relevant
circumstances, including the desirability of financing further growth of the Company and its financial position at the
relevant time. The Board of Directors has adopted a policy to pay quarterly dividends, which commenced in 2012.
Constellation intends to declare a regular quarterly dividend to allow shareholders to participate in its free cash flow,
while retaining sufficient capital to invest in acquisitions and organic growth. There is no guarantee that dividends
will continue to be declared and paid in the future.

The Company makes adjustments to its capital structure in light of general economic conditions, the risk
characteristics of the underlying assets and the Company's working capital requirements. In order to maintain or
adjust its capital structure, the Company, upon approval from its Board of Directors, may increase or decrease
dividends, increase or decrease the line of credit or undertake other activities as deemed appropriate under the
specific circumstances. The Board of Directors reviews and approves any material transactions not in the ordinary
course of business, as well as significant acquisitions and other major investments above pre-determined
quantitative thresholds.

68

C NSTE ATI N S FT ARE INC.

Notes to Consolidated Financial Statements
(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)
Years ended December 31, 2016 and 2015

21. Financial ris management and financial instruments

Overview

The Company is exposed to risks of varying degrees of significance which could affect its ability to achieve its
strategic objectives for growth. The main objectives of the Company's risk management process are to ensure that
risks are properly identified and that the capital base is adequate in relation to those risks. The principal financial
risks to which the Company is exposed are described below.

Market risk

Market risk is the risk that changes in market prices, such as fluctuations in foreign exchange rates and interest
rates, will affect the Company's income or the value of its financial instruments.

The Company is exposed to interest rate risk on the utilized portion of its revolving credit facility and its Debentures
and does not currently hold any financial instruments that mitigate this risk. If there was a 1% increase in the
interest rate on the Debentures, there would be a corresponding decrease in income before tax of $2,099. There
would be an equal and opposite impact if there was a 1% decrease in the interest rate.

The Company is also exposed to interest rate risk on the utilized portion of its CNH Facility. As required by our
lenders, the Company entered into a floating-to-fixed interest rate swap to manage its cash-flow interest rate risk
associated with the CNH Facility. The notional principal amount of the outstanding floating to fixed interest rate
swap contract at December 31, 2016 was 120,000.

The Company operates internationally, giving rise to exposure to market risks from changes in foreign exchange
rates which impact sales and purchases that are denominated in a currency other than the respective functional
currencies of certain of its subsidiaries. The Company currently does not typically use derivative instruments to
hedge its exposure to those risks. Most of the Company's businesses are organized geographically so that many
of its expenses are incurred in the same currency as its revenues thus mitigating some of its exposure to currency
fluctuations.

Foreign currency sensitivity analysis:

Foreign currency risk arises on financial instruments that are denominated in a currency other than the functional
currency in which they are measured. The Company s primary exposure with respect to foreign currencies is
through the Canadian dollar denominated Debentures (note 11). The carrying value of the Debentures at December
31, 2016 is $223,870 (C$301,037) (December 31, 2015 - $220,043 (C$305,244)). If there was a 1% strengthening
of the Canadian dollar against the U.S. dollar, there would be a corresponding decrease in income before tax of
$2,239. There would be an equal and opposite impact if there was a 1% weakening of the Canadian dollar against
the U.S. dollar.

Liquidity risk

Liquidity risk is the risk that the Company is not able to meet its financial obligations as they fall due or can do so
only at excessive cost. The Company manages liquidity risk through the management of its capital structure and
financial leverage, as outlined in note 20 to the consolidated financial statements. The Company's growth is
financed through a combination of cash flows from operations and borrowing under the existing credit facilities, TSS
Membership Liability and Debentures. One of management's primary goals is to maintain an optimal level of liquidity
through the active management of the assets and liabilities as well as the cash flows from operations. The details

69

C NSTE ATI N S FT ARE INC.

Notes to Consolidated Financial Statements
(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)
Years ended December 31, 2016 and 2015

of the Company's revolving credit facility, CNH facility, Debentures, and TSS membership liability are disclosed in
note 10, note 11 and note 12 to the consolidated financial statements. As at December 31, 2016, available credit
in respect of the Company's revolving credit facility was $469,622.

The majority of the Company's financial liabilities recorded in accounts payable and accrued liabilities are due within
60 days. The Company also has payment processing liabilities which are settled within a few days of year-end.
Included in cash is an equivalent cash balance of $8,441 (December 31, 2015 - $9,995) that is held to settle these
payment processing liabilities as they become due. Holdbacks payable related to business acquisitions are
generally due within six months to two years.

Given the Company's available liquid resources and credit capacity as compared to the timing of the payments of
liabilities, management assesses the Company's liquidity risk to be low.

Credit risk

Credit risk represents the financial loss that the Company would experience if a counterparty to a financial
instrument, in which the Company has an amount owing from the counterparty failed to meet its obligations in
accordance with the terms and conditions of its contracts with the Company. The carrying amount of the Company's
financial assets, including receivables from customers, represents the Company's maximum credit exposure.

The majority of the accounts receivable balance relates to maintenance invoices to customers that have a history
of payment. In addition, a large proportion of the Company's accounts receivable are with public sector government
agencies where the credit risk has historically been assessed to be low.

The maximum exposure to credit risk for accounts receivable at the reporting date by geographic region was:

December 31, December 31,

2016 201

nited States 136,22 120,1 3

Canada 21, 10 1 ,
nited in dom 16, 6 20,60
uro e , 3 2,1 0
ther 13, 6 1 , 1

2 3, 226, 1

70

C NSTE ATI N S FT ARE INC.

Notes to Consolidated Financial Statements
(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)
Years ended December 31, 2016 and 2015

The maximum exposure to credit risk for accounts receivable at the reporting date by reportable segment was:

December 31, December 31,

2016 201

ublic 16 , 6 160, 1
ri ate , 6 , 20

2 3, 226, 1

The aging of accounts receivables at the reporting date was:

December 31, December 31,

2016 201

Current
ross 1 , 02 1 , 2
Im airment 61 1,
et 1 , 1 3,1 0

0 1 0 days
ross 0, 3 26, 0
Im airment 6 1,
et 3 ,66 2 ,160

ore than 1 0 days

ross 3 , 3 ,603
Im airment 20, 1 ,1 2
et 1 ,103 1 , 61

otal accounts recei able

ross 26 , 2 2 ,23
Im airment 21, 22, 6
et 2 3, 226, 1

An allowance account for accounts receivable is used to record impairment losses unless the Company is satisfied
that no recovery of the amount owing is possible at which point the amounts are considered to be uncollectible and
are written off against the specific accounts receivable amount attributable to a customer. The number of days
outstanding of an individual receivable balance is the key indicator for determining whether an account is at risk of
being impaired.

71

C NSTE ATI N S FT ARE INC.

Notes to Consolidated Financial Statements
(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)
Years ended December 31, 2016 and 2015

The movement in the allowance for impairment in respect of accounts receivable during the year ended:

2016 201

re ate balance at anuary 1 22, 6 13, 1

Increase from business ac uistions ,02
Im airment loss reco ni ed 12, 12, 11
Im airment loss re ersed 6, 6,2 3
mounts written off ,033 3,2
ther mo ements 3 6 1, 3

re ate balance at December 31 21, 22, 6

llowance for doubtful accounts arisin from businss combinations 6, 1 ,

There is no concentration of credit risk because of the Company's diverse and disparate number of customers with
individual receivables that are not significant to the Company on a consolidated basis. In addition, the Company
typically requires up front deposits from customers to protect against credit risk.

The Company manages credit risk related to cash by maintaining the majority of the Company s bank accounts with
Schedule 1 banks.

In the ordinary course of business, the Company and its subsidiaries have provided performance bonds and other
guarantees for the completion of certain customer contracts. The Company has not experienced a loss to date
and future losses are not anticipated therefore, no liability has been recorded in the consolidated statements of
financial position related to these types of indemnifications or guarantees at December 31, 2016.

Fair values versus carrying amounts

The carrying values of cash, accounts receivable, accounts payable, accrued liabilities, the majority of acquisition
holdbacks and revolving line of credit, approximate their fair values due to the short-term nature of these
instruments. Bank debt is subject to market interest rates.

The Company has capitalized transaction costs associated with its current revolving credit facility and CNH Facility.
At December 31, 2016, the fair value and carrying value of the line of credit is $nil (December 31, 2015: $nil). As
at December 31, 2016, the fair value of the CNH Facility is $126,183 and the carrying value is $122,697 (December
31, 2015 - $139,600 and the carrying value is $135,132). As at December 31, 2016, the fair value of the Debentures
is $243,514 and the carrying value is $223,870. (December 31, 2015 the fair value is $220,791 and the carrying
value is $220,043).

Fair value hierarchy

The table below analyzes financial instruments carried at fair value, by valuation method.

level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities

72

C NSTE ATI N S FT ARE INC.

Notes to Consolidated Financial Statements
(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)
Years ended December 31, 2016 and 2015

level 2 inputs are inputs other than quoted prices included in level 1 that are observable for the asset or
liability either directly (i.e. prices) or indirectly (i.e. derived from prices) and
level 3 inputs are inputs for the asset or liability that are not based on observable market data (i.e.
unobservable inputs).

In the table below, the Company has segregated all financial assets and liabilities that are measured at fair value
into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value
at the measurement date.

Financial assets and financial liabilities measured at fair value as at December 31, 2016 and December 31, 2015
in the financial statements are summarized below. The Company has no additional financial liabilities measured at
fair value initially other than those recognized in connection with business combinations.

L L L T L L L T

A
ailable for sale e uity securities ,236 ,236

L
Contin ent consideration 1 , 3 1 , 3 21, 21,
Interest rate swa contract 03 03 0 0

There were no transfers of fair value measurements between level 1, 2 and level 3 of the fair value hierarchy in the
years ended December 31, 2016 and 2015.

The following table shows a reconciliation from the beginning balances to the ending balances for fair value
measurements in Level 3 of the fair value hierarchy.

alance at anuary 1, 2016 21,

Increase from business ac uisitions , 1

Cash ayments 11,20
Char es throu h rofit or loss 6
Forei n e chan e and other mo ements 3

alance at December 31, 2016 1 , 3

Contin ent consideration classified as current liabilities 6,

Contin ent consideration classified as other non current liabilities , 3

Estimates of the fair value of contingent consideration is performed by the Company on a quarterly basis. ey
unobservable inputs include revenue growth rates and the discount rates applied (8% to 11%). The estimated fair
value increases as the annual growth rate increases and as the discount rate decreases and vice versa.
73

C NSTE ATI N S FT ARE INC.

Notes to Consolidated Financial Statements
(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)
Years ended December 31, 2016 and 2015

22. perating leases

The Company leases premises and certain equipment and automobiles under operating leases. The operating
rental expense for the year ended December 31, 2016 was $42,255 (2015 - $34,670). The annual minimum
lease commitments are as follows:

December 31, December 31,

2016 2015

Less than 1 year $ 59,541 $ 43,230

Between 1 and 5 years 113,500 96,593
More than 5 years 30,333 31,331

Total $ 203,374 $ 171,154

23. perating segments

Segment information is presented in respect of the Company's business and geographical segments. The
accounting policies of the segments are the same as those described in the significant accounting policies section
of these consolidated financial statements.

Reportable segments

The Company has six operating segments, referred to as Operating Groups by the Company, being olaris, Harris,
TSS, Jonas, Perseus, and ela. The operating segments are aggregated into two reportable segments in
accordance with IFRS 8 Operating Segments. The Company s Public Sector segment develops and distributes
software solutions primarily to government and government-related customers. The Company s Private Sector
segment develops and distributes software solutions primarily to commercial customers.

The operating groups exhibit similar economic characteristics (such as gross and earnings before income tax and
amortization ( EBITA ) margins) and are substantially similar in relation to the nature of products and services, the
nature of production processes, and the methods used to distribute product however, the determination that the
Company has two reportable segments is based primarily on the assessment that differences in economic cycles
and procedures for securing contracts between our governmental clients and commercial, or private sector clients,
are significant, thus warranting distinct segmented disclosures. olaris, Harris and TSS have been aggregated into
the Public Sector segment. Jonas, Perseus and ela have been aggregated into the Private Sector segment.

Intercompany expenses (income) primarily represent Constellation head office management fees and
intercompany interest charged on related borrowings to the reportable segments.

74

C NSTE ATI N S FT ARE INC.

Notes to Consolidated Financial Statements
(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)
Years ended December 31, 2016 and 2015

Consolidated
Year ended December 31, 2016 ublic Sector ri ate Sector ther otal

e enue 1, 2 ,2 6 6, 02 2,12 ,0 6

enses
Staff 0 , 26 3 6, ,01 1,0 ,
ardware 6 ,630 16,6 2,30
hird arty licenses, maintenance and rofessional ser ices 112,0 0,6 1 2, 03
ccu ancy 31, 1 , 6 2 1,6 6
ra el ,6 16, 1 2 61,
elecommunications 13,232 ,3 1 61 21,6
Su lies 6, 2, 63 6 , 20
Software and e ui ment 2 ,2 ,0 1 0 36,
rofessional fees 1 , , 2, 1 2 ,2
ther, net 10, 23 1 ,0 1, 6 2 , 63
De reciation 1 ,1 2 ,1 3 11 22,3 6
morti ation of intan ible assets 12 , 6 ,6 1 0,
1,1 1, 0 , 0 ,326 1, ,6 0

Forei n e chan e ain loss 2, 3 23, 33 2 , 0

SS membershi liability re aluation char e 21,63 21,63
uity in net income loss of e uity in estees 30 ,013 ,31
Finance income ,613 1 6 6,03 10, 3
Finance costs 6, 2 1 ,23 21, 3
Intercom any e enses income 3 , 01 1 , 22 0, 23
61,020 16,131 2 ,10 3,0

rofit before income ta 1 , , 66 1 , 2 6,3

Current income ta e ense reco ery 3,622 2 ,63 1,6 2 , 3

Deferred income ta e ense reco ery 1 2, 6 2,301 ,32
Income ta e ense reco ery 3, 1 26,6 3 61 ,61

et income 132,1 ,213 1 ,3 206,

Consolidated
December 31, 2016 ublic Sector ri ate Sector ther otal

Current assets 31 , 130, 0 32 , 0 3,6

Current liabilities 6, 12 26 ,32 22,12 3,16

75

C NSTE ATI N S FT ARE INC.

Notes to Consolidated Financial Statements
(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)
Years ended December 31, 2016 and 2015

ublic ri ate Consolidated

Year ended December 31, 201 Sector Sector ther otal

e enue 1,26 , 6 , 1 1, 3 ,30

enses
Staff 62 , 2 2 2, ,11 12, 16
ardware ,321 1 , 0,30
hird arty licenses, maintenance and rofessional ser ices 6,2 3 6 , 11 163,6
ccu ancy 2 , 10 1 ,060 2 3,21
ra el 3 ,3 2 1 ,0 2 1 ,6 3
elecommunications 10, 6, 6 1 , 0
Su lies , 0 3,1 1 2 10, 1
Software and e ui ment 2 ,6 0 , 2 30,
rofessional fees 1 , 3 , 00 2,6 1 22,61
ther, net 1 , 6 12,2 3 1,1 3 2 ,0 2
De reciation 11, 62 ,1 1 1 ,02
morti ation of intan ible assets 12 , 2 3,0 1 0, 6
1,0 , 6 ,316 , 60 1, 3,2 1

Forei n e chan e ain loss 1,6 1 6,0 3 11,361 1 , 3

SS membershi liability re aluation char e 22,2 22,2
uity in net income loss of e uity in estees 1,0 0 1,0 0
Finance income , 23 1 , 2
Finance costs , 1, 1 10, 00 20,110
Intercom any e enses income 0, 02 16,23 6,63
6 , 11, ,66 20, 6

rofit before income ta 12 ,0 1 6 , 0 , 0 2 ,2

Current income ta e ense reco ery 2, 1 22,236 1,3 63, 0

Deferred income ta e ense reco ery 1, 2, 1 3,601
Income ta e ense reco ery , 6 2 , 10 2,22 6 ,0 1

et income 0, 2 , 0 1, 36 1 ,2

ublic ri ate Consolidated

December 31, 201 Sector Sector ther otal

Current assets 30 ,3 11 , 12 ,12 6,303

Current liabilities 1 ,62 23 ,03 1 ,0 0 6 ,

76

C NSTE ATI N S FT ARE INC.

Notes to Consolidated Financial Statements
(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)
Years ended December 31, 2016 and 2015

eographical segments

The public and private sector segments are managed on a worldwide basis, but operate in three principal
geographical areas, Canada, USA, and U Europe.

In presenting information on the basis of geographical segments, segment revenue is based on the region in
which the revenue is transacted and intellectual property is located. Segment assets are based on the
geographic locations of the assets.

C A E O T

e enue 2 2, 0 1,11 , 21 6 3,1 11 ,610 2,12 ,0 6

on current assets 20 ,666 3 , 1 , 03 , 63 1,10 , 3

C A E O T

e enue 22 ,223 0,2 1 30,60 3,23 1, 3 ,30

on current assets 232, 32 3 , , 3 0, 2 1,0 3,01

ajor customers

No customer represents revenue in excess of 5% of total revenue in both years ended December 31, 2016 and
2015.

24. Contingencies

In the normal course of operations, the Company is subject to litigation and claims from time to time. The Company
may also be subject to lawsuits, investigations and other claims, including environmental, labour, product, customer
disputes and other matters. Management believes that adequate provisions have been recorded in the accounts
where required. Although it is not always possible to estimate the extent of potential costs, if any, management
believes that the ultimate resolution of such contingencies will not have a material adverse impact on the results of
operations, financial position or liquidity of the Company.

25. uarantees

(a) In the ordinary course of business the Company and its subsidiaries have provided performance bonds and
other guarantees for the completion of certain customer contracts. The total obligations of the Company
pursuant to such bonds and related contingencies total $46,932 (2015 - $56,049). No liability has been
recorded in the consolidated financial statements.

(b) As at December 31, 2016, in the normal course of business, the Company and its subsidiaries have
outstanding letters of credit totalling $18,263 (2015 - $17,130).

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C NSTE ATI N S FT ARE INC.

Notes to Consolidated Financial Statements
(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)
Years ended December 31, 2016 and 2015

(c) In the normal course of business, some of the Company's subsidiaries entered into lease agreements for
facilities. As the joint lessees, the subsidiaries agree to indemnify the lessor for liabilities that may arise
from the use of the leased facility. The maximum amount potentially payable under the foregoing indemnity
cannot be reasonably estimated. The subsidiaries have liability insurance that relates to the
indemnifications.

(d) The Company and its subsidiaries have provided routine indemnifications to some of its customers against
liability if the Company's product infringes on a third party's intellectual property rights. The maximum
exposure from the indemnifications cannot be reasonably estimated.

26. Changes in non cash operating wor ing capital

Year ended
December 31,
2016 201

Decrease increase in accounts recei able 2,60 ,663

Decrease increase in wor in ro ress 3, 2,2 0
Decrease increase in other current assets 3,132 ,
Decrease increase in in entory , 3 666
Decrease increase in non current assets 3 , 06
Increase decrease in other non current liabilities 2, 6 11, 0
Increase decrease in accounts ayable and accrued liabilities,
e cludin holdbac s from ac uisitions ,06 23, 0
Increase decrease in deferred re enue 1 , 66 ,3
Increase decrease in ro isions ,13

Chan e in non cash o eratin wor in ca ital 16, 6 3,0 0

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C NSTE ATI N S FT ARE INC.

Notes to Consolidated Financial Statements
(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)
Years ended December 31, 2016 and 2015

27. Related parties

Key management personnel compensation

The key management personnel of the Company, inclusive of the operating segments, are the members of the
Company s executive management team at the Company operating segments and head office and Board of
Directors.

Years ended December 31,

2016 2015

Salaries, bonus and employee benefits $ 10,746 $ 8,740

Total $ 10,746 $ 8,740

There were no significant post-employment benefits, other long-term benefits, or share-based payments attributed
to the key management personnel in 2016 and 2015.

28. Subsequent events

On February 15, 2017, the Company declared a $1.00 per share dividend that is payable on April 5, 2017 to all
common shareholders of record at close of business on March 17, 2017.

79