LIVANOVA PLC (the "Company")

3 mei 2016

29 April 2016

LIVANOVA PLC
(the "Company")

The Company announces that its UK Annual Report and IFRS Financial Statements for the period ended 31 December 2015 (" 2015 Annual Report ") has been published today. The 2015 Annual Report has been made publicly available on the Company's website ( www.livanova.com/investor-relations/annual-meetings-and-reports ).

The Company also announces that it will today file Amendment No.1 on Form 10-K/A, which amends the Transition Report on Form 10-K/T for the transitional period 25 April 2015 to 31 December 2015 filed by the Company with the US Securities and Exchange Commission (" SEC ") on 4 March 2015 (the " Form 10-K/A "). The Form 10-K/A will be viewable on the SEC's website at www.sec.gov .

The 2015 Annual Report has been, and the Form 10-K/A will be, uploaded to the National Storage Mechanism and will be available for viewing shortly at http://www.morningstar.co.uk/uk/NSM .

The Company's annual general meeting for 2016 (the " AGM ") will be held on 15 June 2016 at 1:00 p.m (British Summer Time) at the offices of Latham & Watkins (London) LLP, 99 Bishopsgate, London, EC2M 3XF, United Kingdom. Amongst other things, at the AGM, the directors will be seeking shareholder authority to repurchase the Company's ordinary shares "on-market" on the London Stock Exchange and "off-market" on the NASDAQ Global Market pursuant to the Companies Act 2006. The 2015 Annual Report, together with the notice of AGM and accompanying proxy statement, will be posted to shareholders in due course.

Compliance with Disclosure and Transparency Rule ("DTR") 6.3.5 - Extracts from the 2015 Annual Report

The information below, which is extracted from the 2015 Annual Report, is included solely for the purpose of complying with DTR 6.3.5 and the requirements it imposes on how to make public annual financial reports. This material is not a substitute for reading the full 2015 Annual Report. References to page numbers and notes to the accounts set out in the Appendices below refer to page numbers and notes to the accounts in the Company's 2015 Annual Report. Certain terms used in the information below are defined in the 2015 Annual Report, on pages 230 to 233.

The information contained in this announcement does not constitute the Company's or the LivaNova group's (" LivaNova ") statutory accounts, but is derived from those statutory accounts. The statutory accounts for the period ended 31 December 2015 have been approved by the Company's board of directors and will be delivered to the Registrar of Companies following the AGM. The auditor has reported on those statutory accounts and their report was unqualified, with no matters by way of emphasis, and did not contain statements under Section 498(2) of the Companies Act 2006 (regarding adequacy of accounting records and returns) or under Section 498(3) of the Companies Act 2006 (regarding provision of necessary information and explanations).

About LivaNova

LivaNova PLC, headquartered in London, U.K., is a global medical technology company formed by the merger of Sorin S.p.A, a leader in the treatment of cardiovascular diseases, and Cyberonics Inc., a medical device company with core expertise in neuromodulation. LivaNova transforms medical innovation into meaningful solutions for the benefit of patients, healthcare professionals, and healthcare systems. The company employs approximately 4,500 employees worldwide. With a presence in more than 100 countries, LivaNova operates as three business units: Cardiac Rhythm Management, Cardiac Surgery, and Neuromodulation, with operating headquarters in Clamart (France), Mirandola (Italy) and Houston (U.S.), respectively.

LivaNova is listed on NASDAQ and listed on the Official List of the UK's Financial Conduct Authority and traded on London Stock Exchange (LSE) under the ticker symbol "LIVN".

For more information, please visit www.livanova.com , or contact:

Investor Relations and Media:

Karen King
Vice President, Investor Relations & Corporate Communications
Phone: +1 (281) 228-7262
Fax: +1 (281) 218-9332
e-mail: corporate.communications@livanova.com

Appendix A - Directors' Responsibility Statement

The 2015 Annual Report includes a responsibility statement in compliance with DTR 4.1.12. The directors' responsibility statement is set out on pages 53 and 54 of the 2015 Annual Report. This statement is set out below in full and unedited text.

The directors are responsible for preparing the UK Annual Report, the Directors' Remuneration Report and the financial statements in accordance with applicable law and regulations.

The Companies Act requires the directors to prepare financial statements for each financial year. The directors have prepared the LivaNova group and Company financial statements in accordance with IFRS as adopted by the European Union. Under the Companies Act, the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the LivaNova group and the Company, and of the profit or loss of the LivaNova group and the Company for that period. In preparing these financial statements, the directors are required to:

select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
state whether applicable IFRS as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the financial statements;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the LivaNova group and the Company's transactions and disclose with reasonable accuracy at any time the financial position of the LivaNova group and the Company and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act and, as regards the LivaNova group and the Company's financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of LivaNova and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Appendix B - Principal Risks and Uncertainties

The principal risks and uncertainties are set out on pages 32 to 47 of 2015 Annual Report. The full and unedited text relating to these disclosures are set out below.

Global healthcare policy changes, including US healthcare reform legislation, may have a material adverse effect on LivaNova.

In response to perceived increases in healthcare costs, there have been and continue to be proposals by governments, regulators, and third-party payers to control these costs. The adoption of some or all of these proposals could have a material adverse effect on LivaNova's financial position and results of operations. These proposals have resulted in efforts to reform the US healthcare system which may lead to pricing restrictions, limits on the amounts of reimbursement available for LivaNova's products and could limit the acceptance and availability of LivaNova's products.

In the US, the federal government enacted legislation, including the Affordable Care Act to overhaul the nation's healthcare system. While one goal of healthcare reform is to expand coverage to more individuals, it also involves increased government price controls, additional regulatory mandates and other measures designed to constrain medical costs. Among other things, the Affordable Care Act:

imposes an annual excise tax of 2.3 per cent. on any entity that manufactures or imports medical devices offered for sale in the US. Due to subsequent legislative amendments, the excise tax has been suspended from 1 January 2016 to 31 December 2017, and, absent further legislative action, will be reinstated starting 1 January 2018;
establishes a new Patient-Centered Outcomes Research Institute to oversee and identify priorities in comparative clinical effectiveness research in an effort to coordinate and develop such research; and
implements payment system reforms including a national pilot programme on payment bundling to encourage hospitals, physicians and other providers to improve the coordination, quality, and efficiency of certain healthcare services through bundled payment models.

In addition, other legislative changes have been proposed and adopted in the US since the Affordable Care Act was enacted. On 2 August 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation's automatic reduction to several government programmes. This includes aggregate reductions of Medicare payments to providers of 2 per cent. per fiscal year, which went into effect in April 2013, and, due to subsequent legislative amendments to the statute, will remain in effect through 2025 unless additional Congressional action is taken. On 2 January 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, further reduced Medicare payments to several providers, including hospitals. The Company cannot predict what healthcare programmes and regulations will be ultimately implemented at the federal or state level, or the effect of any future legislation or regulation. However, any changes that lower reimbursement for LivaNova's products or reduce medical procedure volumes could adversely affect LivaNova's business and results of operations.

The Affordable Care Act also focuses on a number of Medicare provisions aimed at decreasing costs. It is uncertain at this point what unintended consequences these provisions will have on patient access to new technologies. The Medicare provisions include value-based payment programmes, increased funding of comparative effectiveness research, reduced hospital payments for avoidable readmissions and hospital-acquired conditions, and pilot programmes to evaluate alternative payment methodologies that promote care coordination (such as bundled physician and hospital payments). Additionally, the law includes a reduction in the annual rate of inflation for hospitals that began in 2011 and the establishment of an independent payment advisory board to recommend ways of reducing the rate of growth in Medicare spending beginning in 2014. The Company cannot predict what healthcare programmes and regulations will be implemented at the global level or the US federal or state level, or the effect of any future legislation or regulation. However, any changes that lower reimbursement for LivaNova's products or reduce medical procedure volumes could adversely affect LivaNova's business and results of operations.

The Italian Parliament introduced new rules for entities that supply goods and services to the Italian National Healthcare System. The new healthcare law is expected to impact the business and financial reporting of companies operating in the medical technology sector that sell medical devices in Italy. A key provision of the law is a 'payback' measure, requiring companies selling medical devices in Italy to make payments to the Italian state if medical device expenditures exceed regional maximum ceilings. Companies are required to make payments equal to a percentage of expenditures exceeding maximum regional caps. There is considerable uncertainty about how the law will operate and what the exact timeline is for finalisation. The Company's current assessment of the Italian medical device payback law involves significant judgment regarding the expected scope and actual implementation terms of the measure as the latter have not been clarified to date by Italian authorities. LivaNova accounts for the estimated cost of the medical device payback as a deduction from revenue.

Outside of the US, reimbursement systems vary significantly by country. Many foreign markets have government-managed healthcare systems that govern reimbursement for medical devices and procedures. Additionally, some foreign reimbursement systems provide for limited payments in a given period and therefore result in extended payment periods. If adequate levels of reimbursement from third-party payers outside of the US are not obtained, international sales of LivaNova's products may decline.

In addition, in the US, certain state governments and the federal government have enacted legislation aimed at increasing transparency of LivaNova's interactions with healthcare providers, for example, federal "sunshine" requirements imposed by the Affordable Care Act on certain manufacturers of devices for which payment is available under Medicare, Medicaid, or the Children's Health Insurance Program regarding any "transfer of value" made or distributed to physicians and teaching hospitals. Failure to submit required information may result in civil monetary penalties of up to an aggregate of $150,000 per year (or up to an aggregate of $1 million per year for "knowing failures"), for all payments, transfers of value or ownership or investment interests that are not timely, accurately, and completely reported in an annual submission. Manufacturers must submit reports by the 90 ^th day of each calendar year.

Similar laws exist outside the US, such as in France, which adopted the "Physician Payments Sunshine Act" in 2011. The French act requires companies to publicly disclose agreements with, and certain benefits provided to, certain French healthcare professionals. Other countries are considering or may enact laws or regulations comparable to those implemented in the US and France. Any failure to comply with these legal and regulatory requirements could impact LivaNova's business. In addition, LivaNova may continue to devote substantial additional time and financial resources to further develop and implement policies, systems, and processes to comply with enhanced legal and regulatory requirements, which may also impact LivaNova's business. The Company anticipates that governmental authorities will continue to scrutinise LivaNova's industry closely, and that additional regulation may increase compliance and legal costs, exposure to litigation, and other adverse effects to LivaNova's operations.

LivaNova may be unable to obtain and maintain adequate third-party reimbursement on its products, which could have a significant negative impact on its future operating results.

LivaNova's ability to commercialise its products is dependent, in large part, on whether third-party payers, including private healthcare insurers, managed care plans, governmental programmes and others agree to cover the costs and services associated with LivaNova's products and related procedures in the US and internationally.

LivaNova's products are purchased principally by healthcare providers that typically bill various third-party payers, such as governmental programmes (e.g., Medicare and Medicaid in the US), private insurance plans and managed care plans, for the healthcare services provided to their patients. The ability of customers to obtain appropriate reimbursement for their services and the products they provide from government and third-party payers is critical to the success of medical technology companies. The availability of adequate reimbursement affects which procedures customers perform, the products customers purchase and the prices customers are willing to pay. Reimbursement varies from country to country and can significantly impact the acceptance of new technology. After LivaNova develops a promising new product, it may find limited demand for the product unless reimbursement approval is obtained from private and governmental third-party payers. In addition, periodic changes to reimbursement methodologies could have an adverse impact on LivaNova's business.

LivaNova may also experience decreasing prices for its goods and services due to pricing pressure experienced by customers from governmental payers, managed care organisations and other third-party payers, increased market power of LivaNova's customers as the medical device industry consolidates and increased competition among medical engineering and manufacturing services providers. If the prices for goods and services decrease and LivaNova is unable to reduce expenses, LivaNova's results of operations will be adversely affected.

Cost-containment pressures and legislative or administrative reforms resulting in restrictive reimbursement practices of third-party payers or preferences for alternate therapies could decrease the demand for products purchased by LivaNova's customers, the prices they are willing to pay for those products and the number of procedures using LivaNova's devices.

Major third-party payers for healthcare provider services continue to work to contain healthcare costs. The introduction of cost containment incentives, combined with closer scrutiny of healthcare expenditures by both private health insurers and employers, could result in increased discounts and contractual adjustments to healthcare provider charges for services performed and in the shifting of services between inpatient and outpatient settings. Initiatives to limit the growth of healthcare costs, including price regulation, are also underway in several countries in which LivaNova does business. Implementation of healthcare reforms in the US and in significant overseas markets such as Germany, Italy, France, Japan and other countries may limit the price of, or the level at which, reimbursement is provided for LivaNova's products and adversely affect both LivaNova's pricing flexibility and the demand for LivaNova's products. Healthcare providers may respond to such cost-containment pressures by substituting lower cost products or other therapies for LivaNova's products.

The continuing efforts of governmental authorities, insurance companies, and other payers of healthcare costs to contain or reduce these costs could lead to patients being unable to obtain approval for payment from these payers. If payment approval cannot be obtained by patients, sales of finished medical devices or those that use LivaNova's components may decline significantly, and LivaNova's customers may reduce or eliminate purchases of its products and/or components. This could have a material or adverse impact on LivaNova's results of earnings and cash flows.

Patient confidentiality and federal and state privacy and security laws and regulations in the US may adversely impact LivaNova's selling model.

HIPAA establishes federal rules protecting the privacy and security of personal health information. The privacy and security rules address the use and disclosure of individual healthcare information and the rights of patients to understand and control how such information is used and disclosed. HIPAA provides both criminal and civil fines and penalties for covered entities or business associates that fail to comply. If LivaNova fails to comply with the applicable regulations, it could suffer civil penalties up to or exceeding $50,000 per violation, with a maximum of $1.5 million for multiple violations of an identical requirement during a calendar year and criminal penalties with fines up to $250,000 and potential imprisonment.

In addition to HIPAA, virtually every state has enacted one or more laws to safeguard privacy, and these laws vary significantly from state to state and change frequently. Even if LivaNova's business model is compliant with the HIPAA Privacy and Security Rule and the privacy laws of the states it operates in, it may not be compliant with the privacy laws of all states. As the operation of LivaNova's business involves the collection and use of substantial amounts of "protected health information," it endeavours to conduct its business as a "covered entity" under the HIPAA Privacy and Security Rule and consistent with the state privacy laws, obtaining HIPAA-compliant patient authorisations where required to support LivaNova's use and disclosure of patient information. LivaNova also sometimes act as a "business associate" for a covered entity. The US Office for Civil Rights of the Department of Health and Human Services or another government enforcement agency may determine that LivaNova's business model or operations are not in compliance with the HIPAA Privacy and Security Rules, which could subject it to penalties, could severely limit its ability to market and sell its products under its existing business model and could harm its business growth and consolidated financial position.

Britain is holding a referendum on its continued membership in the EU, and if the referendum favours an exit from the EU, there could be a material adverse effect on LivaNova's financial position, business and results of operations.

Following the renegotiation of the terms of the UK's membership of the EU, as agreed by all 28 EU Member States on 19 February 2016, a referendum will be held on 23 June 2016 for eligible members of the electorate in the UK to decide whether to remain a member of the EU or to leave the EU. In the event voters elect to leave the EU (the so-called " Brexit "), LivaNova will face risks associated with the potential uncertainty and consequences that may flow from the Brexit vote. Since a significant proportion of the regulatory framework in the UK is derived from EU directives and regulations, the referendum could materially change the regulatory regime applicable to LivaNova's operations in the future. A Brexit vote would also result in the UK no longer being an EU Member State and a member of the EU single market, which may result in increased trade barriers, which could impact LivaNova's results of operations and share price. Any increased costs may result in higher costs being passed to customers. As a company domiciled in the UK, and with operations across Europe, Brexit could result in restrictions on the movement of capital, distribution and sale of goods, and the mobility of LivaNova's personnel, which could have adverse material effect on LivaNova's operations. Conversely, a vote to remain in the EU may also create similar uncertainties and adverse policy consequences in the event the UK Government and the EU enter into negotiations to further reform the UK's membership of the EU.

LivaNova's information technology systems may be vulnerable to hacker intrusion, malicious viruses and other cybercrime attacks, which may harm its business and expose it to liability.

LivaNova's operations depend to a great extent on the reliability and security of its information technology system, software and network, which are subject to damage and interruption caused by human error, problems relating to the telecommunications network, software failure, natural disasters, sabotage, viruses and similar events. Any interruption in LivaNova's systems could have a negative effect on the quality of products and services offered and, as a result, on customer demand and therefore volume of sales.

LivaNova's product sales are subject to regulatory clearance or approval and its business is subject to extensive regulatory requirements. If LivaNova fails to maintain regulatory clearances and approvals, or is unable to obtain, or experiences significant delays in obtaining, such clearances or approvals for future products or product enhancements, its ability to commercially distribute and market these products could suffer.

LivaNova's medical device products and operations are subject to extensive regulation by the US FDA and various other federal, state and foreign government authorities. Government regulation of medical devices is meant to assure their safety and effectiveness and includes regulation of, among other things:

design, development and manufacturing;
testing, labelling, packaging, content and language of instructions for use, and storage;
clinical trials;
product safety;
pre-market clearance and approval;
marketing, sales and distribution (including making product claims);
advertising and promotion;
product modifications;
recordkeeping procedures;
reports of corrections, removals, enhancements, recalls and field corrective actions;
post-market surveillance, including reporting of deaths or serious injuries and malfunctions that, if they were to recur, could lead to death or serious injury;
complying with the new federal law and regulations requiring Unique Device Identifiers on devices and also requiring the submission of certain information about each device to the US FDA's Global Unique Device Identification Database; and
product import and export laws.

If LivaNova's marketed medical devices are defective or otherwise pose safety risks, the US FDA and similar foreign governmental authorities could require their recall, or LivaNova may initiate a recall of its products voluntarily.

The US FDA and similar foreign governmental authorities may require the recall of commercialised products in the event of material deficiencies or defects in design or manufacture or in the event that a product poses an unacceptable risk to health. Manufacturers, on their own initiative, may recall a product if any material deficiency in a device is found. LivaNova has initiated voluntary product recalls in the past.

A government-mandated or voluntary recall by LivaNova or one of its sales agencies could occur as a result of an unacceptable risk to health, component failures, manufacturing errors, design or labelling defects or other deficiencies and issues. Recalls of any of LivaNova's products would divert managerial and financial resources and have an adverse effect on its financial condition and operating results. Any recall could impair LivaNova's ability to produce its products in a cost-effective and timely manner in order to meet its customers' demands. LivaNova also may be required to bear other costs or take other actions that may have a negative impact on its future revenue and the ability to generate profits. LivaNova may initiate voluntary actions to withdraw or remove or repair its products in the future that it determines do not require notification of the US FDA as a recall. If the US FDA disagrees with LivaNova's determinations, it could require LivaNova to report those actions as recalls. In addition, the US FDA could take enforcement action for failing to report the recalls when they were conducted.

In addition, depending on the corrective action LivaNova takes to redress a product's deficiencies or defects, the US FDA may require, or LivaNova may decide, that LivaNova will need to obtain new approvals or clearances for the device before LivaNova may market or distribute the corrected device. Seeking such approvals or clearances may delay LivaNova's ability to replace the recalled devices in a timely manner. Moreover, if LivaNova does not adequately address problems associated with its devices, it may face additional regulatory enforcement action, including US FDA warning letters, product seizure, injunctions, administrative penalties, or civil or criminal fines.

In the EEA, LivaNova's European operations must comply with the EU Medical Device Vigilance System, the purpose of which is to improve the protection of health and safety of patients, users and others by reducing the likelihood of reoccurrence of incidents related to the use of a medical device. Under this system, incidents must be reported to the competent authorities of the Member States of the EU or the EEA countries. An incident is defined as any malfunction or deterioration in the characteristics and/or performance of a device, as well as any inadequacy in labelling or instructions that may, directly or indirectly, lead or have led to death or serious health deterioration of a patient. Incidents are evaluated by the relevant competent authorities to whom they have been reported, and where appropriate, information is disseminated between them in the form of National Competent Authority Reports. The Medical Device Vigilance System is further intended to facilitate a direct, early and harmonised implementation of FSCAs, across the Member States where the device is in use. An FSCA is an action taken by a manufacturer to reduce a risk of death or serious deterioration in the state of health associated with the use of a medical device that is already placed on the market. An FSCA may include the recall, modification, exchange, destruction or retrofitting of the device. FSCAs must be communicated by the manufacturer or its legal representative to its customers and/or to the end users of the device through Field Safety Notices.

A future recall announcement in the US, EEA or elsewhere could harm LivaNova's reputation with customers and negatively affect LivaNova's revenue.

LivaNova's manufacturing operations require LivaNova to comply with the US FDA's and other governmental authorities' laws and regulations regarding the manufacture and production of medical devices, which is costly and could subject LivaNova to enforcement action.

LivaNova and certain of its third-party manufacturers are required to comply with the US FDA's current Good Manufacturing Practice requirements, as embodied in the QSR which covers the design, testing, production, control, quality assurance, labelling, packaging, sterilisation, storage and shipping of medical device products in the US. LivaNova and certain of its suppliers also are subject to the regulations of foreign jurisdictions regarding the manufacturing process for products marketed outside of the US. The US FDA enforces the QSR through periodic announced (routine) and unannounced (for cause or directed) inspections of manufacturing facilities, during which the US FDA may issue Forms US FDA-483 listing inspectional observations which, if not addressed to the US FDA's satisfaction, can result in further enforcement action. Similar inspections are carried out in the EEA by Notified Bodies and competent authorities within the EEA. The failure by LivaNova or one of the its suppliers to comply with applicable statutes and regulations administered by the US FDA and other regulatory bodies, or the failure to timely and adequately respond to any adverse inspectional observations or product safety issues could result in:

untitled letters, warning letters, fines, injunctions or consent decrees;
customer notifications or repair, replacement, refund, recall, detention or seizure of products;
operating restrictions or partial suspension or total shutdown of production;
refusal to grant or delay in granting 510(k) clearance or PMA approval of new products or modified products;
withdrawing 510(k) clearances or PMA approvals that have already been granted;
refusal to grant export approval for LivaNova's products; or
civil penalties or criminal prosecution.

Any of these actions could impair LivaNova's ability to produce its products in a cost-effective and timely manner in order to meet customers' demands. LivaNova also may be required to bear other costs or take other actions that may have a negative impact on its future revenue and ability to generate profits. Furthermore, LivaNova's key component suppliers may not currently be or may not continue to be in compliance with all applicable regulatory requirements, which could result in failure to produce products on a timely basis and in the required quantities, if at all.

Product liability claims could adversely impact LivaNova's consolidated financial condition and LivaNova's earnings and impair its reputation.

LivaNova's business exposes it to potential product liability risks that are inherent in the design, manufacture and marketing of medical devices. In addition, many of the medical devices LivaNova manufactures and sells are designed to be implanted in the human body for long periods of time. Component failures, manufacturing defects, design flaws or inadequate disclosure of product-related risks or product-related information with respect to these or other products LivaNova manufactures or sells could result in an unsafe condition or injury to, or death of, a patient. The occurrence of such an event could result in product liability claims or a recall of, or safety alert relating to, one or more of LivaNova's products. LivaNova has elected to self-insure with respect to a portion of its product liability risks and hold global insurance policies in amounts the Company believes are adequate to cover future losses. Product liability claims or product recalls in the future, regardless of their ultimate outcome, could have a material adverse effect on LivaNova's business and reputation and on its ability to attract and retain customers for its products.

LivaNova's failure to comply with rules relating to healthcare fraud and abuse, false claims and privacy and security laws may subject LivaNova to penalties and adversely impact its reputation and business operations.

LivaNova's devices and therapies are subject to regulation regarding quality and cost by various governmental agencies worldwide responsible for coverage, reimbursement and regulation of healthcare goods and services. In the US, for example, federal government healthcare laws apply when a customer submits a claim for an item or service that is reimbursable under a US federal government-funded healthcare program, such as Medicare or Medicaid. The principal US federal laws implicated include:

the US Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and wilfully soliciting, receiving, offering or paying remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal healthcare programmes, such as the Medicare and Medicaid programmes. A person or entity does not need to have actual knowledge of the US Anti-Kickback Statute or specific intent to violate it to have committed a violation; in addition, the government may assert that a claim including items or services resulting from a violation of the US Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the US False Claims Act;
federal civil and criminal false claims laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid or other federal third-party payers that are false or fraudulent. Private individuals can file suits on behalf of the government under the US False Claims Act, known as "qui tam" actions and such individuals, commonly known as "whistleblowers," may share in any amounts paid by the entity to the government in fines or settlement. When an entity is determined to have violated the US False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus civil penalties for each separate false claim;
the federal US Civil Monetary Penalties Law, which prohibits, among other things, offering or transferring remuneration to a federal healthcare beneficiary that a person knows or should know is likely to influence the beneficiary's decision to order or receive items or services reimbursable by the government from a particular provider or supplier;
federal criminal laws that prohibit executing a scheme to defraud any federal healthcare benefit programme or making false statements relating to healthcare matters. Similar to the federal US Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation;
HIPAA, as amended by the HITECH, which governs the conduct of certain electronic healthcare transactions and protects the security and privacy of protected health information;
the federal Physician Payment Sunshine Act, which requires manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children's Health Insurance Program (with certain exceptions) to report annually to the CMS information related to payments or other "transfers of value" made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, and requires applicable manufacturers and group purchasing organisations to report annually to the government ownership and investment interests held by the physicians described above and their immediate family members and payments or other "transfers of value" to such physician owners. Manufacturers are required to submit reports to CMS by the 90 ^th day of each calendar year;
the FCPA, which prohibits corporations and individuals from paying, offering to pay or authorising the payment of anything of value to any foreign government official, government staff member, political party or political candidate in an attempt to obtain or retain business or to otherwise influence a person working in an official capacity; the UK Bribery Act, which prohibits both domestic and international bribery, as well as bribery across both public and private sectors; and bribery provisions contained in the German Criminal Code, which, pursuant to draft legislation being prepared by the German government, may make the corruption and corruptibility of physicians in private practice and other healthcare professionals a criminal offence; and
analogous state and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payer, including commercial insurers; state laws that require device companies to comply with the industry's voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws that require device manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.

The risk of LivaNova being found in violation of these laws is increased by the fact that many of them have not been fully interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of interpretations. Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbours available under such laws, it is possible that some of LivaNova's business activities, including its relationships with surgeons and other healthcare providers, some of whom recommend, purchase and/or prescribe LivaNova's devices, group purchasing organisations and its independent sales agents and distributors, could be subject to challenge under one or more of such laws. LivaNova is also exposed to the risk that its employees, independent contractors, principal investigators, consultants, vendors, independent sales agents and distributors may engage in fraudulent or other illegal activity. While LivaNova has policies and procedures in place prohibiting such activity, misconduct by these parties could include, among other infractions or violations, intentional, reckless and/or negligent conduct or unauthorised activity that violates US FDA regulations, including those laws that require the reporting of true, complete and accurate information to the US FDA, manufacturing standards, federal and state healthcare fraud and abuse laws and regulations, laws that require the true, complete and accurate reporting of financial information or data or other commercial or regulatory laws or requirements. It is not always possible to identify and deter misconduct by LivaNova's employees and other third parties, and the precautions it takes to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting LivaNova from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations.

There are similar laws and regulations applicable to LivaNova outside the US, all of which are subject to evolving interpretations. Global enforcement of anti-corruption laws has increased substantially in recent years, with more frequent voluntary self-disclosures by companies, aggressive investigations and enforcement proceedings by governmental agencies, and assessment of significant fines and penalties against companies and individuals. LivaNova's operations create the risk of unauthorised payments or offers of payments by one of its employees, consultants, sales agents, or distributors because these parties are not always subject to LivaNova's control. It is LivaNova's policy to implement safeguards to discourage these practices. However, LivaNova's existing safeguards and any future improvements may prove to be less than effective, and LivaNova's employees, consultants, sales agents, or distributors may engage in conduct for which LivaNova might be held responsible. Any alleged or actual violations of these regulations may subject LivaNova to government scrutiny, severe criminal or civil sanctions and other liabilities, including exclusion from government contracting or government healthcare programmes, and could negatively affect its business, reputation, operating results, and financial condition. In addition, a governmental authority may seek to hold LivaNova liable for successor liability violations committed by any companies in which it invests or that it acquires.

If a governmental authority were to conclude that LivaNova is not in compliance with applicable laws and regulations, LivaNova and its officers and employees could also be subject to exclusion from participation as a supplier of product to beneficiaries. If LivaNova is excluded from participation based on such an interpretation it could adversely affect its reputation and business operations. Any action against LivaNova for violation of these laws, even if it successfully defends against it, could cause LivaNova to incur significant legal expenses and divert its management's attention from the operation of its business.

LivaNova's insurance policies may not be adequate to cover future losses.

LivaNova's insurance policies (including general and products liability) provide insurance in such amounts and against such risks LivaNova has reasonably determined to be prudent in accordance with industry practices or as is required by law or regulation. Although, based on historical loss trends, the Company believes that LivaNova's insurance coverage will be adequate to cover future losses; the Company cannot guarantee that this will remain true. Historical trends may not be indicative of future losses, and losses from unanticipated claims could have a material adverse impact on LivaNova's consolidated earnings, financial condition, and/or cash flows.

Consolidation in the healthcare industry could have an adverse effect on LivaNova's revenue and results of operations.

Many healthcare industry companies, including medical device companies, are consolidating to create new companies with greater market power. As the healthcare industry consolidates, competition to provide goods and services to industry participants will become more intense. These industry participants may try to use their market power to negotiate price concessions or reductions for medical devices that incorporate components LivaNova produces. Increasing pricing pressures as a result of industry consolidation could have an adverse effect on LivaNova's revenue, results of operations, financial position and cash flows.

LivaNova is substantially dependent on patent and other proprietary rights and failing to protect such rights or to be successful in litigation related to LivaNova's rights or the rights of others may result in LivaNova's payment of significant monetary damages and/or royalty payments, negatively impact its ability to sell current or future products, or prohibit it from enforcing its patent and other proprietary rights against others.

LivaNova operates in an industry characterised by extensive patent litigation. Patent litigation against LivaNova could result in significant damage awards and injunctions that could prevent the manufacture and sale of affected products or require LivaNova to pay significant royalties in order to continue to manufacture or sell affected products.

LivaNova also relies on a combination of patents, trade secrets, and non-disclosure and non-competition agreements to protect its proprietary intellectual property and LivaNova will continue to do so. While LivaNova intends to defend against any threats to its intellectual property, these patents, trade secrets, or other agreements may not adequately protect its intellectual property. Further, pending patent applications may not result in patents being issued to LivaNova. Patents issued to or licensed by LivaNova in the past or in the future may be challenged or circumvented by competitors and such patents may be found invalid, unenforceable or insufficiently broad to protect LivaNova's technology and may limit its competitive advantage. Third parties could obtain patents that may require LivaNova to negotiate licences to conduct its business, and the required licences may not be available on reasonable terms or at all. LivaNova also relies on non-disclosure and non-competition agreements with certain employees, consultants, and other parties to protect, in part, trade secrets and other proprietary rights. The Company cannot be certain that these agreements will not be breached, that LivaNova will has adequate remedies for any breach, that others will not independently develop substantially equivalent proprietary information, or that third parties will not otherwise gain access to LivaNova's trade secrets or proprietary knowledge.

In October 2009 for example, the legacy Cyberonics business entered into a licence arrangement with Flint Hills Scientific, L.L.C., which was amended in January 2011 and January 2015. The licence relates to the ability of the AspireSR generator to, among other things, provide additional stimulation automatically by responding to a patient's relative heart-rate changes that exceed variable thresholds. The licence provides for a royalty fee in the low single digit percentages as it relates to AspireSR sales. Failure to protect such a licence arrangement could have a material adverse effect on the Neuromodulation Business Unit.

In addition, the laws of certain countries in which LivaNova markets its products are not uniform and may not protect LivaNova's intellectual property rights equally. If LivaNova is unable to protect its intellectual property in particular countries, it could have a material adverse effect on LivaNova's business, financial condition or results of operations.

LivaNova is exposed to foreign currency exchange risk.

LivaNova transacts business in numerous countries around the world and expects that a significant portion of its business will continue to take place in international markets. Consolidated financial statements are prepared in the Company's functional currency, while the financial statements of each of the Company's subsidiaries are prepared in the functional currency of that entity.

Accordingly, fluctuations in the exchange rate of the functional currencies of the Company's foreign currency entities against the functional currency of the Company will impact its results of operations and financial condition. Several of the Company's subsidiaries conduct transactions in currencies different to their functional currency. As such, it is expected that the Company's revenue and earnings will continue to be exposed to the risks that may arise from fluctuations in foreign currency exchange rates, which could have a material adverse effect on the Company's business, results of operation or financial condition. Although the Company may elect to hedge certain foreign currency exposure, the Company cannot be certain that the hedging activity will eliminate the Company's currency risk.

Changes in tax laws or exposure to additional income tax liabilities could have a material impact on LivaNova's financial condition and results of operations.

LivaNova is exposed to potentially adverse changes in the tax regime in each jurisdiction in which it operates. LivaNova is subject to income taxes as well as non-income based taxes, in the US, the EU and various jurisdictions. LivaNova is also subject to ongoing tax audits in various other foreign jurisdictions. Tax authorities may disagree with certain positions LivaNova has taken and assess additional taxes. The Company believes that LivaNova's accruals reflect the probable outcome of known contingencies. However, there can be no assurance that LivaNova will accurately predict the outcomes of ongoing audits, and the actual outcomes of these audits could have a material impact on LivaNova's consolidated net income or financial condition. Changes in tax laws or tax rulings could materially impact LivaNova's effective tax rate or results of operations.

Furthermore, the increased international scrutiny of the tax payments of multinational companies, together with the complexity of tax rules and other business activities, are such that LivaNova's decisions related to tax may be publicly criticised and may result in reputational damage.

LivaNova is subject to lawsuits.

LivaNova is or has been a defendant in a number of lawsuits for, among other things, alleged products liability and suits alleging patent infringement, and could be subject to additional lawsuits in the future. Given the uncertain nature of litigation generally, LivaNova is not able in all cases to estimate the amount or range of loss that could result from an unfavourable outcome of the litigation (including tax litigation) to which LivaNova is a party. Any such future losses, individually or in the aggregate, could have a material adverse effect on LivaNova's results of operations and cash flows.

Risks related to access to financial resources.

The credit lines provided by LivaNova's lenders are governed by clauses, commitments and covenants. The failure to comply with these provisions can constitute a failure to perform a contractual obligation, which authorises the lender banks to demand the immediate repayment of the facilities, making it difficult to obtain alternative resources.

Changes in LivaNova's financial position are the result of a number of factors, specifically including the achievement of budgeted objectives and the trends shaping general economic conditions, and the financial markets and the industry within which LivaNova operates. LivaNova expects to generate the resources needed to repay maturing indebtedness and fund scheduled investments from the cash flow produced by LivaNova's operations, LivaNova's available liquidity, the renewal or refinancing of bank borrowings and possibly, access to the capital markets. Even under current market conditions, the Company expects that LivaNova's operations will generate adequate financial resources. Nevertheless, given the volatility in current financial markets, the possibility that problems in the banking and monetary markets could hinder the normal handling of financial transactions cannot be excluded.

Certain of LivaNova's debt instruments will require it to comply with certain affirmative covenants and specified financial covenants and ratios.

Certain restrictions in LivaNova's debt instruments could affect its ability to operate and may limit LivaNova's ability to react to market conditions or to take advantage of potential business opportunities as they arise. For example, such restrictions could adversely affect LivaNova's ability to finance its operations, make strategic acquisitions, investments or alliances, restructure its organisation or finance capital needs. Additionally, LivaNova's ability to comply with these covenants and restrictions may be affected by events beyond LivaNova's control such as prevailing economic, financial, regulatory and industry conditions. If any of these restrictions or covenants is breached, LivaNova could be in default under one or more of its debt instruments, which, if not cured or waived, could result in acceleration of the indebtedness under such agreements and cross defaults under its other debt instruments. Any such actions could result in the enforcement of LivaNova's lenders' security interests and/or force LivaNova into bankruptcy or liquidation, which could have a material adverse effect on LivaNova's financial condition and results of operations.

Risks related to the reduction or interruption in supply and an inability to develop alternative sources for supply may adversely affect LivaNova's manufacturing operations and related product sales.

LivaNova maintains manufacturing operations in nine countries located throughout the world and purchases many of the components and raw materials used in manufacturing these products from numerous suppliers in various countries. Some of these companies are highly unionised. A close collaborative relationship between a manufacturer and its suppliers is typical in the medical device industry. While this approach can produce economic benefits in terms of lower costs, it also causes LivaNova to rely heavily on its suppliers. As a result, any problem affecting a supplier (whether due to external or internal causes) could have a negative impact on LivaNova.

In addition, LivaNova manufactures its products at its own facilities or through subcontractors located in various countries, purchasing the components and materials used to manufacture these products from numerous suppliers in various countries. However, in a few limited cases, specific components and raw materials are purchased from primary or main suppliers (or in some cases, a single supplier) for reasons related to quality assurance, cost-effectiveness ratio and availability. While LivaNova work closely with its suppliers to ensure supply continuity, the Company cannot guarantee that LivaNova's efforts will always be successful. Moreover, due to strict standards and regulations governing the manufacture and marketing of LivaNova's products, LivaNova may not be able to quickly locate new supply sources in response to a supply reduction or interruption, with negative effects on its ability to manufacture its products effectively and in a timely fashion.

LivaNova manufactures its products at production facilities in Italy, France, Costa Rica, Germany, the US, Canada, Brazil, Australia and the Dominican Republic, all of which are exposed to the risk of production stoppages caused by exceptional or accidental events (fires, shutdowns of access roads, etc.) or natural calamities (floods, earthquakes, etc.). Even though LivaNova has implemented what the Company believes to be appropriate preventive actions and insurance coverage, the possibility that the occurrence of events of exceptional severity or duration could have an impact on LivaNova's performance cannot be excluded.

LivaNova's inability to integrate recently acquired businesses or to successfully complete future acquisitions could limit its future growth or otherwise be disruptive to its ongoing business.

From time to time, LivaNova expects to pursue acquisitions in support of its strategic goals. In connection with any such acquisitions, LivaNova faces significant challenges in managing and integrating any expanded or combined operations, including acquired assets, operations and personnel. There can be no assurance that acquisition opportunities will be available on acceptable terms or at all, or that LivaNova will be able to obtain necessary financing or regulatory approvals to complete potential acquisitions. LivaNova's success in implementing this strategy will depend to some degree upon the ability of management to identify, complete and successfully integrate commercially viable acquisitions. Acquisition transactions may disrupt LivaNova's ongoing business and distract management from other responsibilities.

The success of any acquisition, investment or alliance may be affected by a number of factors, including LivaNova's ability to properly assess and value the potential business opportunity or to successfully integrate any businesses LivaNova may acquire into its existing business. The integration of the operations of acquired businesses requires significant efforts, including the coordination of information technologies, R&D, sales and marketing, operations, manufacturing and finance. These efforts result in additional expenses and involve significant amounts of management's time that cannot then be dedicated to other projects. Failure to successfully manage and coordinate the growth of the combined company could also have an adverse impact on LivaNova's business. In addition, LivaNova cannot be certain that its investments, alliances and acquired businesses will become profitable or remain so. If LivaNova's investments, alliances or acquisitions are not successful, it may record unexpected impairment charges. Factors that could affect the success of potential future acquisitions include:

the presence or absence of adequate internal controls and/or significant fraud in the financial systems of acquired companies;
adverse developments arising out of investigations by governmental entities of the business practices of acquired companies;
any decrease in customer loyalty and product orders caused by dissatisfaction with the combined companies' product lines and sales and marketing practices, including price increases;
LivaNova's ability to retain key employees; and
the ability of the combined company to achieve synergies among its constituent companies, such as increasing sales of the combined company's products, achieving cost savings and effectively combining technologies to develop new products.

LivaNova may not realise the cost savings, synergies and other benefits that are anticipated as a result of the Mergers.

The combination of two independent companies is a complex, costly and time-consuming process. As a result of the completed Mergers, LivaNova has been required to devote significant management attention and resources to integrating the business practices and operations of Sorin and Cyberonics. The integration process may disrupt LivaNova's business operations and, if implemented ineffectively, could preclude realisation of the full benefits expected to be realised in connection with the Mergers. LivaNova's failure to meet the challenges involved in successfully integrating the operations of Sorin and Cyberonics or otherwise to realise the anticipated benefits of the Mergers could cause an interruption of LivaNova's activities and could seriously harm LivaNova's results of operations. In addition, the overall integration of the two companies may result in material unanticipated problems, expenses, liabilities, competitive responses, loss of client relationships and diversion of management's attention, and may cause the combined company's stock price to decline. The difficulties of combining the operations of the companies include, among others:

managing a significantly larger company;
coordinating geographically separate organisations;
the potential diversion of management focus and resources from other strategic opportunities and from operational matters;
retaining existing customers and attracting new customers;
maintaining employee morale and retaining key management and other employees;
integrating two unique business cultures, which may prove to be incompatible;
the possibility of faulty assumptions underlying expectations regarding the integration process;
consolidating corporate and administrative infrastructures and eliminating duplicative operations;
coordinating distribution and marketing efforts;
integrating information technology, communications and other systems;
changes in applicable laws and regulations;
managing tax costs or inefficiencies associated with integrating the operations of the combined company;
unforeseen expenses associated with the Mergers; and
effecting actions that may be required in connection with obtaining regulatory approvals.

Many of these factors are outside of LivaNova's control and any one of them could result in increased costs, decreased revenue and diversion of management's time and energy, which could materially impact LivaNova's business, financial condition and results of operations. In addition, even if the operations of Sorin and Cyberonics are integrated successfully, LivaNova may not realise the full benefits of the Mergers, including the synergies, cost savings or sales or growth opportunities that the Company expects. These benefits may not be achieved within the anticipated time frame, or at all. As a result, the Company cannot assure the Company's shareholders that the combination of Sorin and Cyberonics will result in the realisation of the full benefits anticipated.

LivaNova's business relationships may be subject to disruption due to uncertainty associated with the Mergers.

Parties with which LivaNova does business may experience uncertainty associated with the Mergers. LivaNova's business relationships may be subject to disruption as customers, distributors, suppliers, vendors and others may attempt to negotiate changes in existing business relationships or consider entering into business relationships with parties other than LivaNova. These disruptions could have an adverse effect on LivaNova's business, financial condition, and/or results of operations or prospects, including an adverse effect on LivaNova's ability to realise the anticipated benefits of the Mergers.

LivaNova may have difficulty attracting, motivating and retaining executives and other key employees due to uncertainty associated with the recent Mergers.

Since the Mergers are now complete, LivaNova's success will depend in part upon its ability to retain key employees of Sorin and Cyberonics and hire new personnel. Competition for qualified personnel can be intense. Current and prospective employees may experience uncertainty about the effect of the Mergers, which may impair LivaNova's ability to attract, retain and motivate key management, sales, marketing, technical and other personnel.

In addition, pursuant to change-in-control provisions in LivaNova's employment and transition agreements, certain of LivaNova's key employees are entitled to receive severance payments upon a constructive termination of employment. Certain of LivaNova's key employees potentially could terminate their employment following specified circumstances set forth in the applicable employment or transition agreement, including certain changes in such key employees' title, status, authority, duties, responsibilities or compensation, and collect severance. Such circumstances could occur in connection with the Mergers as a result of changes in roles and responsibilities. If LivaNova's key employees depart, the continued integration of Sorin's and Cyberonics' businesses may be more difficult and LivaNova's operations may be harmed. Furthermore, LivaNova may have to incur significant costs in identifying, hiring and retaining replacements for departing employees and may lose significant expertise and talent relating to the businesses of Sorin or Cyberonics, and LivaNova's ability to realise the anticipated benefits of the Mergers may be adversely affected. In addition, there could be disruptions to or distractions for the workforce and management associated with activities of labour unions or works councils or integrating employees into the combined company. Accordingly, no assurance can be given that LivaNova will be able to attract or retain key employees to the same extent that the legacy Sorin and Cyberonics companies were able to attract or retain employees in the past.

LivaNova has and will continue to incur certain transaction and merger-related costs in connection with the Mergers.

LivaNova has incurred and expects to incur a number of non-recurring direct and indirect costs associated with the Mergers. These costs and expenses include fees paid to financial, legal and accounting advisors, filing fees, printing expenses and other related charges as well as ongoing expenses related to facilities and systems consolidation costs, severance payments and other potential employment-related costs, including payments remaining to be made to certain Sorin and Cyberonics executives. In the transitional period April 25, 2015 to December 31, 2015, we incurred $42.1 million in expenses related to the Mergers and expects additional expenses in future for the integration of the two merged businesses. In addition, we incurred $13.7 million and $11.3 million in integration and restructuring expenses, respectively, during the prior year, of which integration expenses related to systems integration, organisation structure integration, finance, synergy and tax planning, transitioning of accounting methodologies, the Company's listing in London and certain re-branding efforts, and restructuring efforts related to LivaNova's intent to leverage economies of scale, eliminate overlapping corporate expenses and streamline distributions, logistics and office functions in order to reduce overall costs. While the Company has assumed a certain level of expenses in connection with the terms of the Merger Agreement, there are many factors beyond the Company's control, including unanticipated costs that could affect the total amount or the timing of these expenses. Although the Company expects that the benefits of the Mergers will offset the transaction expenses and implementation costs over time, this net benefit may not be achieved in the near term or at all.

The IRS may not agree with the conclusion that the Company should be treated as a foreign corporation for US federal tax purposes, and the Company may be required to pay substantial US federal income taxes.

The Company believes that under current law, it is treated as a foreign corporation for US federal tax purposes because it is a UK incorporated entity. Although the Company is incorporated in the UK, the IRS may assert that it should be treated as a US corporation (and, therefore, a US tax resident) for US federal tax purposes pursuant to Section 7874. For US federal tax purposes, a corporation is considered a tax resident in the jurisdiction of its organisation or incorporation, except as provided under Section 7874. Subject to the discussion of Section 7874 below, because the Company is a UK incorporated entity, it would be classified as a foreign corporation (and, therefore, a non-US tax resident) under these rules. Section 7874 provides an exception under which a foreign incorporated entity may, in certain circumstances, be treated as a US corporation for US federal tax purposes.

For the Company to be treated as a foreign corporation for US federal tax purposes under Section 7874, in connection with the Mergers completed on 19 October 2015, either (i) the former stockholders of Cyberonics must own (within the meaning of Section 7874) less than 80 per cent. (by both vote and value) of the Company's Ordinary Shares by reason of holding shares of Cyberonics common stock, or (ii) the Company must have substantial business activities in the UK after the Mergers (taking into account the activities of the Company's expanded affiliated group). For purposes of Section 7874, "expanded affiliated group" means a foreign corporation and all subsidiaries in which the foreign corporation, directly or indirectly, owns more than 50 per cent. of the shares by vote and value. The Company does not expect to have substantial business activities in the UK within the meaning of these rules.

The Company believes that because the former stockholders of Cyberonics own (within the meaning of Section 7874) less than 80 per cent. (by both vote and value) of the Ordinary Shares by reason of holding shares of Cyberonics common stock, the test set forth above to treat the Company as a foreign corporation was satisfied in connection with the Mergers completed on 19 October 2015. However, the IRS may disagree with the calculation of the percentage of the Ordinary Shares deemed held by former holders of Cyberonics common stock by reason of being former holders of Cyberonics common stock due to the calculation provisions laid out under Section 7874 and accompanying guidance, or the Section 7874 Percentage. The rules relating to calculating the Section 7874 Percentage are new and subject to uncertainty, and thus it cannot be assured that the IRS will agree that the ownership requirements to treat the Company as a foreign corporation were met. In addition, there have been legislative proposals to expand the scope of US corporate tax residence, including by potentially causing the Company to be treated as a US corporation if the management and control of the Company and its affiliates were determined to be located primarily in the US. There have also been recent IRS publications expanding the application of Section 7874 and there could be prospective or retroactive changes to Section 7874 or the US Treasury Regulations promulgated thereunder that could result in the Company being treated as a US corporation. For example, the IRS and US Treasury recently issued new rules that (i) make changes to the manner in which the Section 7874 Percentage is calculated, (ii) limit the ability to acquire certain US companies within a 36 month period and (iii) recharacterise certain intercompany indebtedness as equity in certain circumstances. Certain of these changes may affect the Company's ability to undertake future planning and acquisition strategies (see discussion " The Company's ability to engage in certain acquisition strategies and certain tax planning may be impacted by recent IRS guidance. Status as a foreign corporation for US federal income tax purposes could be affected by a change in law " below).

The IRS may not agree with the conclusion that Section 7874 does not limit Cyberonics' and its US affiliates' ability to utilise their US tax attributes and does not impose an excise tax on gain recognised by certain individuals.

If the Section 7874 Percentage is calculated to be at least 60 per cent. but less than 80 per cent., Section 7874 imposes a minimum level of tax on any "inversion gain" of a US corporation (and any US person related to the US corporation) after the acquisition. Inversion gain is defined as (i) the income or gain recognised by reason of the transfer of property to a foreign related person during the 10-year period following the Cyberonics merger, and (ii) any income received or accrued during such period by reason of a license of any property by the US corporation to a foreign related person. The effect of this provision is to deny the use of certain US tax attributes (including net operating losses and certain tax credits) to offset US tax liability, if any, attributable to such inversion gain. In addition, the IRS and the US Treasury Department have issued guidance that has further limited benefits of certain post-combination transactions for combinations resulting in a Section 7874 Percentage of at least 60 per cent. but less than 80 per cent., and have announced the intention to issue future guidance that could potentially limit benefits of interest deductions from intercompany debt or other deductions deemed to inappropriately "strip" US source earnings.

Additionally, if the Section 7874 Percentage is calculated to be at least 60 per cent. but less than 80 per cent., Section 7874 and rules related thereto would impose the Section 4985 Excise Tax on the gain recognised by certain "disqualified individuals" (including the former officers and directors of Cyberonics) on certain Cyberonics stock-based compensation held thereby at a rate equal to 15 per cent. If the Section 4985 Excise Tax is applicable, the compensation committee of the Cyberonics board previously determined that it is appropriate to provide such individuals with a payment with respect to the Section 4985 Excise Tax, so that, on a net after-tax basis, they would be in the same position as if no such Section 4985 Excise Tax had been applied.

The Company believes the Section 7874 Percentage following the combination of Cyberonics and Sorin was less than 60 per cent. As a result, the Company believes that (i) Cyberonics and its US affiliates will be able to utilise their US tax attributes to offset their US tax liability, if any, resulting from certain subsequent specified taxable transactions, and (ii) "disqualified individuals" will not be subject to the Section 4985 Excise Tax. However, the rules relating to calculating the Section 7874 Percentage are new and subject to uncertainty, and thus it cannot be assured that the IRS will agree that the Section 7874 Percentage following the combination of Cyberonics and Sorin was less than 60 per cent.

The Company's ability to engage in certain acquisition strategies and certain internal restructurings may be impacted by recent IRS guidance.

The IRS and US Treasury recently issued new rules that materially change the manner in which the Section 7874 Percentage will be calculated in certain future acquisitions of US businesses in exchange for Company equity, which may impact the Company's ability to engage in particular acquisition strategies. For example, the new temporary regulations would impact certain acquisitions of US companies for stock in the Company in the 36 month period beginning 19 October 2015 by excluding from the Section 7874 Percentage the portion of shares of the Company that are allocable to the legacy Sorin shareholders. This new rule would generally have the effect of increasing the otherwise applicable Section 7874 Percentage with respect to a future acquisition of a US business.

New rules also provide that certain intercompany debt instruments issued on or after 4 April 2016 will be treated as equity for US federal income tax purposes, therefore limiting US tax benefits and resulting in possible US withholding taxes. Moreover, while these new rules are not retroactive, they could impact the Company's ability to engage in future restructurings if such transactions cause an existing debt instrument to be treated as reissued.

The Company's status as a foreign corporation for US federal income tax purposes could be affected by a change in law.

The Company believes that under current law, it is treated as a foreign corporation for US federal tax purposes because it is a UK incorporated entity. However, changes to the inversion rules in Section 7874 or the US Treasury Regulations promulgated thereunder could adversely affect the Company's status as a foreign corporation for US federal tax purposes, and any such changes could have prospective or retroactive application to the Company and its respective stockholders, shareholders and affiliates. For example, the IRS and US Treasury recently issued new rules that (i) make changes to the manner in which the Section 7874 Percentage is calculated in the case of future acquisitions, (ii) limit the ability to acquire certain US companies within a 36 month period and (iii) characterise certain intercompany indebtedness as equity in certain circumstances. See discussion " The Company's ability to engage in certain acquisition strategies and certain tax planning may be impacted by recent IRS guidance. Status as a foreign corporation for US federal income tax purposes could be affected by a change in law " above.

In addition, recent legislative proposals and IRS guidance have aimed to expand the scope of US corporate tax residence, including by reducing the Section 7874 Percentage threshold at or above which the Company would be treated as a US corporation or by determining the Company's US corporate tax residence based on the location of the management and control of the Company and its affiliates. Any such changes to Section 7874 or other such legislation, if passed, could have a significant adverse effect on the Company's financial results.

Future changes to US and foreign tax laws could adversely affect the Company.

The US Congress, the UK Government, the Organisation for Economic Co-operation and Development and other government agencies in jurisdictions where the Company and its affiliates do business have had an extended focus on issues related to the taxation of multinational corporations. One example is in the area of "base erosion and profit shifting," where payments are made between affiliates from a jurisdiction with high tax rates to a jurisdiction with lower tax rates. In addition, other recent legislative proposals in the US would treat the Company as a US corporation if the management and control of the Company and its affiliates were determined to be located primarily in the US and/or would reduce the Section 7874 Percentage threshold at or above which the Company would be treated as a US corporation. Furthermore, the 2016 US Model Income Tax Convention recently released by the US Treasury Department would reduce potential tax benefits with respect to the Company and its affiliates if the Section 7874 Percentage were calculated to be at least 60 per cent. but less than 80 per cent. by imposing full withholding taxes on payments pursuant to certain financing structures, distributions from US subsidiaries and payments pursuant to certain licensing arrangements. Thus, the tax laws in the US, the UK and other countries in which the Company and its affiliates do business could change on a prospective or retroactive basis, and any such changes could adversely affect the Company.

The Company may not qualify for benefits under the tax treaty entered into between the UK and the US.

The Company believes that it operates in a manner such that it is eligible for benefits under the tax treaty entered into between the UK and the US. However, its ability to qualify for such benefits will depend upon the requirements contained in such treaty.

The failure by the Company or its subsidiaries to qualify for benefits under the tax treaty entered into between the UK and the US could result in adverse tax consequences for the Company and its subsidiaries.

The 2016 US Model Income Tax Convention recently released by the US Treasury Department would reduce potential tax benefits with respect to the Company and its affiliates if the Section 7874 Percentage is calculated to be at least 60 per cent. but less than 80 per cent. by imposing full withholding taxes on payments pursuant to certain financing structures, distributions from US subsidiaries and payments pursuant to certain licensing arrangements. If the proposed treaty is enacted with applicability to the Company or its affiliates, it would result in material reductions in the benefit of qualifying for a treaty.

The Company believes that it operates so as to be treated exclusively as a resident of the UK for tax purposes, but the relevant tax authorities may treat it as also being a resident of another jurisdiction for tax purposes.

The Company is a company incorporated in the UK. Current UK law provides that the Company will be regarded as being a UK resident for tax purposes from incorporation and shall remain so unless (a) it is concurrently resident in another jurisdiction (applying the tax residence rules of that jurisdiction) that has a double tax treaty with the UK and (b) there is a provision or procedure in that tax treaty which allocates or determines exclusive residence to that other jurisdiction.

Based upon the Company's management and organisational structure, the Company believes that it should be regarded as resident exclusively in the UK from its incorporation for tax purposes. However, because this analysis is highly factual and may depend on future changes in the Company's management and organisational structure, there can be no assurance regarding the final determination of its tax residence. Should the Company be treated as resident in a country or jurisdiction other than the UK, it could be subject to taxation in that country or jurisdiction on its worldwide income and may be required to comply with a number of material and formal tax obligations, including withholding tax and/or reporting obligations provided under the relevant tax law, which could result in additional costs and expenses for the Company, as well as its shareholders, lenders and/or bondholders.

The effective tax rate that will apply to the Company is uncertain and may vary from expectations.

No assurances can be given as to what the Company's worldwide effective corporate tax rate will be because of, among other things, uncertainty regarding the tax policies of the jurisdictions where it operates. The Company's actual effective tax rate may vary from its expectations and that variance may be material. Additionally, tax laws or their implementation and applicable tax authority practices could change in the future.

Appendix C - Extracts from the Strategic Report

The business review of LivaNova for the period ended 31 December 2015 is set out in pages 25 to 32 of the 2015 Annual Report. The full and unedited text relating to these disclosures is set out below.

A. Introduction

The Mergers became effective on 19 October 2015 and LivaNova became the holding company of the combined businesses of Cyberonics and Sorin. Based on the structure of the Mergers, management determined that Cyberonics is considered to be the acquirer and predecessor for accounting purposes.

LivaNova is reporting in its consolidated financial statements in this UK Annual Report the results from operations for Cyberonics for the period 25 April 2015 to 31 December 2015 and the results of operations for Sorin for the period 19 October 2015 to 31 December 2015, being the Transitional Period.

Historically, Sorin and Cyberonics prepared their financial statements in accordance with IFRS and US GAAP, respectively. Following completion of the Mergers, LivaNova is preparing its consolidated financial statements in accordance with both (i) US GAAP in accordance with US securities law and reporting requirements, and (ii) IFRS in accordance with the requirements of the Companies Act and the DTRs. The US GAAP financial statements for the Transitional Period were contained in the Annual Report on Form 10-K filed with the SEC on 4 March 2016 and the IFRS financial statements are contained in this UK Annual Report.

The basis of presentation, critical accounting estimates and significant accounting policies are set out in note 2 to the consolidated IFRS financial statements contained in this UK Annual Report.

LivaNova reported a loss from operations of $23.7 million on net sales of $415.7 million for the Transitional Period. This period included a $24.5 million impact from amortisation of the step-up in inventory and fixed assets. Also included in this period is $72 million in exceptional items, including merger, integration and restructuring expenses, and an impairment of an equity investment, along with $23 million in accelerated equity compensation expenses. The directors believe that, due to the timing of completion of the Mergers, and the time period covered by the transitional results, the results are not comparable to prior periods.

B. Key Performance Indicators

The directors of LivaNova consider that the most important KPIs for 2016 are those set out below. As LivaNova only began operating as a combined entity on 19 October 2015 on completion of the Mergers, it is not possible to provide KPI information for 2015.

Net sales growth (on a constant currency basis, or adjusted net sales)

Due to the number of currencies in which LivaNova's sales are invoiced to customers, the directors believe that constant currency sales growth is a more appropriate way to measure operational performance. Constant currency growth measures the change in sales between any particular year and the immediate prior year using average foreign exchange rates during the immediate prior year.

Adjusted income from operations

Income from operations, as adjusted for various costs arising from the Mergers (including those costs incurred as a result of purchase price accounting), measures LivaNova's management of sales, gross profit and normalized operating expenses.

Adjusted net profit

Net profit, as adjusted for the items referred to above, and also adjusted for unusual costs from finance related matters, minority investments and accounting for taxation, measures the totality of LivaNova's income statement.

Adjusted earnings per share

Earnings per share, as adjusted for the items referred to above, is a measure often used by investors to arrive at a value for each share issued by a company, including the dilutive effect of incentive shares issued to management.

An important KPI to be evaluated over a period longer than one year is the share price , which reflects not only the management of LivaNova's earnings on a consistent basis, but also management's ability to articulate medium and longer term strategy and communicate both of these to investors.

C. Results of Operations

On 19 October 2015, pursuant to the terms of the Merger Agreement Sorin merged with and into the Company, with the Company continuing as the surviving company, immediately followed by the merger of Merger Sub with and into Cyberonics, with Cyberonics continuing as the surviving company and as a wholly owned subsidiary of the Company. Upon the consummation of the Mergers, the historical financial statements of Cyberonics became the Company's historical financial statements. Accordingly, the historical financial statements of Cyberonics are included in the comparative prior period.

Prior to the Mergers, Cyberonics had a 52/53-week financial year that ended on the last Friday in April. The financial year ended 24 April 2015 on the accompanying consolidated statement of income is a 52-week year. As a result of the Mergers, Cyberonics changed to a calendar year ending 31 December of each year. The change in financial year, effective as of 19 October 2015, resulted in a transitional period which began on 25 April 2015 and ended on 31 December 2015. Therefore, the comparative amounts for the financial year ended 24 April 2015 are not comparable.

Upon completion of the Mergers, LivaNova reorganised its reporting structure and aligned its segments and the underlying divisions and businesses. The Cyberonics operations and historical data are included in the Neuromodulation segment, and the Sorin businesses activities are included in the Cardiac Surgery and the CRM segments.

Net Sales

The table below illustrates net sales by operating segment for the Transitional Period as compared to the financial year ended 24 April 2015 (which uses historical Cyberonics data), or Cyberonics FY 2015 (in thousands):

	Transitional Period 25 April 2015 to 31 December 2015 $	Financial year ended 24 April 2015 $	% Change
Net revenues
Neuromodulation	214,761	291,558	(26.3)
Cardiac Surgery	147,635	-
Cardiac Rhythm Management	52,470	-
Corporate and New Venture	841	-
Total	$415,707	$291,558

The Cardiac Surgery and CRM segment sales occurred from 19 October 2015 to 31 December 2015 following the accounting acquisition of Sorin as a result of the Mergers.

Neuromodulation net sales for the Transitional Period decreased $76.8 million, or 26.3 per cent., compared to Cyberonics FY 2015. The decrease in Neuromodulation net sales is primarily due to the Transitional Period including approximately 36 weeks compared to 52 weeks in Cyberonics FY 2015. The successful US launch of AspireSR in June 2015 provided an important impetus for net sales.

The table below illustrates net sales by market geography for the Transitional Period as compared to Cyberonics FY 2015 (in thousands):

	Transitional Period 25 April 2015 to 31 December 2015				Financial year ended 24 April 2015
	Neuro- modulation $	Cardiac Surgery $	Cardiac Rhythm Management $	New Ventures and Corporate $	Neuro- modulation $
United States	180,764	48,960	2,537	-	235,712
Europe ⁽¹⁾	21,081	40,272	43,188	242	41,484
Rest of World	12,916	58,403	6,745	599	14,362
Total	$214,761	$147,635	$52,470	$841	$291,558

⁽¹⁾ Includes those countries in Europe where LivaNova has a direct sales presence. Countries where sales are made through distributors are included in Rest of World.

Cost of Sales and Expenses

The table below illustrates LivaNova's cost of sales and major expenses as a percentage of sales for the Transitional Period, as compared to Cyberonics FY 2015:

	Transitional Period 25 April 2015 to 31 December 2015	Financial year ended 24April 2015	% Change
Cost of Sales	35.8%	9.4%	26.4%
Selling, general and administrative	40.3%	42.3%	(2.0)%
Research and development	12.2%	14.9%	(2.7)%
Merger related expenses	10.1%	3.0%	7.1%
Integration expenses	3.3%	-%	3.3%
Restructuring expenses	2.7%	-%	2.7%

Cost of Sales

Cost of sales consisted primarily of direct labour, allocated manufacturing overhead, the acquisition cost of raw materials and components and the MDET. MDET began on 1 January 2013 and has been suspended for the period 1 January 2016 to 31 December 2017.

LivaNova's cost of sales as a percentage of net sales increased to 35.8 per cent. for the Transitional Period, as compared to 9.4 per cent. for Cyberonics FY 2015. Cost of sales, as a percentage of net sales, increased as a result of including lower margin sales in Cardiac Surgery and CRM from the date of the Mergers, as well as the product transitions in CRM and Neuromodulation.

Looking ahead

The Company expects the cost of sales as a percentage of net sales in the year ending 31 December 2016 will be approximately the same as the Transitional Period.

SG&A Expenses

SG&A expenses are comprised of sales, marketing, general and administrative activities. SG&A expenses exclude expenses incurred in connection with the merger between Cyberonics and Sorin, integration costs after the Mergers and restructuring costs under the Restructuring Plan.

SG&A expenses as a percentage of net sales for the Transitional Period decreased by 2.0 per cent. to 40.3 per cent. as compared to Cyberonics FY 2015. SG&A expenses, as a percentage of net sales, declined due to the higher sales base arising from the Mergers, and the initial impact of certain cost savings due to the elimination of duplicate overhead costs.

Looking ahead

LivaNova's SG&A expenses in future years could be favourably impacted by synergies from the Restructuring Plan.

R&D Expenses

R&D expenses consist of product design and development efforts, clinical trial programmes and regulatory activities. R&D expenses as a percentage of net sales were 12.2 per cent. for the Transitional Period, as compared to 14.9 per cent. for Cyberonics FY 2015. R&D expenses, as a percentage of net sales, decreased due to changes in the R&D programmes within Neuromodulation, the initial impact of cost savings as well as lower R&D costs for Cardiac Surgery and CRM from the date of the Mergers.

Looking ahead

LivaNova's R&D expenditures could be affected by future impairment of intangible assets utilised in R&D projects that may be cancelled or by the delay or cancellation of a project based on LivaNova's review and product priorities. Ongoing projects include opportunities in the area of heart failure. LivaNova's R&D expenses in future years could, however, be favourably impacted by synergies from the Restructuring Plan.

Exceptional Items

Merger Related Expenses

In the Transitional Period, LivaNova incurred $42.1 million in expenses related to the Mergers. These expenses consisted of professional fees for legal services, accounting services, due diligence, a fairness opinion and the preparation of registration and regulatory filings in the US and Europe, as well as investment banking fees.

The Company reported these expenses as a part of exceptional item separately in the Company's consolidated income statement. Share-based compensation triggered by the Mergers is included under merger related expenses.

Looking ahead

The Company expect merger related expenses to be significantly reduced in the year ending 31 December 2016.

Integration Expenses

LivaNova incurred $13.7 million in the Transitional Period in integration expenses related to the Mergers. These expenses consisted primarily of consultation with regard to: LivaNova's systems integration, organisation structure integration, finance, synergy and tax planning, the transition to US GAAP for Sorin activity, the Company's LSE listing and certain re-branding efforts. The Company reported these expenses as a part of exceptional item separately in the Company's consolidated income statement.

Looking ahead

The Company expects integration expenses to continue to be material in the year ending 31 December 2016.

Restructuring Expenses

LivaNova incurred $11.3 million in the Transitional Period in restructuring expenses. The Company reported these expenses as a part of exceptional item separately in the Company's consolidated income statement. Termination payments triggered by the Mergers are included in restructuring expenses. Certain termination payments occurred following efforts to eliminate duplicate corporate expenses. LivaNova also initiated its Restructuring Plan which is intended to leverage economies of scale and streamline distributions, logistics and office functions in order to reduce overall costs.

Looking ahead

The Company expects Restructuring Plan expenses to increase in the year ending 31 December 2016, particularly with respect to the Reorganisation Plan for the CRM Business Unit announced on 10 March 2016 (see note 33 to the consolidated Financial Statements).

Impairment of Investments

LivaNova fully impaired a cost-method equity investment in Cerbomed, a European company developing a t-VNS device for epilepsy treatment, for a loss of $5.1 million. The Company reported these expenses as a part of exceptional item separately in the Company's consolidated income statement.

Interest Expense

LivaNova incurred interest expense of $1.5 million for the Transitional Period, primarily from LivaNova's outstanding borrowings, amortisation of debt issuance costs and debt discounts and interest accrued on unrealised tax benefits.

Looking ahead

The Company expects LivaNova's interest expense to increase in the year ending 31 December 2016.

Foreign Exchange and Other Income (Expense), Net

Foreign exchange and other expenses of $7.5 million recognised during the Transitional Period included loss of $5.6 million from both realised and unrealised foreign currency hedges. These derivative contracts were established to hedge against exchange rate movements on the loan from the EIB and other loans, which are denominated in Euros. The loss on the hedge was recorded in the Company's consolidated income statement, whereas the hedged instrument's gain was recorded in comprehensive income in the Company's consolidated financial statements. Other losses included net foreign currencytransaction losses of $1.9 million.

Income Taxes

LivaNova's effective tax rate for the Transitional Period was 15.9 per cent., primarily due to the foreign tax rate differential between the UK tax rate and the non-UK tax rates of $11.2 million in the jurisdictions in which LivaNova operates; unfavourable effect of change in tax rate of $3.3 million; the tax benefit of notional interest deduction of $3.1 million; non-deductible transaction costs of $5.4 million; a US R&D tax credit of $1.6 million; unfavourable change in unrecognised deferred tax assets of $2.2 million; equity compensation adjustment of $5.8 million; and other permanent differences, including US IRC subpart F income, US domestic manufacturing deduction and other non-deductible expenses.

LivaNova files federal and local tax returns in many jurisdictions throughout the world and is subject to income tax examinations for financial year 1992 for the legacy Cyberonics business and subsequent years, with certain exceptions. Tax authorities may disagree with certain positions LivaNova has taken and assess additional taxes, and as a result LivaNova establishes reserves for uncertain tax positions, which requires a significant degree of management judgment. LivaNova regularly assesses the likely outcomes of LivaNova's tax positions in order to determine the appropriateness of LivaNova's reserves for uncertain tax positions. The total amount of unrecognised tax benefit as of 31 December 2015, if recognised, would reduce LivaNova's income tax expense by approximately $20.2 million. The Company is unable to estimate the amount of change of the majority of LivaNova's unrecognised tax benefits over the next 12 months; however, approximately $0.9 million will be resolved over the next 12 months due to the expected completion of an audit.

As of closing of the Mergers, there were several investments in subsidiaries where the book basis was greater than the tax basis, whereby the deferred tax liability was recognised through the acquisition method of accounting. The deferred tax liability recognised through purchase accounting related to these subsidiaries was approximately $17.9 million. No further provision has been made for income taxes on undistributed earnings of foreign subsidiaries as of 31 December 2015, because it is the Company's intention to indefinitely reinvest undistributed earnings of LivaNova's foreign subsidiaries. In the event of the distribution of those earnings in the form of dividends, a sale of the subsidiaries or certain other transactions, LivaNova may be liable for income taxes. There should be no material tax liability on future distributions as most jurisdictions with undistributed earnings have various participation exemptions or no withholding tax. As of 31 December 2015, it was not practicable to determine the amount of the income tax liability related to those investments.

Losses from Equity Method Investments

LivaNova recognised a loss of $3.3 million from LivaNova's share of the losses at LivaNova's equity method investments during the Transitional Period, primarily due to losses at Highlife, Caisson, Respicardia and MicroPort Sorin CRM.

Looking ahead

LivaNova's share of its investees' losses during the Transitional Period was incurred during the period 19 October 2015 to 31 December 2015. In the year ending 31 December 2016, LivaNova's share of its investees' losses will be incurred for the period 1 January 2016 to 31 December 2016, and the Company expect the losses to be significantly greater.

D. Liquidity and Capital Resources

Based on LivaNova's current business plan, the Company believes that LivaNova's existing cash, investments and future cash generated from operations will be sufficient to fund its expected operating needs, working capital requirements, R&D opportunities, capital expenditures and debt service requirements over the next 12 months. LivaNova regularly reviews its capital needs and considers various investing and financing alternatives to support its requirements.

Cash Flows

Net cash and cash equivalents provided by (used in) operating, investing and financing activities and the net increase (decrease) in the balance of cash and cash equivalents were as follows (in thousands):

	Transitional Period 25 April 2015 to December 31, 2015 $	Financial year ended 24 April 2015 $
Operating activities	(9,288)	79,676
Investing activities	16,182	(9,765)
Financing activities	(18,127)	(48,256)
Effect of exchange rate changes on cash and cash equivalents	(341)	(767)
Net increase (decrease)	(11,574)	20,888

Operating Activities

Cash utilised in LivaNova's consolidated operating activities during the Transitional Period was $9.3 million. In Cyberonics FY 2015, Cyberonics' cash flow provided by operations was $79.6 million.

During the Transitional Period, cash flow from operating activities benefited from a cash inflow of $36.3 million primarily due to the reduction of Sorin's inventory that was acquired in the Mergers. The Company acquired $233.8 million of Sorin inventory as of 19 October 2015. In addition, during the Transitional Period, accounts payable and accrued liabilities decreased by $32.8 million, primarily due to payment of accrued merger costs.

Investing Activities

Cash provided by investing activities of $16.2 million during the Transitional Period was due to the transfer of $20.0 million to cash and cash equivalents from short-term investments and an increase in cash of $12.5 million obtained in the business acquisition, offset by net investment activity of $16.4 million.

Financing Activities

LivaNova utilised cash of $18.1 million for financing activities during the Transitional Period, which included the repayment of long-term debt of $32.0 million, and the purchase of treasury shares for $7.3 million, partially offset by cash proceeds from net short-term debt borrowing of $11.1 million and stock based compensation activities of $8.8 million. In Cyberonics FY 2015, LivaNova utilised cash for treasury stock repurchases of $55.0 million, while stock-based compensation activity provided $4.7 million for a net utilisation of $48.3 million.

Debt and Capital

LivaNova's capital structure consists of debt and equity. As of 31 December 2015, LivaNova's total debt of $174.3 million was 9.6 per cent. of total equity of $1,809.9 million.

Debt Acquired in the Mergers

At the consummation of the Mergers on 19 October 2015, LivaNova acquired all of the outstanding debt of Sorin in the aggregate principal amount of $203.0 million payable to various financial and non-financial institutions. Prior to the Mergers, Cyberonics had no debt.

Debt - Post Mergers

During the period between 19 October 2015 and 31 December 2015, LivaNova repaid $32.0 million of long-term debt and borrowed $11.1 million against short-term credit facilities.

Factoring

As of 31 December 2015, LivaNova includes an obligation of $1.2 million related to advances on customer receivables in Accrued Liabilities in the consolidated balance sheet, with the balance of $23.3 million as an offset against customer receivables. The Company expects to reduce or eliminate this form of financing in fiscal year 2016.

Contractual Obligations

A summary of contractual and contingent obligations as of 31 December 2015 is as follows (in thousands):

	Less than One Year $	One to Three Years $	Three to Five Years $	Over Five Years $	Total Contractual Obligations $
Contingent obligations
Guarantees on government bids ⁽¹⁾	25,879	-	-	-	25,879
Guarantees - commercial ⁽²⁾	5,010	-	-	-	5,010
Guarantees to tax authorities ⁽³⁾	11,163	-	-	-	11,163
	42,052	-	-	-	42,052
Contractual obligations related to off-balance sheet arrangements:
Operating leases obligations ⁽⁴⁾	17,798	33,429	20,139	29,300	100,666
Interest payments ⁽⁵⁾	1,364	1,751	768	61	3,944
Minimum royalty obligations ⁽⁶⁾	50	100	100	50	300
Inventory purchase commitments	30,147	3,828	51	214	34,240
	49,359	39,108	21,058	29,625	139,150
Long-term debt, including current portion	82,513	42,124	39,649	10,018	174,304
Capital leases	4	-	-	-	4
Derivatives and other	1,815	1,414	368	11	3,608
	84,332	43,538	40,017	10,029	177,916
Total ⁽⁷⁾	$175,743	$82,646	$61,075	$39,654	$359,118

⁽¹⁾ Government bid guarantees include such items as unconditional bank guarantees, irrevocable letters of credit and bid bonds.

⁽²⁾ Commercial guarantees include LivaNova's Canadian production site lease guarantee of $4.1 million.

⁽³⁾ Tax guarantees include the Milan VAT Authority security of €10.2 million.

⁽⁴⁾ Operating lease commitments include facilities, office equipment and automobiles.

⁽⁵⁾ Interest payments reflect the contractual interest due on LivaNova's outstanding debt and exclude the impact of interest rates swap agreements.

⁽⁶⁾ Minimum royalty fees are payable to Flint Hills L.L.C. for cardiac-based seizure detection intellectual property. Other royalty payments are not disclosed as they cannot be determined at this time.

⁽⁷⁾ Unrecognised tax benefits of $20.2 million are not reflected in the above schedule due to LivaNova's inability to make a reasonably reliable estimate of the timing of any income tax payments.

E. Quantitative and Qualitative Disclosures about Market Risk

LivaNova is exposed to certain market risks as part of its ongoing business operations, including risks from foreign currency exchange rates, interest rate risks and concentration of procurement suppliers that could adversely affect LivaNova's consolidated balance sheet, income statement and cash flow. LivaNova manages these risks through regular operating and financing activities and, at certain times, derivative financial instruments.

Foreign Currency Exchange Rate Risk

Due to the global nature of LivaNova's operations, it is exposed to foreign currency exchange rate fluctuations. LivaNova generally utilises foreign exchange forward contracts that are designed to hedge the variability of material cash flows associated with forecast revenue and costs denominated in a currency different from the functional currency of the consolidated income statement that will take place in the future.

LivaNova does not enter into currency exchange rate derivative instruments for speculative purposes.

Based on its exposure to foreign currency exchange rate risk, a sensitivity analysis indicates that if the US dollar had uniformly weakened or strengthened by 10 per cent. against the pound sterling and the yen the effect on LivaNova's unrealised income or expense for its derivatives outstanding as at 31 December 2015 would have been approximately $2.3 million.

Any gains or losses on the fair value of derivative contracts would generally be offset by gains and losses on the underlying transactions. These offsetting gains and losses are not reflected in the above analysis.

Interest Rate Risk

LivaNova is subject to interest rate risk on its investments and debt. LivaNova manages a portion of its interest rate risk with contracts that swap floating-rate interest payments for fixed rate interest payments. If interest rates were to increase or decrease by 0.5 per cent., the effects on LivaNova's consolidated income statement would have been immaterial.

Concentration of Credit Risk

LivaNova's trade accounts receivable represents potential concentrations of credit risk. This risk is limited due to the large number of customers and their dispersion across a number of geographic areas, as well as LivaNova's efforts to control its exposure to credit risk by monitoring its receivables and the use of credit approvals and credit limits. In addition, LivaNova has historically had strong collections and minimal write-offs. Whilst the Company believes that LivaNova's reserves for credit losses are adequate, essentially all of LivaNova's trade receivables are concentrated in the hospital and healthcare sectors worldwide and, accordingly, LivaNova is exposed to their respective businesses, economic and country-specific variables. Although the Company does not currently foresee a concentrated credit risk associated with these receivables, repayment is dependent on the financial stability of these industry sectors and their respective countries' national economies and healthcare systems.

Appendix D - Consolidated IFRS Financial Statements

The consolidated IFRS Financial Statements of LivaNova for the period ended 31 December 2015 are set out on pages 90 to 179 of the 2015 Annual Report. The full unedited text of these IFRS Financial Statements is set out below.

LIVANOVA PLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(In thousands, except per share amounts)

	Notes	Transitional Period 25 April 2015 to 31 December 2015			Fiscal Year Ended 24 April 2015
Revenue	26	$	415,707		$	291,558
Cost of sales	28	(148,849		)	(27,340		)
Gross profit		$	266,858		$	264,218
Operating expenses:
Selling, general and administrative	28	(167,655		)	(123,331		)
Research and development	28	(50,740		)	(43,449		)
Operating profit before exceptional items		48,463			97,438
Exceptional items	30	(72,172		)	(8,692		)
Operating (loss)/profit		(23,709		)	88,746
Interest income		392			184
Interest expense		(1,509		)	(21		)
Foreign exchange		(7,522		)	479
Share of (loss)/profit from equity method investments	11	(3,308		)	-
(Loss)/profit before tax		$	(35,656	)	$	89,388
Income tax (benefit)/expense	23	(6,540		)	32,385
(Loss)/profit attributable to owners of the parent		$	(29,116	)	$	57,003

Basic (loss)/earnings per share	25	$	(0.89	)	$	2.16
Diluted (loss)/earnings per share	25	$	(0.89	)	$	2.14
Shares used in computing basic (loss)/earnings per share		32,741,357			26,391,064
Shares used in computing diluted (loss)/earnings per share		32,741,357			26,625,721

LIVANOVA PLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)

	Notes	Transitional Period 25 April 2015 to 31 December 2015			Fiscal Year Ended 24 April 2015
(Loss)/profit attributable to owners of the parent		$	(29,116	)	$	57,003
Items of other comprehensive income that will subsequently be reclassified to profit or loss
Cash flow hedges for interest rate fluctuations	15	124			-
Tax impact		(38		)	-
Cash flow hedges for exchange rate fluctuations	15	1,150			-
Tax impact		(348		)	-
Foreign currency translation differences		(51,716		)	(3,856		)

Total items of other comprehensive income that will subsequently be reclassified to profit or loss		(50,828		)	(3,856		)

Items of other comprehensive income that will not subsequently be reclassified to profit or loss:
Remeasurements of net (asset) for defined benefits		(180		)	-
Tax impact		50			-
Total items of other comprehensive income that will not subsequently be reclassified to profit or loss		(130		)	-
Total other comprehensive (loss), net of taxes		(50,958		)	(3,856		)
Total comprehensive (loss)/income for the period, net of taxes attributable to owners of the parent		$	(80,074	)	$	53,147

LIVANOVA PLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(In thousands)

	Notes	31 December 2015			24 April 2015			26 April 2014
ASSETS
Non-current assets
Property, plant and equipment	9	$	228,991		$	38,376		$	37,528
Intangible assets	10	674,538			12,079			13,662
Goodwill	10	746,860			-			-
Equity investments in associates and joint ventures measured at equity	11	61,639			-			-
Financial assets	12	19,829			17,127			15,944
Deferred tax assets	23	165,729			20,662			34,184
Other assets		1,463			1,563			856
Total non-current assets		$	1,899,049		$	89,807		$	102,174
Inventories	13	212,448			23,963			17,630
Trade receivables	14	249,075			50,569			50,674
Other receivables	14	24,305			4,812			3,690
Other financial assets	12	9,271			27,020			25,029
Tax assets	23	28,418			2,971			2,900
Cash and cash equivalents		112,613			124,187			103,299
Total current assets		636,130			233,522			203,222
Total assets		$	2,535,179		$	323,329		$	305,396
LIABILITIES AND EQUITY
Equity
Share capital	16	75,444			321			318
Group reconstruction reserve	16	1,729,764			-			-
Additional paid-in capital/Share premium	16	1,673			456,434			440,203
Treasury shares	16	-			(243,535		)	(188,519		)
Accumulated other comprehensive income (loss)	16	(54,359		)	(3,401		)	455
Retained earnings	16	57,340			71,591			14,588
Total equity		$	1,809,862		$	281,410		$	267,045
Non-current liabilities
Financial derivative liabilities	15	$	1,793		$	-		$	-
Financial liabilities	17	91,791			-			-
Other liabilities	18	7,047			-			-
Provisions	19	16,985			6,610			4,711
Provision for employee severance indemnities and other employee benefit provisions	22	32,597			3,860			3,742
Public grants		3,918			-			-
Deferred income taxes liability	23	235,342			-			-
Total non-current liabilities		$	389,473		$	10,470		$	8,453
Current liabilities
Trade payables		$	106,258		$	7,251		$	7,570
Other payables	20	105,679			13,781			16,957
Financial derivative liabilities	15	1,815			-			-
Other financial liabilities	17	82,513			-			-
Provisions	19	12,880			8,334			4,769
Tax payable		26,699			2,083			602
Total current liabilities		$	335,844		$	31,449		$	29,898
Total liabilities and equity		$	2,535,179		$	323,329		$	305,396

The financial statements were approved by the Board of Directors and were signed on its behalf on 29 April 2016 by:

André-Michel Ballester

Chief Executive Officer & Director

LIVANOVA PLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In thousands)


	Notes	Common / Ordinary					Group Reconstruction		Additional Paid-In						Accumulated Other
		Number of Shares		Share Capital			Reserve		Capital/ Share Premium			Treasury Shares			Comprehensive Income (Loss)			Retained Earnings			Total Equity
Balance at 26 April 2014		31,820		$	318		$	-	$	440,203		(188,519		)	$	455		$	14,588		$	267,045
Share-based compensation plans	21	235		3			-		14,581			-			-			-			14,584
Tax benefits from share-based compensation plans		-		-			-		1,650			-			-			-			1,650
Purchase of common share		-		-			-		-			(55,016		)	-			-			(55,016		)
Total transactions with owners, recognised directly in shareholders equity		235		3			-		16,231			(55,016		)	-			-			(38,782		)
Net income		-		-			-		-			-			-			57,003			57,003
Other comprehensive loss		-		-			-		-			-			(3,856		)	-			(3,856		)
Total comprehensive income (loss) for the period							-		-			-			(3,856		)	57,003			53,147
Balance at 24 April 2015		32,055		321			-		456,434			(243,535		)	(3,401		)	71,591			281,410
Share-based compensation plans	21	86		1			-		10,028			-			-			-			10,029
Purchase of common share		-		-			-		-			(7,350		)	-			-			(7,350		)
Cancellation of Cyberonics shares	7,16	(32,141	)	(322		)	-		(466,462		)	250,885			-			-			(215,899		)
Sub-total		-		-			-		-			-			(3,401		)	71,591			68,190
Issuance of LivaNova ordinary shares for Cyberonics shares and equity awards	7,16	26,046		40,213			175,686		-			-			-			-			215,899
Issuance of LivaNova ordinary shares for Sorin share and equity awards	7,16	22,673		35,005			1,554,078		-			-			-			-			1,589,083
Tax benefits from share-based compensation plans		-		-			-		-			-			-			2,432			2,432
Share-based compensation plans	21	149		226			-		1,673			-			-			12,433			14,332
Total transactions with owners, recognised directly in shareholders equity		48,868		75,444			1,729,764		1,673			-			-			14,865			1,821,746
Net loss		-		-			-		-			-			-			(29,116		)	(29,116		)
Other comprehensive loss	16	-		-			-		-			-			(50,958		)	-			(50,958		)
Total comprehensive income (loss) for the period							-		-			-			(50,958		)	(29,116		)	(80,074		)
Balance at 31 December 2015		48,868		$	75,444		$	1,729,764	$	1,673		$	-		$	(54,359	)	$	57,340		$	1,809,862

LIVANOVA AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

	Notes	Transitional Period 25 April 2015 to 31 December 2015			Fiscal Year Ended 24 April 2015
Cash Flows From Operating Activities:
(Loss)/profit for the period		$	(29,116	)	$	57,003
Non-cash items included in net income (loss):
Depreciation and amortization	26	20,500			6,807
Share-based compensation	21	27,387			12,557
Deferred income tax expense (benefit)		(35,021		)	10,339
Impairment of intangible assets	10	1,689			448
Loss on disposal of assets		102			-
Impairment of available-for-sale	12	5,127			-
Loss from equity method investments		3,308			-
Unrealised (gain) loss in foreign currency transactions		2,576			(434		)
Other non-cash items		2,835			-
Changes in operating assets and liabilities:					-
Accounts receivable, net		(15,850		)	(2,654		)
Inventories		36,326			(7,113		)
Other current and non-current assets		4,020			(2,112		)
Current and non-current liabilities		(33,171		)	4,835
Net cash provided by (used in) operating activities		(9,288		)	79,676
Cash Flow From Investing Activities:
Purchase of short-term investments		(13,990		)	(31,985		)
Maturities of short-term investments		34,013			30,089
Purchase of property, plant and equipment		(16,057		)	(6,687		)
Intangible assets purchases		(1,229		)	-
Proceeds from asset sales		950			-
Cash obtained in the Merger	7	12,495			-
Investment in cost method equity securities		-			(1,182		)
Net cash provided by (used in) investing activities		16,182			(9,765		)
Cash Flows From Financing Activities:
Short-term borrowing		56,956			-
Short-term repayment		(45,844		)	-
Repayment of long-term debt obligations		(31,968		)	-
Purchase of treasury shares		(7,350		)	(55,015		)
Proceeds from exercise of options for shares		6,480			3,184
Cash settlement of compensation-based share units		(708		)	(1,171		)
Realised excess tax benefits - share-based compensation		3,050			4,746
Other financial assets and liabilities		1,257			-
Net cash used in financing activities		(18,127		)	(48,256		)
Effect of exchange rate changes on cash and cash equivalents		(341		)	(767		)
Net increase (decrease) in cash and cash equivalents		(11,574		)	20,888
Cash and cash equivalents at beginning of period		124,187			103,299
Cash and cash equivalents at end of period		$	112,613		$	124,187

Supplementary Disclosures of Cash Flow Information:
Cash paid for interest		815			1
Cash paid for income taxes		22,738			15,577
Supplementary disclosure of non-cash financing activity:
Acquisition financed by ordinary shares of LivaNova	7	1,589,083			-

Note 1. Nature of Operations

Company information. LivaNova PLC is a public limited company incorporated in the United Kingdom under the Companies Act 2006 (Registration number 09451374). The Company is domiciled in the United Kingdom and its registered address is 5 Merchant Square, North Wharf Road, London, W2 1AY, United Kingdom.

Background . LivaNova PLC and its subsidiaries (collectively, the "Company", "LivaNova", "we", or "our"), the successor registrant to Cyberonics, Inc., was incorporated in England and Wales on 20 February 2015 for the purpose of facilitating the business combination of Cyberonics, Inc., a Delaware corporation ("Cyberonics") and Sorin S.p.A., a joint stock company organized under the laws of Italy ("Sorin"). As a result of the business combination, LivaNova became the holding company of the combined businesses of Cyberonics and Sorin. This business combination became effective on 19 October 2015, at which time LivaNova's ordinary shares were listed for trading on the NASDAQ Global Market ("NASDAQ") and on the London Stock Exchange (the "LSE") as a standard listing under the trading symbol "LIVN".

The principal legislation under which LivaNova operates is the Companies Act 2006, and regulations made thereunder. The LivaNova Shares are admitted to listing on the Official List pursuant to Chapter 14 of the Listing Rules, which sets out the requirements for standard listings. LivaNova complies with Listing Principles 1 and 2 as set out in Chapter 7 of the Listing Rules, as required by the Financial Conduct Authority.

Description of the business . Headquartered in London, United Kingdom ("U.K."), LivaNova, is a global medical device company focused on the development and delivery of important therapeutic solutions for the benefit of patients, healthcare professionals, and healthcare systems throughout the world. Working closely with medical professionals throughout the world in the field of Cardiac Surgery, Neuromodulation and Cardiac Rhythm Management, we design, develop, manufacture and sell innovative therapeutic solutions. These solutions are consistent with our mission to improve our patients' quality of life, increase the skills and capabilities of healthcare professionals and minimize healthcare costs.

Description of the Mergers . On 19 October 2015, pursuant to the terms of a definitive Transaction Agreement entered into by LivaNova, Cyberonics, Sorin and Cypher Merger Sub (the "Merger Sub"), dated 23 March 2015, Sorin merged with and into LivaNova, with LivaNova continuing as the surviving company, immediately followed by the merger of Merger Sub with and into Cyberonics, with Cyberonics continuing as the surviving company and as a wholly owned subsidiary of LivaNova (the "Mergers"). Upon the consummation of the Mergers, the historical financial statements of Cyberonics became the Company's historical financial statements, as it was considered the accounting acquirer under IFRS 3 Business Combinations. Accordingly, the historical financial statements of Cyberonics are included in the comparative prior periods.

Note 2. Basis of Preparation, Use of Accounting Estimates and Significant Accounting Policies

Basis of Preparation. The consolidated financial statements of LivaNova have been prepared on a going concern basis, in accordance with the Companies Act 2006 as applicable to companies using International Financial Reporting Standards (IFRS) as adopted by the European Union and interpretations issued by the IFRS Interpretations Committee (IFRIC).

For all periods up to and including the transitional period ended 31 December 2015, LivaNova prepared its financial statements in accordance with U.S. generally accepted accounting principles (Local GAAP). These financial statements for the transitional period ended 31 December 2015 are the first LivaNova has prepared in accordance with IFRS. Refer to Note 3 First-time adoption of IFRS for information on how LivaNova adopted IFRS.

The consolidated financial statements have been prepared on a historical cost basis, except for derivative financial instruments and share awards that have been measured at fair value. The consolidated financial statements are presented in United States (U.S.) dollars and all values are rounded to the nearest thousand, except where otherwise indicated.

Fiscal Year-End. Prior to the Mergers, Cyberonics utilized a 52/53-week fiscal year that ended on the last Friday in April. The fiscal years ended 24 April 2015 and 26 April 2014 in the accompanying consolidated statements of income, are 52-week years. As a result of the merger, Cyberonics changed to a calendar year ending the 31st of December each year. The change of fiscal year, effective as of 19 October 2015, resulted in a transitional period which began 25 April 2015 and ended 31 December 2015. Therefore, the comparative amounts for the fiscal year ended 24 April 2015 are not entirely comparable.

Reporting Period. LivaNova, as the successor company to Cyberonics, is reporting the results of operations for Cyberonics for the period 25 April 2015 to 31 December 2015 and the results of operations for Sorin and Cyberonics from 19 October 2015 to 31 December 2015.

Consolidation. The accompanying consolidated financial statements include LivaNova, our wholly owned subsidiaries and the LivaNova PLC Employee Benefit Trust ("the Trust").

Subsidiaries are all entities (including structured entities) over which we have control. The Company controls an entity when the Company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are deconsolidated from the date that control ceases. The acquisition method of accounting is used to account for business combinations by the Company.

Intercompany transactions, balances and unrealised gains on transactions between LivaNova companies are eliminated. Unrealised losses are also eliminated, unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Company.

Investments in Associates. Associates are all entities over which the group has significant influence but not control or joint control. This is generally where the Company holds between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting, after initially being recognised at cost.

Joint Arrangements. Under IFRS 11 Joint Arrangements investments in joint arrangements are classified as either joint operations or joint ventures. The classification depends on the contractual rights and obligations of each investor, rather than the legal structure of the joint arrangement. In joint operations the Company recognises its direct right to the assets, liabilities, revenues and expenses of joint operations and its share of any jointly held or incurred assets, liabilities, revenues and expenses. Interests in joint ventures are accounted for using the equity method of accounting, after initially being recognised at cost in the consolidated balance sheet. LivaNova has joint ventures.

Equity method. Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter to recognise the Company's share of the post-acquisition profits or losses of the investee in profit or loss, and the Company's share of movements in other comprehensive income of the investee in other comprehensive income. Dividends received or receivable from associates are recognised as a reduction in the carrying amount of the investment.

When the Company's share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any other unsecured long-term receivables, the Company does not recognise further losses, unless it has incurred obligations or made payments on behalf of the other entity.

Unrealised gains on transactions between the Company and its associates and joint ventures are eliminated to the extent of the Company's interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of equity accounted investees have been changed where necessary to ensure consistency with the policies adopted by the Company.

Business Combinations. We allocate the amounts we pay for on acquisition to the assets we acquire and liabilities we assume based on their fair values at the date of acquisition, including property, plant and equipment, inventories, accounts receivable, long-term debt, and identifiable intangible assets which either arise from a contractual or legal right or are separable from goodwill. We base the fair value of identifiable intangible assets acquired in a business combination, including in-process research and development, on detailed valuations that use information and assumptions provided by management, which consider management's best estimates of inputs and assumptions that a market participant would use. We allocate any excess purchase price over the fair value of the net tangible and identifiable intangible assets acquired to goodwill. Transaction costs associated with these acquisitions are expensed as incurred and are reported as operating expenses.

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. All contingent consideration (except that which is classified as equity) is measured at fair value with the changes in fair value going through profit or loss. Contingent consideration that is classified as equity is not remeasured and subsequent settlement is accounted for within equity.

Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests) and any previous interest held, over the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Company re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognised in profit or loss.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Company's cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.

Where goodwill has been allocated to a cash-generating unit (CGU) and part of the operation within that unit is disposed of, the goodwill associated with the disposed operation is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed in these circumstances is measured based on the relative values of the disposed operation and the portion of the cash generating unit retained.

Foreign currencies. The financial statements of all LivaNova entities are measured using the currency of the primary economic environment in which the entity operates (functional currency). The U.S. dollar (US$) is the functional currency of the Company and presentation currency of LivaNova financial statements. Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Consolidated Statements of Income (Loss), except when deferred in other comprehensive income as qualifying cash flow hedges.

Foreign currency differences arising from translation are recognised in the income statement, except for available-for-sale equity investments which are recognised in other comprehensive income, unless regarding an impairment, in which case foreign currency differences that have been recognised in other comprehensive income are reclassified to the income statement.

All exchange differences are presented as part of Foreign exchange on the Consolidated Statements of Income (Loss).

The British pound (GBP) exchange rate to the US dollar used in preparing the Company financial statements was as follows.

	Weighted average rate GBP	Closing rate GBP
Transitional period 25 April 2015 to 31 December 2015	0.650364	0.678578
Fiscal year ended 24 April 2015	0.625882	0.661401

Foreign operations. The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisitions 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 at exchange rates at the dates of transactions. Foreign currency differences arising on translation of foreign operations into U.S. dollars are recognised in other comprehensive income (loss).

Current versus non-current classification. The Company presents assets and liabilities in the statement of financial position based on current/non-current classification. An asset is current when it is:

Expected to be realised or intended to be sold or consumed in the normal operating cycle
Held primarily for the purpose of trading
Expected to be realised within twelve months after the reporting period, or
A Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period

All other assets are classified as non-current.

A liability is current when:

It is expected to be settled in the normal operating cycle
It is held primarily for the purpose of trading
It is due to be settled within twelve months after the reporting period, or
There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period

The Company classifies all other liabilities as non-current.

Deferred tax assets and liabilities are classified as non-current assets and liabilities.

Financial Instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial assets and financial liabilities are offset with the net amount reported in the consolidated statement of financial position only if there is a current enforceable legal right to offset the recognised amounts and intent to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

Financial assets

Initial recognition and measurement. Financial assets are classified, at initial recognition, as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, AFS financial assets, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Company determines the classification of its financial assets at initial recognition. All financial assets are recognised initially at fair value plus, in the case of assets not at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the marketplace (regular way trades) are recognised on the trade date, i.e., the date on which the Company commits to purchase or sell the asset.

Impairment of financial assets. The Company assesses, at each reporting date, whether there is any objective evidence that a financial asset or a group of financial assets is impaired. An impairment exists if one or more events that has occurred since the initial recognition of the asset (an incurred 'loss event'), has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation. Evidence of impairment may also include cases where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

The subsequent measurement and impairment of financial assets depends on their classification as described below:

Financial assets at fair value through profit or loss. Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held-for trading if they are acquired for the purpose of selling or repurchasing in the near term. This category includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by IAS 39. We use freestanding derivative forward contracts to offset exposure to the variability of the value associated with assets and liabilities denominated in a foreign currency. These derivatives are not designated as hedges, and therefore changes in the value of these forward contracts are recognised in income statement, thereby offsetting the current net income (loss) effect of the related change in value of foreign currency denominated assets and liabilities. The Company has not designated any financial assets as at fair value through profit or loss.

Loans and receivables. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method, less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the statement of profit or loss. The receivable balance consists of trade receivables from direct customers and distributors and loans issued. We maintain an allowance for doubtful accounts for potential credit losses based on our estimates of the ability of customers to make required payments, historical credit experience, existing economic conditions and expected future trends. We write off uncollectible accounts against the allowance when all reasonable collection efforts have been exhausted. Loans, together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Company. The losses arising from impairment are recognised in the statement of profit or loss in cost of sales or other operating expenses for receivables. Refer to " Note 14 Trade Receivables and Allowance for Bad Debt " for further information.

Available-for-sale (AFS) financial investments. The Company has certain investments in equity and other securities of unquoted companies that are in varied stages of development. The investments in these companies are classified as available-for-sale and are valued based on non-market observable information. The valuation requires management to make certain assumptions about the model inputs, including forecast cash flows, the discount rate, credit risk and volatility. The probabilities of the various estimates within the range can be reasonably assessed and are used in management's estimate of fair value for these unquoted equity investments. After initial measurement, available-for-sale financial investments are subsequently measured at fair value with unrealised gains or losses recognised as other comprehensive income (loss) in the available-for-sale reserve until the investment is derecognised, at which time, the cumulative gain or loss is recognised in other operating income, or the investment is determined to be impaired, at which time, the cumulative loss is reclassified to the statement of profit or loss and removed from the available-for-sale reserve. If it is not possible to determine the fair value in the absence of a market value or company plans from which the value in use can be determined using valuation techniques, they are carried at cost and written down for any impairment. These investments are included in non-current "Financial assets" on the consolidated balance sheet.

For available-for-sale financial investments, the Company assesses at each reporting date whether there is objective evidence that an investment or a group of investments is impaired. In the case of equity investments classified as available-for-sale, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost. 'Significant' is evaluated against the original cost of the investment and 'prolonged' against the period in which the fair value has been below its original cost. Where there is evidence of impairment, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in the statement of profit or loss is removed from other comprehensive income and recognised in the Consolidated Statements of Income (Loss). Impairment losses on equity investments are not reversed through profit or loss; increases in their fair value after impairments are recognised in other comprehensive income. The determination of what is 'significant' or 'prolonged' requires judgement. In making this judgement, the Company evaluates, among other factors, the duration or extent to which the fair value of an investment is less than its cost.

Derecognition. A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when:

The rights to receive cash flows from the asset have expired, or
The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a 'pass-through arrangement, and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and, to what extent, it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset nor transferred control of it, the asset is recognised to the extent of its continuing involvement in it. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.

The Company enters into sale of trade receivables through factoring transactions. The trade receivables that are sold without recourse are derecognised only if such sale transfers substantially all risks and rewards associated with owning the receivables, as required by IAS 39. In other cases of non-recourse sales or with-recourse sales, the receivables continue to be recognised within current assets in the consolidated balance sheet, and the advances received for such receivables are recorded as a financial liability. Refer to "Note 14. Trade Receivables and Allowance for Bad Debt" for a detailed description.

Financial liabilities

Initial recognition and measurement. Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings (bank debt), payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial liabilities are recognised initially at fair value and, in the case of loans, borrowings and payables, net of directly attributable transaction costs. The Company's financial liabilities include trade and other payables, loans and bank debt including bank overdrafts, and derivative financial instruments.

The measurement of financial liabilities depends on their classification, as follows:

Financial liabilities at fair value through profit or loss. Financial liabilities at fair value through profit or loss include financial liabilities held-for-trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held-for-trading if they are acquired for the purpose of selling in the near term. This category includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by IAS 39. Gains or losses on liabilities held-for-trading are recognised in the Consolidated Statements of Income (Loss). Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of recognition, and only if the criteria in IAS 39 are satisfied. The Company has not designated any financial liabilities as at fair value through profit or loss.

Loans and borrowings (bank debt) . After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. Gains and losses are recognised in the statement of income (loss) when the liabilities are derecognised, as well as through the effective interest rate method (EIR) amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance costs in the Consolidated Statements of Income (Loss).

Financial guarantee contracts. Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs, because the specified debtor fails to make a payment when due, in accordance with the terms of a debt instrument. Financial guarantee contracts are recognised initially as a liability at fair value, and then adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the best estimate of the expenditure required to settle the present obligation at the reporting date and the amount recognised less cumulative amortisation.

Derecognition. A financial liability is derecognised when the obligation under the liability is discharged, canceled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of income (loss).

Derivative financial instruments and hedge accounting. We use currency exchange rate derivative contracts and interest rate derivative instruments to manage the impact of currency exchange and interest rate changes on the statement of income (loss) and the statement of cash flows. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. We evaluate hedge effectiveness at inception and on an ongoing basis. If a derivative is no longer expected to be highly effective, hedge accounting is discontinued. Hedge ineffectiveness, if any, is recorded in the statement of income (loss). Cash flows from derivative contracts are reported as operating activities in the consolidated statements of cash flows.

When a hedging instrument expires, is sold or is terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the Consolidated Statements of Income (Loss). When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately reclassified to profit or loss.

In order to minimize income statement and cash flow volatility resulting from currency exchange rate changes, we enter into derivative instruments, principally forward currency exchange rate contracts. These contracts are designed to hedge anticipated foreign currency transactions and changes in the value of specific assets and liabilities and of some revenue. At inception of the forward contract, the derivative is designated as either a freestanding derivative or a cash flow hedge. For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative instrument is reported as a component of accumulated other comprehensive income (loss) and reclassed into the Consolidated Statements of Income (Loss) to offset exchange differences originated by the hedged item or to adjust the value of operating income (expense). We do not enter into currency exchange rate derivative contracts for speculative purposes.

We use interest rate derivative instruments designated as cash flow hedges to manage the exposure to interest rate movements and to reduce the risk of the increase of borrowing costs, by converting floating-rate debt into fixed-rate debt. Under these agreements, we agree to exchange, at specified intervals, the difference between fixed and floating interest amounts, calculated by reference to agreed-upon notional principal amounts. The interest rate swaps are structured to mirror the payment terms of the underlying loan. The fair value of the interest rate swaps is reported in the consolidated balance sheets financial assets or liabilities (current or non-current) depending upon the gain or loss position of the contract and the maturity of the future cash flows of the fair value of each contract. The effective portion of the gain or loss on these derivatives is reported as a component of accumulated other comprehensive income (loss). The non-effective portion is reported in interest expense in the consolidated statements of income loss.

Cash and Cash Equivalents . Cash and cash equivalents include all cash balances and highly liquid investments with an original maturity of three months or less, consisting of demand deposit accounts and money market mutual funds, and are carried on the consolidated balance sheets at cost, which approximate their fair value. We carried $41.1 million, $28.3 million and $30.2 million in money market mutual funds at 31 December 2015, 24 April 2015 and 26 April 2014, respectively.

Borrowing costs. General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets, is deducted from the borrowing costs eligible for capitalisation. Other borrowing costs are expensed in the period in which they are incurred.

Non-monetary assets

Property, Plant and Equipment ("PP&E"). PP&E is carried at cost, less accumulated depreciation and any accumulated impairment losses. Maintenance and repairs, and minor replacements are charged to expense as incurred, while significant renewals and improvements are capitalized. We compute depreciation using the straight-line method over estimated useful lives. Where an item of PP&E comprises several parts with different useful lives, each part is recognised as a separate item and depreciated over its useful life. Useful life and residual value of PP&E are reviewed at each period-end. As necessary, the occurrence of changes to the useful life or residual value is recognised prospectively as a change in accounting estimates.

Leasehold improvements are depreciated over the shorter of the useful life of an asset or the lease term. Capital improvements to the building are added as building components and depreciated over the useful life of the improvement or the building, whichever is less.

The estimated useful lives for all classes of depreciable PP&E except for land and capital investment in process as of 31 December 2015 are as follow:

	Lives in years
Building and building improvements	up to 45
Equipment, furniture, fixtures	up to 16
Other	up to 10

Where there are any internal or external indications that the value of an item of PP&E may be impaired, the recoverable amount of the group of cash generating units (CGUs) to which it belongs is calculated. If the recoverable amount is less than the carrying amount of the group of CGUs, a provision for impairment is recorded. PP&E is reviewed for impairment annually on 1 ^st of October.

Intangible Assets. Intangible assets shown on the consolidated balance sheet are finite-lived assets. Developed technology rights consist primarily of existing technology and technical capabilities acquired from Sorin in the Mergers, that were recorded at their respective fair values as of the acquisition date. These include patents, related know-how and licensed patent rights, that represent assets expected to generate future economic benefits. Trademarks and trade names include Sorin trade names acquired as part of the Mergers. Customer relationships consist of relationships with hospitals and cardiac surgeons in the countries where we operate. Other intangible assets consist of favorable leases acquired from Sorin in the Mergers. We amortize our intangible assets over their useful lives using the straight-line method.

Amortization expense for developed technology is recorded in cost of sales and research and development costs over the period the product is expected to be marketed. Amortization expense for trade names, customer relationships and other is recorded in Selling, general and administrative expense on the Consolidated Statements of Income (Loss). Amortization expense for software is recorded in Cost of sales, Research and development and Selling, general and administrative expense on the Consolidated Statements of Income (Loss). We evaluate our intangible assets each reporting period to determine whether events and circumstances indicate either a different useful life or impairment. If we change our estimate of the useful life of an asset, we amortize the carrying amount over the revised remaining useful life.

The Company does not have internally generated intangible assets.

Impairment of Intangible Assets and Goodwill. The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's CGU's fair value less costs of disposal and its value in use. It is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

Usually, the Company applies the fair value less costs of disposal method for its impairment assessment. In most cases no directly observable market inputs are available to measure the fair value less costs of disposal. Therefore, an estimate is derived indirectly and is based on net present value techniques, utilizing post-tax cash flows and discount rates. Fair value less costs of disposal reflects estimates of assumptions that market participants would be expected to use when pricing the asset or CGU, and for this purpose management considers the range of economic conditions that are expected to exist over the remaining useful life of the asset. The estimates used in calculating the net present values are highly sensitive and depend on assumptions specific to the nature of the Company's activities with regard to:

amount and timing of projected future cash flows;
outcome of R&D activities (compound efficacy, results of clinical trials, etc.);
amount and timing of projected costs to develop R&D into commercially viable products;
probability of obtaining regulatory approval;
long-term sales forecasts;
timing of the entry of generic competition;
selected tax rate;
behavior of competitors (launch of competing products, marketing initiatives, etc.); and
selected discount rate.

Generally, for intangible assets with a definite useful life, the Company uses cash flow projections for the whole useful life of these assets with a terminal value based on cash flow projections usually in line with or lower than inflation rates for later periods. Probability-weighted scenarios are typically used.

Discount rates used are based on the Company's estimated weighted average cost of capital adjusted for specific country and currency risks associated with cash flow projections as an approximation of the weighted average cost of capital of a comparable market participant. Due to the above factors, actual cash flows and values could vary significantly from forecasted future cash flows and related values derived using discounting techniques.

Goodwill is tested for impairment annually as at 1 October and when circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group of CGUs) to which the goodwill relates. Where the recoverable amount of the cash-generating unit is less than their carrying amount, an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods.

Research and Development ("R&D").

Research costs are recognised as an expense for the period in which they are incurred. Development costs are recognised as an intangible asset if the following can be demonstrated:

the technical feasibility of completing the intangible asset so that it will be available for use or sale;
the Company's intention to complete the intangible asset and use or sell it;
the Company's ability to use or sell the intangible asset;
how the intangible asset will generate probable future economic benefits;
the availability of technical, financial and other resources to complete the intangible asset; and
the reliable measurement of development expenditures.

Due to the risks and uncertainties concerning whether the products will be commercially successful, the above criteria are considered as not being fulfilled for LivaNova development projects. Consequently, development costs are recognised as an expense. In case of projects where the confidence of management to respect all the conditions required by the development capitalisation criteria is high, costs will be capitalized as required by the standard.

R&D includes costs of basic research activities as well as engineering and technical effort required to develop a new product or make significant improvement to an existing product or manufacturing process. R&D costs also include regulatory and clinical study expenses, including post-market clinical studies. Amortization of intangible assets not associated with a marketable product is recorded in R&D.

Inventories. We state our inventories at the lower of cost and net realizable value. Cost is determined using the first-in first-out ("FIFO") method. Our calculation of cost includes the acquisition cost of raw materials and components, direct labor and overhead. We reduce the carrying value of inventories for those items that are potentially excess, obsolete or slow moving based on changes in customer demand, technology developments or other economic factors.

Revenue Recognition

Product Revenue. We sell our products through a direct sales force and independent distributors. We recognise revenue when significant risks and benefits associated with the products' ownership are transferred, and the amount of revenues can be reliably determined. We estimate expected sales returns based on historical data and record a reduction of sales with a return reserve. We record state and local sales taxes net, that is, we exclude sales tax from revenue.

Service Revenue. Services largely consist of technical assistance services provided to hospitals for the installation maintenance and support in the operation of heart lung machines, and autotransfusion systems. Service related revenue is recognised on the basis of progress of the services, when services are rendered, when collectability is probable and when the revenue amount can be reliably measured.

License Revenue. We record upfront payments received under license agreements as deferred revenue on the consolidated balance sheet and recognise license revenue over the period of the license agreement.

U.S. Medical Device Excise Tax ("MDET"). Section 4191 of the Internal Revenue Code enacted by the Health Care and Education Reconciliation Act of 2010, in conjunction with the Patient Protection and Affordable Care Act, established a 2.3% excise tax on medical devices sold domestically beginning on 1 January 2013 and is suspended from 1 January 2016 through 31 December 2017. We include the cost of MDET in cost of sales on the Consolidated Statements of Income (Loss).

Italian Medical Device Payback. The Italian Parliament introduced new rules for entities that supply goods and services to the Italian National Healthcare System. The new healthcare law is expected to impact the business and financial reporting of companies operating in the medical technology sector that sell medical devices in Italy. A key provision of the law is a 'payback' measure, requiring companies selling medical devices in Italy to make payments to the Italian state if medical device expenditures exceed regional maximum ceilings. Companies are required to make payments equal to a percentage of expenditures exceeding maximum regional caps. There is considerable uncertainty about how the law will operate and what the exact timeline is for finalization. Our current assessment of the Italian Medical Device Payback involves significant judgement regarding the expected scope and actual implementation terms of the measure as the latter have not been clarified to date by Italian authorities. We account for the estimated cost of the Italian Medical Device Payback as a deduction from revenue.

Defined Benefit Pension Plans and Other Post-Employment Benefits. The Company sponsors various retirement benefit plans, including defined benefit pension plans (pension benefits), defined contribution savings plans and termination indemnity plans, covering substantially all U.S. employees and employees outside the United States. The cost of providing benefits under the defined benefit plans is determined separately for each plan using the projected unit credit method.

Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling (excluding amounts included in net interest on the net defined benefit liability) and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the consolidated balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Re-measurements are not reclassified to profit or loss in subsequent periods.

Past service costs are recognised in profit or loss on the earlier of:

The date of the plan amendment or curtailment, and
The date on which the Company recognises related restructuring costs

Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognises the following changes in the net defined benefit obligation under 'Cost of sales' and 'Selling, general and administrative' expenses in the Consolidated Statements of Income (Loss) (by function):

Service costs comprising current service costs, past-service costs, gains and losses on curtailments and nonroutine settlements
Net interest expense or income

Provision for severance indemnity (TFR) is mandatory for Italian companies and is considered:

a defined benefit plan with respect to amounts vested up to 31 December 2006 and amounts vesting from 1 January 2007 for employees who have chosen to maintain the TFR at the company, for companies with 50 or fewer employees;
a defined contribution plan with respect to amounts vesting as from 1 January 2007 for employees who have opted for supplementary pensions or who have chosen to maintain the TFR at the company, for companies with more than 50 employees.

As a defined benefit plan, the TFR is measured using the unit credit projection method based on actuarial assumptions (demographic assumptions: mortality, turnover, disability of the population included in the above plan; financial assumptions: discount rate, benefit growth rate, capitalization rate). The increase in the present value of the TFR is included in personnel expense, with the exception of the revaluation of the net liability, which is recorded among items of other comprehensive income. The cost of TFR accrued through 31 December 2006 no longer includes the component related to future salary increases. Payments of TFR, as a defined contribution plan, are also included in personnel expense, and until they are settled financially, they have a balancing entry in the statement of financial position in the form of current payables.

Share-Based Compensation

We grant share-based incentive awards to directors, officers, key employees and consultants during each fiscal year. We measure the cost of employee services received in exchange for an award of equity instruments based on the grant date fair market value of the award. The cost of equity-settled transactions is recognised in employee benefits expense, together with a corresponding increase in equity (in "Additional paid-in-capital" prior to the Mergers and after the Mergers expense in "Retained earnings") over the period in which the service and the performance conditions are fulfilled (the vesting period). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Company's best estimate of the number of equity instruments that will ultimately vest. We issue new shares upon share option exercise, share appreciation right ("SAR") exercise, the award of restricted share and at our election, on vesting of a restricted share unit. The social security contributions on employee share-based payment awards is accrued over the service period.

The following share-based incentive awards are offered by the Company:

Share Appreciation Rights. A share appreciation right ("SAR") confers upon an employee the contractual right to receive an amount of cash, share, or a combination of both that equals the appreciation in the Company's common share from an award's grant date to the exercise date. SARs may be exercised at the employee's discretion during the exercise period and do not give the employee an ownership right in the underlying share. The SARs may be settled in LivaNova shares and/or cash, as determined by LivaNova and as set forth in the individual award agreements. SARs do not involve payment of an exercise price. We use the Black-Scholes option pricing methodology to calculate the grant date fair market value of SARs. We determine the expected volatility on historical volatility.
Share Options. Options granted under the Share Plans are service-based and typically vest annually over four years, or cliff-vest in one year, following their date of grant, as required under the applicable agreement establishing the award, and have maximum terms of 10 years. Share option grant prices are set equal to the closing price of our ordinary shares on the day of the grant. When the share options are exercised, LivaNova issues new shares. There are no post-vesting restrictions on the shares issued. We use the Black-Scholes option pricing methodology to calculate the grant date fair market value of share option awards. We determine expected volatility based on the historic volatility of our share price over a period equal to the expected term of the option.
Restricted Share and Restricted Share Units. We grant restricted share and restricted share units at no purchase cost to the grantee, which typically vest over four years or cliff-vest in one or three years. Unvested restricted share entitles the grantees to dividends, if any, and voting rights for their respective shares. Sale or transfer of the share and share units are restricted until they are vested. We issue new shares for our restricted share and restricted share unit awards. We have the right to elect to pay the cash value of vested restricted share units in lieu of the issuance of new shares. Under our share-based compensation plans we repurchase a portion of these shares from our employees to permit our employees to meet their minimum statutory tax withholding requirements on vesting of their restricted share.
Service-Based Restricted Share and Restricted Share Units. The fair market value of service-based restricted share and restricted share units are determined using the market closing price on the grant date, and compensation is expensed ratably over the vesting period. Calculation of compensation for restricted share awards requires estimation of employee turnover and forfeiture rates.
Market and Performance-Based Restricted Share and Performance-Based Restricted Share Units. We may grant restricted share and restricted share units subject to market or performance conditions that vest based on the satisfaction of the conditions of the award. The fair market values of market condition-based awards are determined using the Monte Carlo simulation method. The Monte Carlo simulation method is subject to variability as several factors utilized must be estimated, including the derived service period, which is estimated based on our judgement of likely future performance and our share price volatility. The fair value of performance-based awards is determined using the market closing price on the grant date. Derived service periods and the periods charged with compensation expense for performance-based awards are estimated based on our judgement of likely future performance and may be adjusted in future periods depending on actual performance.

Income Taxes. The tax expense for the period comprises current and deferred tax. Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

The income tax expense or credit for the period is the tax payable on the current period's taxable income based on the applicable income tax rate for each jurisdiction, adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the company's subsidiaries and associates operate and generate taxable income. The Company is subject to taxation on earnings in several countries under various tax regulations. Calculation of taxes on a global scale requires the use of estimates and assumptions developed based on the information available at the balance sheet date. Management establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred taxes are recognised by the liability method for temporary differences between the carrying amount of assets and liabilities in the consolidated balance sheet and their tax base. They are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Adjustments to deferred taxes resulting from changes in tax rates are recognised in profit or loss. However, when the deferred tax relates to items recognised in equity, the adjustment is also recognised in equity. A deferred tax asset is recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilized. At each period-end, the Company reviews the recoverable value of deferred tax assets of tax entities holding significant loss carryforwards. This value is based, by tax entity, on the strategy for recoverability of the tax loss carryforwards. Deferred taxes are charged or credited directly to equity when the tax relates to items that are recognised directly in equity, such as gains and losses on cash flow hedges and actuarial gains and losses on defined benefit plan obligations. Deferred tax assets and liabilities are set off when they are levied on the same taxable entity (legal entity or tax group) by the same taxation authority and the entity has a legally enforceable right of set off. Deferred taxes are recognised for all temporary differences associated with investments in subsidiaries and associates, except to the extent that the Company is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax balances are not discounted.

Leases. We account for leases that transfer substantially all risks and rewards incident to the ownership of property as an acquisition of an asset and the incurrence of an obligation, and we account for all other leases as operating leases. Certain of our leases provide for tenant improvement allowances that have been recorded as deferred rent and amortized, using the straight-line method, over the life of the lease as a reduction to rent expense. In addition, scheduled rent increases and rent holidays are recognised on a straight-line basis over the term of the lease.

Equity. Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Where any group company purchases the Company's equity instruments, for example as the result of a share buy-back or a share-based payment plan, the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the owners of LivaNova as treasury share until the shares are cancelled or reissued. Where such ordinary shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the owners of LivaNova.

Provisions and warranties. Provisions for legal claims, service warranties and make good obligations are recognised when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of management's best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.

The Company offers a warranty on various products. The Company estimates the costs that may be incurred under warranties and records a liability in the amount of such costs at the time the product is sold. The amount of the reserve recorded is equal to the net costs to repair or otherwise satisfy the claim. The warranty obligation is included in accrued liabilities on the consolidated balance sheet. Warranty expense is recorded to Cost of sales in the Consolidated Statements of Income (Loss).

Contingencies. The Company is subject to product liability claims, government investigations and other legal proceedings in the ordinary course of business. Legal fees and other expenses related to litigation are expensed as incurred and included in Selling, general and administrative expenses in the Consolidated Statements of Income (Loss). Contingent accruals are recorded when the Company determines that a loss is both probable and reasonably estimable. Due to the fact that legal proceedings and other contingencies are inherently unpredictable, our assessments involve significant judgement regarding future events.

Earnings Per Share. Basic earnings (loss) per share (EPS) is calculated by dividing the profit (loss) for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year. Diluted EPS is calculated by dividing the net profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares. Refer to "Note 25. Earnings per Share" for additional information.

Segments. Prior to the Mergers we had one operating and reportable segment. Upon completion of the Mergers, we reorganized our reporting structure and aligned our segments and the underlying divisions and businesses. We currently function in three operating segments; the historical Cyberonics operations are included in the Neuromodulation segment, and the historical Sorin businesses are included in the Cardiac Surgery and the Cardiac Rhythm Management segments.

The Company's chief operating decision maker ("CODM") is the Chief Executive Officer ("CEO") supported as necessary by the remaining members of the executive leadership team which includes the Chief Finance Officer, Presidents, and Senior Vice Presidents of the Company. The CODM assesses performance and allocates resources at the business unit level which includes Neuromodulation, Cardiac Rhythm Management, and Cardiac Surgery. Refer to "Note 26. Geographic and Segment Information" for additional information.

Critical Estimates and Judgements. The preparation of our consolidated financial statements in conformity with IFRS requires management to make estimates and judgements that affect the amounts reported in such financial statements and accompanying notes. These estimates and judgements are based on management's best knowledge of current events and actions we may undertake in the future. Actual results could differ materially from those estimates. Application of the following accounting policies requires certain judgements and estimates that have the potential for the most significant impact on our consolidated financial statements:

Impairment of non-financial assets. An impairment exists when the carrying value of an asset or cash generating unit (CGU) exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on available data from binding sales transactions, conducted at arm's length for similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a discounted cash flow (DCF) model. The cash flows are derived from the budgets and do not include restructuring activities that the Company is not yet committed to or significant future investments that will enhance the asset's performance of the CGU being tested. The recoverable amount is most sensitive to the discount rate used for the DCF model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes.
Commitments and Contingencies. A number of LivaNova subsidiaries are involved in various government investigations and legal proceedings (product liability, commercial, employment, environmental claims, etc.) arising out of the normal conduct of their businesses. For more information, see ''Note 24. Commitments and Contingencies. '' We record accruals for contingencies when it is probable that a liability has been incurred and the amount can be reliably estimated. These accruals are adjusted periodically as assessments change or additional information becomes available. Expected legal defense costs are accrued when the amount can be reliably estimated. Provisions relating to estimated future expenditure for liabilities do not usually reflect any insurance or other claims or recoveries, since these are only recognized as assets when the amount is reasonably estimable and collection is virtually certain.
Retirement and Other Post-Employment Benefit Plans. We sponsor pension and other post-employment benefit plans in various forms that cover a significant portion of our current and former associates. For post-employment plans with defined benefit obligations, we are required to make significant assumptions and estimates about future events in calculating the expense and the present value of the liability related to these plans. These include assumptions about the interest rates we apply to estimate future defined benefit obligations and net periodic pension expense as well as rates of future pension increases. In addition, our actuarial consultants provide our management with historical statistical information, such as withdrawal and mortality rates in connection with these estimates. Assumptions and estimates used by the Company may differ materially from the actual results we experience due to changing market and economic conditions, higher or lower withdrawal rates, and longer or shorter life spans of participants among other factors. For more information on obligations under retirement and other post-employment benefit plans and underlying actuarial assumptions, see ''Note 22. Employee Retirement Plans. ''
Research & Development. Internal Research & Development costs are fully charged to the consolidated income statement in the period in which they are incurred. We consider that regulatory and other uncertainties inherent in the development of new products preclude the capitalization of internal development expenses as an intangible asset usually until marketing approval from the regulatory authority is obtained in a relevant market.
Taxes. We prepare and file our tax returns based on an interpretation of tax laws and regulations, and record estimates based on these judgements and interpretations. Our tax returns are subject to examination by the competent taxing authorities, which may result in an assessment being made requiring payments of additional tax, interest or penalties. Inherent uncertainties exist in our estimates of our tax positions. We believe that our estimated amounts for current and deferred tax assets or liabilities, including any amounts related to any uncertain tax positions, are appropriate based on currently known facts and circumstances.
Impairment of available-for-sale financial (AFS). The fair value of financial instruments classified as available-for-sale that are not traded in an active market is determined using valuation techniques. The Company uses its judgement to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each reporting period. During the transitional period 25 April 2015 to 31 December 2015 the Company made a significant judgement about the impairment of an investment in Cerbomed GmbH, see "Note 12. Financial Assets." To determine if an available-for-sale financial asset is impaired, the Company evaluates the duration and extent to which the fair value of the asset is less than its cost, and the financial health of and short-term business outlook for the investee (including factors such as industry performance, changes in technology and operational and financing cash flows).
Share-based payments. Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which depends on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model including the expected life of the share option or appreciation right, volatility and dividend yield and making assumptions about them.
Exceptional items. Exceptional items are expense or income items recorded in a period which have been determined by management as being material by their size or incidence and are presented separately within the results of the group. The determination of which items are disclosed as exceptional items will affect the presentation of profit measures and requires a degree of judgement. Details relating to exceptional items reported during the period are set out in "Note 30. Exceptional items ".

Note 3. First-time Adoption of IFRS

These financial statements, for the transitional period ended 31 December 2015, are the first the Company has prepared in accordance with IFRS. For periods up to the transitional period ended 31 December 2015, the Company prepared its financial statements in accordance with U.S. generally accepted accounting principles (Local GAAP).

Accordingly, the Company has prepared financial statements that comply with IFRS applicable as at 31 December 2015, together with the comparative period data for the year ended 24 April 2015, as described in the summary of significant accounting policies. In preparing the financial statements, the Company's opening balance sheet was prepared as at 26 April 2014, the Company's date of transition to IFRS. This note explains the principal adjustments made by the Company in restating its Local GAAP financial statements, including the consolidated balance sheet as at 26 April 2014 and 24 April 2015.

Exemptions applied. IFRS 1 allows first-time adopters certain exemptions from the retrospective application of certain requirements under IFRS. The Company has applied the following exemptions:

IFRS 2 Share-based Payment has not been applied to equity instruments in share-based compensation transactions that were granted on or before 7 November 2002, nor has it been applied to equity instruments granted after 7 November 2002 that vested before 26 April 2014.
Property, plant and equipment were carried in the balance sheet prepared in accordance with Local GAAP on the basis of carrying value on 26 April 2014. The Company has elected to regard those values as deemed cost at the date of transition to IFRS since they were broadly comparable to fair value.
The Company has applied the transitional provision in IFRIC 4 Determining whether an Arrangement Contains a Lease and has assessed all arrangements based upon the conditions in place as at the date of transition.
IFRS 3 Business combinations has not been applied to either acquisitions of subsidiaries that are considered businesses under IFRS, or acquisitions of interest in associates and joint ventures that occurred before 26 April 2014. Use of this exemption means that the local GAAP carrying amounts of assets and liabilities, that are required to be recognised under IFRS, is their deemed cost at the date of acquisition. After the date of the acquisition, measurement is in accordance with IFRS. Assets and liabilities that do not qualify for recognition under IFRS are excluded from the opening IFRS balance sheet. The Company did not recognise or exclude any previously recognised amounts as a result of IFRS recognition requirements.

Estimates. The estimates at 26 April 2014 and at 24 April 2015 are consistent with those made for the same dates in accordance with Local GAAP (after adjustments to reflect any differences in accounting policies).

Group reconciliation of equity as at 26 April 2014 (date of transition to IFRS)

(in thousands)	Notes	Local GAAP			Adjustments			IFRS as at 26 April 2014
ASSETS
Non-current assets
Property, plant and equipment	A	$	39,535		$	(2,007	)	$	37,528
Intangible assets	A	11,655			2,007			13,662
Financial assets		15,944			-			15,944
Deferred tax assets	B,C	5,771			28,413			34,184
Other assets		856			-			856
Total non-current assets		73,761			28,413			102,174
Current assets
Inventories		17,630			-			17,630
Trade receivables		50,674			-			50,674
Other receivables		3,690			-			3,690
Other financial assets		25,029			-			25,029
Deferred tax assets, net	B	17,208			(17,208		)	-
Tax assets		2,900			-			2,900
Cash and cash equivalents		103,299			-			103,299
Total current assets		220,430			(17,208		)	203,222
Total assets		$	294,191		$	11,205		$	305,396
LIABILITIES AND EQUITY
Equity
Share capital		318			-			318
APIC/Share premium	D	426,867			13,336			440,203
Treasury shares		(188,519		)	-			(188,519		)
Accumulated other comprehensive income (loss)		455			-			455
Retained earnings	C,D,E	19,979			(5,391		)	14,588
Total equity		$	259,100		$	7,945		$	267,045
Non-current liabilities
Other liabilities		4,711			-			4,711
Provision for employee severance indemnities and other employee benefit provisions	E	482			3,260			3,742
Total non-current liabilities		5,193			3,260			8,453
Current liabilities
Trade payables		7,570			-			7,570
Other payables		16,957			-			16,957
Provisions		4,769			-			4,769
Tax payable		602			-			602
Total current liabilities		29,898			-			29,898
Total liabilities		35,091			3,260			38,351
Total liabilities and equity		$	294,191		$	11,205		$	305,396

Group reconciliation of equity as at 24 April 2015

(in thousands)	Notes	Local GAAP			Adjustments			IFRS as at 24 April 2015
ASSETS
Non-current assets
Property, plant and equipment	A	$	40,287		$	(1,911	)	$	38,376
Intangible assets	A	10,168			1,911			12,079
Financial assets		17,127			-			17,127
Deferred tax assets	B,C	6,078			14,584			20,662
Other assets		1,563			-			1,563
Total non-current assets		75,223			14,584			89,807
Current assets
Inventories		23,963			-			23,963
Trade receivables		50,569			-			50,569
Other receivables		4,812			-			4,812
Other financial assets		27,020			-			27,020
Deferred tax assets, net	B	7,199			(7,199		)	-
Tax assets		2,971			-			2,971
Cash and cash equivalents		124,187			-			124,187
Total current assets		240,721			(7,199		)	233,522
Total assets		$	315,944		$	7,385		$	323,329
LIABILITIES AND EQUITY
Equity
Share capital		321			-			321
APIC/Share premium	D	445,362			11,072			456,434
Treasury shares		(243,535		)	-			(243,535		)
Accumulated other comprehensive income (loss)		(3,401		)	-			(3,401		)
Retained earnings	C,D,E	77,827			(6,236		)	71,591
Total equity		$	276,574		$	4,836		$	281,410
Non-current liabilities
Other liabilities		6,610			-			6,610
Provision for employee severance indemnities and other employee benefit provisions	E	1,311			2,549			3,860
Total non-current liabilities		7,921			2,549			10,470
Current liabilities
Trade payables		7,251			-			7,251
Other payables		13,781			-			13,781
Provisions		8,334			-			8,334
Tax payable		2,083			-			2,083
Total current liabilities		31,449			-			31,449
Total liabilities		39,370			2,549			41,919
Total liabilities and equity		$	315,944		$	7,385		$	323,329

Group reconciliation of total comprehensive income for the fiscal year ended 24 April 2015

(in thousands)	Notes	Local GAAP			Adjustments			26 April 2014 to 24 April 2015
Revenue		$	291,558		$	-		291,558
Cost of sales	D	27,311			29			27,340
Gross profit		$	264,247		$	(29	)	$	264,218
Operating expenses:
Selling, general and administrative	D,E	123,619			(288		)	123,331
Research and development	D	43,284			165			43,449
Merger related expenses		8,692			-			8,692
Total operating expenses		$	175,595		$	(123	)	$	175,472
Operating profit		88,652			94			88,746
Interest income		184			-			184
Interest expense		(21		)	-			(21		)
Foreign exchange		479			-			479
Profit before tax		$	89,294		$	94		$	89,388
Income tax expense	C,E	31,446			939			32,385
Profit attributable to owners of the parent		$	57,848		$	(845	)	$	57,003

Other comprehensive income

(in thousands)	Notes	Local GAAP		Adjustments		26 April 2014 to 24 April 2015
Profit attributable to the owners of the parent	C, D, E	57,848		(845	)	57,003
Items of other comprehensive income that will subsequently be reclassified to profit or loss
Foreign currency translation differences		(3,856	)	-		(3,856	)
Total items of other comprehensive income that will subsequently be reclassified to profit or loss		(3,856	)	-		(3,856	)
Total other comprehensive (loss), net of taxes		(3,856	)	-		(3,856	)
Total comprehensive income for the period, net of taxes attributable to the owners of the parent		53,992		(845	)	53,147

Notes to the reconciliation of equity as at 26 April 2014 and 24 April 2015 and total comprehensive income for the fiscal year ended 24 April 2015:

A : Under Local GAAP, the Company classified the software development costs within "Property, plant and equipment". Under IFRS the software costs meet the definition of an intangible asset. Accordingly, the Company's capitalized software development costs have been reclassified from "Property, plant and equipment" to "Intangible assets" at the transition date to IFRS and as at 24 April 2015, respectively.

B : Under Local GAAP, the Company classified deferred taxes as current or noncurrent based on the nature of the related asset or liability giving rise to the temporary difference, except for tax losses and credit carryforwards, which are based on the expected timing of realization. Accordingly, the Company reclassified deferred income tax assets included in current "Deferred tax assets" to "Non-current Deferred tax assets" at the transition date to IFRS and as at 24 April 2015 to conform with the requirements of IFRS.

C : Under Local GAAP, deferred tax assets for share-based payment awards that will result in a deduction are calculated based on the cumulative costs recognised and trued up or down upon realization of the tax benefit. If the tax benefit exceeds the deferred tax asset, the excess ("windfall benefit") is credited directly to equity. Any shortfall of the tax benefit below the deferred tax asset is charged to equity to the extent of prior windfall benefits, and to tax expense thereafter. Under IFRS, deferred tax assets are calculated based on the estimated tax deduction determined at each reporting date under applicable tax law (e.g., intrinsic value). If the tax deduction exceeds cumulative compensation cost, deferred tax based on the excess is credited to equity. If the tax deduction is less than or equal to cumulative compensation cost, deferred taxes are recorded in income. Therefore, the Company recorded the adjustments relating to the tax effect recognised on the share-based payment arrangements as a deferred tax asset with an offsetting entry to equity at the transition date to IFRS and as at 24 April 2015.

D : Under Local GAAP, the Company attributed compensation costs over the vesting period by utilizing the "straight-line" method to account for share-based payment awards subject to graded vesting based on a service condition. The use of the "straight-line" method resulted in less compensation cost being recognised in earlier years. Accordingly, the Company recorded an adjustment to "Additional paid-in capital/Share premium" with an offsetting entry to retained earnings at the transition date to IFRS and as at 24 April 2015.

E : Under Local GAAP, a liability for social security contributions on employee share-based payment awards is recognised on the date of the event triggering the measurement and payment of the tax to the taxing authority (generally the exercise date). Under IFRS, the Company follows the method to accrue the liability based on the consumption of services received from employees. The Company recorded an adjustment to current "Provision for employee severance indemnities" and non-current "Other employee benefit provisions" with an offsetting entry to retained earnings at the transition date to IFRS and as at 24 April 2015.

The transition from Local GAAP to IFRS has not had a material impact on the statement of cash flows.

Note 4. Financial Risk Management

Management of financial risk

Increasing market fluctuations may result in significant earnings and cash flow volatility risk for LivaNova. The Company's operating business as well as its investment and financing activities are affected particularly by changes in foreign exchange rates, interest rates and concentration of procurement suppliers. In order to optimize the allocation of the financial resources across the LivaNova segments and entities, as well as to achieve its aims, LivaNova identifies, analyzes and manages the associated market risks. The Company seeks to manage and control these risks primarily through its regular operating and financing activities, and uses derivative financial instruments when deemed appropriate.

The Company's CFO oversees the management of these risks. The CFO is supported by a senior financial management team that advises on financial risks and the appropriate financial risk governance framework for the Company. The senior financial management team provides assurance to the Company's senior management that the Company's financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with group policies and group risk appetite. All derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. It is the Company's policy that no trading in derivatives for speculative purposes may be undertaken. Intercompany financing or investments of operating units are preferably carried out in their functional currency or on a hedged basis. The Board of Directors reviews and agrees policies for managing each of these risks.

Liquidity risk

Liquidity risk results from the Company's inability to meet its financial liabilities. LivaNova follows a deliberated financing policy that is aimed towards a balanced financing portfolio, a diversified maturity profile and a comfortable liquidity cushion. LivaNova mitigates liquidity risk by the implementation of an effective working capital and centralized cash management and arranged credit facilities with highly rated financial institutions. In addition, LivaNova constantly monitors funding options available in the capital markets, as well as trends in the availability and costs of such funding, with a view to maintaining financial flexibility and limiting repayment risks.

The following tables reflect the undiscounted cash outflows related to settlement and repayments, of the Company's financial liabilities at a balance sheet date. The disclosed expected undiscounted net cash outflows from derivative financial liabilities are determined based on each particular settlement date of an instrument and based on the earliest date on which LivaNova could be required to pay. Cash outflows for financial liabilities (including interest) without fixed amount or timing are based on the conditions existing at respective balance sheet date.

Contractual undiscounted cash outflows was as follows (in thousands):

	31 December 2015
	DUE WITHIN 1 YEAR		1-2 YEARS		2-5 YEARS		OVER 5 YEARS		TOTAL
Non-derivative financial instruments

Trade payables	$	106,258	$	-	$	-	$	-	$	106,258
Public grants	-		3,918		-		-		3,918
Financial liabilities	21,243		20,853		60,908		10,030		113,034
Other liabilities	-		-		-		-		-
Total	127,501		24,771		60,908		10,030		223,210
Financial derivative liabilities
- on exchange risk	1,107		-		-		-		1,107
- on rate risk	708		865		918		10		2,501
Total	$	1,815	$	865	$	918	$	10	$	3,608

	24 April 2015
	DUE WITHIN 1 YEAR		1-2 YEARS		2-5 YEARS		OVER 5 YEARS		TOTAL
Non-derivative financial instruments

Trade payables	$	7,251	$	-	$	-	$	-	$	7,251
Total	$	7,251	$	-	$	-	$	-	$	7,251

	26 April 2014
	DUE WITHIN 1 YEAR		1-2 YEARS		2-5 YEARS		OVER 5 YEARS		TOTAL
Non-derivative financial instruments

Trade payables	$	7,570	$	-	$	-	$	-	$	7,570
Total	$	7,570	$	-	$	-	$	-	$	7,570

Foreign Currency Exchange Rate Risk

Foreign exchange risk is the risk that reported financial performance of the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. LivaNova operates in many countries and currencies and therefore currency fluctuations may impact LivaNova's financial results. In the ordinary course of business LivaNova is exposed to foreign currency exchange rate fluctuations, particularly between the U. S. dollar, Euro, Pound Sterling and Japanese Yen. LivaNova is exposed to currency risk in the following areas:

Transaction exposures, related to anticipated sales and purchases and on-balance-sheet receivables/ payables resulting from such transactions
Translation exposure of foreign-currency intercompany and external debt
Translation exposure of net income in foreign entities
Translation exposure of foreign-currency denominated equity invested in consolidated companies

It is LivaNova's policy to reduce the potential year on year volatility caused by foreign-currency movements on its net earnings by hedging the anticipated net exposure of foreign currencies resulting from foreign-currency sales and purchases. Intercompany financing or investments of operating units are preferably carried out in their functional currency or on a hedged basis. Additionally, foreign currency exchange rate exposure is partly balanced by purchasing of goods, commodities and services in the respective currencies, as well as production activities in the local markets. LivaNova's operating units are prohibited from borrowing or investing in foreign currencies on a speculative basis. The target is to keep up to 15 months of consolidated EBITDA, denominated in material currencies, hedged against USD, LivaNova's reporting currency. At 31 December 2015, cash flow hedge is carried out for FX net risk positions denominated in Japanese Yen and in Pound Sterling.

Based on our exposure to foreign currency exchange rate risk, a sensitivity analysis indicates that if the U.S. dollar had uniformly weakened or strengthened by 10% against the Pound Sterling and the Japanese Yen, in the transitional period ended at 31 December 2015, the effect on our unrealised income or expense for our derivatives outstanding at 31 December 2015 would have been approximately $2.3 million. We did not engage in derivative contracts prior to the Mergers.

Any gains and losses on the fair value of derivative contracts would generally be offset by gains and losses on the underlying transactions. These offsetting gains and losses are not reflected in the above analysis.

With regard to financial instruments denominated in currencies other than the currency of account of the companies holding them, the currencies involving the greatest exposure are the U. S. dollar, Euro, Pound Sterling and Japanese Yen as indicated below (in thousands):

	31 December 2015
	EUR		USD			JPY			GBP			OTHER			TOTAL
Assets
Cash and cash equivalents denominated in foreign currency	$	85	$	4,264		$	806		$	3,247		$	809		$	9,211
Trade receivables and other assets denominated in foreign currency	372		31,450			1,182			1,027			8,537			42,568
Financial assets denominated in foreign currency	-		-			-			-			-			-
Other assets denominated in foreign currency	-		-			-			-			-			-
Total assets	457		35,714			1,988			4,274			9,346			51,779

Liabilities
Trade payables denominated in foreign currency	128		36,175			1,097			4,522			1,108			43,030
Financial liabilities denominated in foreign currency	-		213			-			-			28			241
Other liabilities denominated in foreign currency	-		-			-			-			-			-
Total liabilities	128		36,388			1,097			4,522			1,136			43,271

Net exposure	329		(674		)	891			(248		)	8,210			8,508

Financial derivative liabilities
- not for hedging ⁽¹⁾	-		-			(147		)	(567		)	603			(111		)
- for hedging	-		-			-			-			-			-
Total	-		-			(147		)	(567		)	603			(111		)

Total net exposure	$	-	$	-		$	147		$	567		$	(603	)	$	111

(1) for hedging transactions that do not meet the requirements for hedge accounting

	24 April 2015
	EUR		USD		JPY		GBP		OTHER		TOTAL
Assets
Cash and cash equivalents denominated in foreign currency	$	-	$	1,958	$	-	$	634	$	1,054	$	3,646
Trade receivables and other assets denominated in foreign currency	5,370		3,603		-		1,914		1,279		12,166
Total assets	5,370		5,561		-		2,548		2,333		15,812

Liabilities
Trade payables denominated in foreign currency	-		40		-		105		84		229
Total liabilities	-		40		-		105		84		229

Total net exposure	$	5,370	$	5,521	$	-	$	2,443	$	2,249	$	15,583

	26 April 2014
	EUR		USD		JPY		GBP		OTHER		TOTAL
Assets
Cash and cash equivalents denominated in foreign currency	$	-	$	1,710	$	-	$	774	$	1,248	3,732
Trade receivables and other assets denominated in foreign currency	3,335		6,496		-		1,480		1,379		12,690
Total assets	3,335		8,206		-		2,254		2,627		16,422

Liabilities
Trade payables denominated in foreign currency	-		137		-		111		130		378
Total liabilities	-		137		-		111		130		378

Total net exposure	$	3,335	$	8,069	$	-	$	2,143	$	2,497	$	16,044

Interest Rate Risk

The Company's main interest rate risk arises from long-term debt with variable rates, which expose the Company to cash flow interest rate risk. LivaNova's policy is to hedge, case by case, medium-long term loans from a floating to a fixed rate, to avoid the impact on net earnings of any potential increase of interest rates. During the transitional period ended 31 December 2015, the Company's debt at variable rates was mainly denominated in Euro and in U.S. dollar.

As at 31 December 2015, as a consequence of the pre-payment of the $20 million Term Loan with Unicredit New York, LivaNova Group has no outstanding financing denominated in USD.

We manage a portion of our interest rate risk with contracts that swap floating-rate interest payments for fixed rate interest payments.

As at 31 December 2015, the Company had outstanding derivative contracts to hedge against the risk of interest rate fluctuations in a notional amount of $99.6 million, equal to about 57% of consolidated financial liabilities at 31 December 2015. There were no hedging activities prior to the Mergers.

At 31 December 2015, if interest rates on Euro-denominated debt had been 10 basis points higher or lower with all other variables held constant, the calculated post-tax profit for the period would have been approximately $85 thousand lower or higher, mainly as a result of higher or lower interest expense on floating rate debt; other components of equity would have been $219 thousand lower or $223 thousand higher mainly as a result of a decrease or increase in the fair value of fixed rate interest rate swaps (derivatives designated for hedge accounting).

The following assumptions were used for the sensitivity analysis as at 31 December 2015:

Interest-bearing assets: change of +0.25% - 0.05% in short-term rates at 31 December;
Unhedged financial liabilities: change of +0.50% - 0.05% in the rate curve at 31 December relative to euro rates;
Hedged financial liabilities: change of +0.50% - 0.05% in the rate curve at 31 December relative to euro and US dollar rates.

Credit Risk

Our trade receivables represent potential concentrations of credit risk. This risk is limited due to the large number of customers and their dispersion across a number of geographic areas, as well as our efforts to control our exposure to credit risk by monitoring our receivables, the use of credit approvals and credit limits and entering into the factoring agreements. Refer to "Note 14. Trade Receivables and Allowance for Bad Debt" for more details. In addition, we have historically had strong collections and minimal write-offs. While we believe that our reserves for credit losses are adequate, essentially all of our trade receivables are concentrated in the hospital and healthcare sectors worldwide, and accordingly, we are exposed to their respective business, economic and country-specific variables. Although we do not currently foresee a concentrated credit risk associated with these receivables, repayment is dependent on the financial stability of these industry sectors and the respective countries' national economies and healthcare systems.

The maximum theoretical credit risk exposure for LivaNova is an aggregate carrying amount of financial assets at each reporting period date (in thousands):

	31 December 2015		24 April 2015		26 April 2014
Financial assets	$	19,829	$	17,127	$	15,944
Other assets	1,381		-		-
Trade receivables	249,075		50,569		50,674
Other receivables	15,230		248		248
Other financial assets	8,533		27,020		25,029
Cash and cash equivalents	112,613		124,187		103,299
Guarantees	42,051		-		-
Total	$	448,712	$	219,151	$	195,194

The risk related to bank accounts, financial assets and assets for financial derivatives is limited since all bank and financial counterparties have a high rating.

The guarantees issued by LivaNova are primarily due to regulatory requirements (security issued to credit institutions to back guarantees issued by them for competitive bidding procedures and guarantees to the tax administration for the VAT tax consolidation scheme), and thus, the related risk is remote as also seen on a historical basis.

Since LivaNova operates in the medical technology sector, there is not a significant risk of customer insolvency, a significant portion of which is related to government agencies, but they are subject to the risk related to cash requirements due to the high level of trade receivables owing to average collection periods (D.S.O. - days of sales outstanding) and the ageing of these receivables.

Credit risk is managed on a group basis. For banks and financial institutions, only independently rated parties with a minimum rating of 'A' (or equivalent) are accepted.

For customers, if there is no independent rating, risk control assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal or external information in accordance with limits set by the Company's Treasury Group. The compliance with and authorization of credit limits by customers is regularly monitored by line management. Additionally, the Company established a Bad Debt Policy, which provides the methodology to be used to calculate an addition to the provision for uncollectible receivables for past-due receivables for each LivaNova company and the ageing of each receivable.

Changes in provisions for uncollectible receivables are explained in "Note 14. Trade Receivables and Allowance for Bad Debt ."

For the purposes of disclosing the credit risk to which LivaNova is exposed, below is a breakdown of trade receivables by due dates (ageing).

(in thousands)	31 December 2015		24 April 2015		26 April 2014
Trade receivables
Performing	$	184,022	$	44,091	$	44,545
Less than 30 days past due	24,282		3,920		5,375
31-120 days past due	19,429		1,273		506
121-365 days past due	12,656		13		173
366-730 days past due	6,600		1,272		75
Over 730 days past due	2,086		-		-
Total	$	249,075	$	50,569	$	50,674

Trade receivables that are past due were $65.1 million, $6.5 million and $6.1 million at 31 December 2015, 24 April 2015 and 26 April 2014, respectively. Of this amount 24.6%, 29.9% and 19.0%, at 31 December 2015, 24 April 2015 and 26 April 2014, respectively, are receivables from certain government hospitals that pay their suppliers in 1-2 years on average, and the remaining are receivables from private customers, clinics and distributors, most of which have agreed to repayment plans through the renegotiation of payment terms.

Trade receivables that are not past due and not written down were $184.0 million, $44.1 million and $45.5 million at 31 December 2015, 24 April 2015 and 26 April 2014, respectively. Of this amount, 13.1%, 23.2% and 29.1%, at 31 December 2015, 24 April 2015 and 26 April 2014, respectively, were the receivables from government as indicated in the following table:

	31 December 2015						24 April 2015						26 April 2014
	TOTAL		PERFORMING		PAST DUE		TOTAL		PERFORMING		PAST DUE		TOTAL		PERFORMING		PAST DUE
BY SECTOR
Public	$	39,484	$	24,106	$	15,378	$	12,155	$	10,219	$	1,936	$	14,143	$	12,978	$	1,165
Private	209,591		159,916		49,675		38,414		33,872		4,542		36,531		31,567		4,964
Total	$	249,075	$	184,022	$	65,053	$	50,569	$	44,091	$	6,478	$	50,674	$	44,545	$	6,129

Concentrations of risk by region are provided below in order to further assess the risk related to the LivaNova's trade receivables:

	31 December 2015							24 April 2015							26 April 2014
	D.S.O.	TOTAL		PERFORMING		PAST DUE		D.S.O.	TOTAL		PERFORMING		PAST DUE		D.S.O.		TOTAL		PERFORMING		PAST DUE
BY REGION
Italy	118	$	25,536	$	15,875	$	9,661	99	$	780	$	462	$	318	$	105	$	679	$	431	$	248
Spain	165	16,996		8,952		8,044		134	1,153		568		585		153		1,200		561		639
France	62	22,645		20,081		2,564		64	805		568		237		52		870		725		145
Germany	17	3,927		3,336		591		27	731		616		115		37		624		476		148
Rest of Europe	70	23,039		15,992		7,047		39	5,282		5,017		265		31		4,495		4,020		475
North America	46	65,347		54,548		10,799		55	35,511		31,753		3,758		54		33,687		30,038		3,649
Japan	61	10,891		10,891		-		135	942		942		-		128		811		811		-
Rest of world	143	80,694		54,347		26,347		112	5,365		4,165		1,200		91		8,308		7,483		825
Total	73	$	249,075	$	184,022	$	65,053	61	$	50,569	$	44,091	$	6,478	57		$	50,674	$	44,545	$	6,129

Revenues are derived from a large number of customers with no customers being individually material.

The average collection period increased from 61 days at 24 April 2015 to 73 days at 31 December 2015.

The D.S.O. (days of sales outstanding), or average collection period, is calculated as the ratio of total receivables at the end of the period to revenues generated in the 12 preceding months.

D.S.O. = (Trade receivables/Revenues) * 365

For comparability the revenue amounts include VAT.

For the purposes of the disclosure of credit risk, there were no past-due balances of a significant amount related to other assets, other receivables and financial assets.

Capital management

LivaNova maintains a sufficient amount of capital to meet its development needs, fund the business units' operations and ensure the Company continues to be a going concern. The equilibrium of sources of funding, which is also aimed at minimising overall capital costs, is achieved by balancing risk capital contributed on a permanent basis by shareholders, and debt capital, which is in turn diversified and structured with several due dates and in many currencies. To this end, changes in debt levels in relation to both equity and operating profit, and the generation of cash by the business units are constantly kept under control.

Note 5. Fair Value Measurements

We follow the guidance on fair value measurements and disclosures with respect to assets and liabilities that are measured at fair value on both a recurring and non-recurring basis. Under this guidance, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The guidance also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability, based on market data obtained from sources independent of us. Unobservable inputs are inputs that reflect our assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. The categorization of financial assets and financial liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The hierarchy is broken down into three levels defined as follows:

Level 1 - Inputs are quoted prices in active markets for identical assets or liabilities
Level 2 - Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly
Level 3 - Inputs are unobservable for the asset or liability

No assets or liabilities are classified as Level 1. Financial assets and liabilities that are classified as Level 2 include derivative instruments, primarily forward and option currency contracts and interest rate swaps contracts, which are valued using standard calculations and models that use readily observable market data as their basis.

Level 3 includes a contingent payment recognised as a result of acquisition of Cellplex Pty Ltd. and investments in non-listed companies classified as AFS.

Assets and Liabilities That Are Measured at Fair Value on a Recurring Basis

The following table provides information by level for assets and liabilities that are measured at fair value on a recurring basis for the transitional period 25 April 2015 to 31 December 2015 (in thousands):

	Fair Value as at		Fair Value Measurements Using Inputs Considered as:
	31 December 2015		Level 1		Level 2		Level 3
Assets:
Available-for-sale investments	$	15,847	$	-	$	-	$	15,487
Derivative Assets - for hedging (exchange rates)	839		-		839		-
Total assets	$	16,686	$	-	$	839	$	15,487

Liabilities:
Derivative Liabilities - for hedging (interest rates)	$	2,876	$	-	$	2,876	$	-
Derivative Liabilities - not for hedging (interest rates)	24		-		24		-
Derivative Liabilities - not for hedging (exchange rates)	1,547		-		1,547		-
Earnout for contingent payments ⁽¹⁾	3,457		-		-		3,457
Total Liabilities	$	7,904	$	-	$	4,447	$	3,457

(1) This contingent payment arose as a result of the acquisition of Cellplex Pty Ltd. in September 2015 and was valued using the Black Scholes method at the date of the Mergers.

	Fair Value as at		Fair Value Measurements Using Inputs Considered as:
	24 April 2015		Level 1		Level 2		Level 3
Assets:
Available-for-sale investments	$	17,127	$	-	$	-	$	17,127
Total assets	$	17,127	$	-	$	-	$	17,127

	Fair Value as at		Fair Value Measurements Using Inputs Considered as:
	26 April 2014		Level 1		Level 2		Level 3
Assets:
Available-for-sale investments	$	15,944	$	-	$	-	$	15,944
Total assets	$	15,944	$	-	$	-	$	15,944

Level 2

To measure the fair value of its derivative transactions (transactions to hedge exchange risk and interest rate risk), we calculate the mark-to-market of each transaction using prices quoted in active markets (e.g. the spot exchange rate of a currency for forward exchange transactions) and observable market inputs processed for the measurement (e.g. the fair value of an interest rate swap using the interest rate curve), or the measurement of an exchange rate option (with the processing of listed prices and observable variables such as volatility).

For all level 2 valuations, we use the information provided by a third-party as a source for obtaining quoted observable prices and to process market variables. In particular, we use the following techniques to calculate the fair value of derivatives:

For forward exchange rate transactions, fair value is calculated using the forward market exchange rate on the reporting date for each contract. The difference calculated between this amount and the contractual forward rate is discounted (present value) to the same reporting date;
For interest rate swaps, the fair value is calculated taking into account the present value of interest flows calculated on the notional amount of each contract using the forward interest rate curve applicable on the reporting date.

The derivative valuation models incorporate the credit quality of counterparties, adjustments for counterparties' credit risk and the Company's own non-performance risk.

Level 3

AFS financial assets consist of investments in equity shares and convertible preferred shares of privately held companies for which there are no quoted market prices. During the transitional period 25 April 2015 to 31 December 2015 it was determined that the fair value of the investment in Cerbomed GmbH was below its carrying value and that the carrying values of this investment was not expected to be recoverable within a reasonable period of time. As a result, an impairment charge of $5.1 million was recognised during the transitional period ended 31 December 2015. No impairment was recorded in the fiscal year ended 24 April 2015. The fair value of the other investments in equity shares approximated their carrying value as at 31 December 2015, 24 April 2015 and 26 April 2014. These investments fall within Level 3 of the fair value hierarchy due to the use of significant unobservable inputs to determine fair value as the investments are privately held entities without quoted market prices. To determine the fair value of these investments management used all pertinent financial information available related to the entities including valuation reports prepared by third parties.

In September 2015 as a result of acquisition of Cellplex Pty Ltd., a contingent payment was recorded and valued using the Black-Scholes model at the acquisition date.

Transfers

We review the fair value hierarchy classification on a quarterly basis. Changes in the ability to observe valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. Our policy is to recognise transfers into and out of levels within the fair value hierarchy at the end of the fiscal quarter in which the actual event or change in circumstances that caused the transfer occurs. There were no transfers between Level 1, Level 2 or Level 3 during the periods ended 31 December 2015, and 24 April 2015. When a determination is made to classify an asset or liability within Level 3, the determination is based upon the significance of the unobservable inputs to the overall fair value.

Assets and Liabilities that are Measured at Fair Value on a Non-recurring Basis

Non-financial assets such as investments in shares that are accounted for using the cost or equity method, goodwill, intangible assets and property, plant and equipment are measured at fair value when there is an indicator of impairment and recorded at fair value only when impairment is recognised. The fair values of these non-financial assets are based on our own judgements about the assumptions that market participants would use in pricing the asset and on observable market data, when available. We classify these measurements as Level 3 within the fair value hierarchy.

We recorded goodwill of $764.7 million on the date of the Mergers. Due to the proximity of the merger date to the year end, we have not identified any indicators of impairment.

During the transitional period 25 April 2015 to 31 December 2015, we fully impaired finite-lived intangible assets primarily related to R&D projects, such as our rechargeable battery technology, that no longer factored into our future product plans, for a loss of $1.7 million. During the fiscal year ended 24 April 2015, we fully impaired certain neurological signal feedback and processing technology that no longer factored into our product plans and recognised an impairment loss of $0.4 million. We estimated the fair value of the intangible assets utilizing a discounted future cash flow analysis, which we classified as a Level 3 within the fair value hierarchy. Refer to "Note 10. Goodwill and Intangible Assets " for further details.

During the fiscal year ended 24 April 2015, we recognised an impairment loss of $0.8 million for certain obsolete manufacturing equipment and software primarily related to the Centro project redesign. We estimated the fair value of the property, plant and equipment utilizing a discounted future cash flow analysis, which we classified as a Level 3 within the fair value hierarchy.

Financial Instruments Not Measured at Fair Value

The carrying values of our cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair values due to the short-term nature of these items.

The balance of our investments in short-term securities as at 31 December 2015 consisted of commercial paper carried at amortized cost which approximates its fair value. The balances as at 24 April 2015 and 26 April 2014 consisted of a certificate of deposit and commercial paper that are considered held-to-maturity debt securities and carried at amortized cost, which approximate fair value. Refer to "Note 12. Financial Assets " for further details.

The carrying value of our long and short-term debt as at 31 December 2015 was $174.3 million which we believe approximates fair value. We did not have any debt outstanding as at 24 April 2015 and 26 April 2014.

Note 6. Financial Instruments

The Company uses several instruments to fund its operating activities including short and long-term debt from credit institutions and other lenders, short-term bank loans and advances against trade receivables sold under factoring agreements. The Company's other financial instruments consist of trade payables and receivables resulting from operating activities, investments in other companies, assets and liabilities for financial derivatives (primarily interest rate swaps and forward foreign currency contracts) and other receivables and payables other than those related to staff, tax authorities and welfare agencies.

Classification of financial instruments

With regard to classification of financial instruments on the basis of the types as specified in IAS 39, the following should be noted:

Assets and liabilities for financial derivatives related to contracts entered into to mitigate exchange risk on imports and exports are classified under "Hedging derivatives" when they meet the requirements for being recognised as hedge accounting instruments, and under "Financial assets/liabilities at fair value through profit or loss" when these requirements are not met.
Assets and liabilities for financial derivatives related to contracts entered into to mitigate interest rate risk are classified under "Hedging derivatives" when they meet the requirements for being recognised as hedge accounting instruments, and under "Financial assets/liabilities at fair value through profit or loss" when these requirements are not met.
Trade receivables also include those sold to third parties under factoring agreements that do not meet the conditions of IAS 39 for their derecognition from the financial statements. To reflect these sales, payables are recorded for advances received that fall into the category of "Financial liabilities at amortised cost".

Classification of financial instruments at 31 December 2015
	CLASSIFICATION												CARRYING AMOUNT
	FINANCIAL ASSETS/ LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS		RECEIVABLES AND LOANS		FINANCIAL ASSETS HELD TO MATURITY		AVAILABLE-FOR-SALE FINANCIAL ASSETS		FINANCIAL LIABILITIES AT AMORTISED COST		HEDGING DERIVATIVES		TOTAL		CURRENT PORTION		NON-CURRENT PORTION		*FAIR VALUE*
Assets
Financial assets	$	-	$	2,205	$	1,777	$	15,847	$	-	$	-	$	19,829	$	-	$	19,829	$	19,829
Other assets	-		1,463		-		-		-		-		1,463		-		1,463		1,463
Trade receivables	-		249,075		-		-		-		-		249,075		249,075		-		249,075
Other receivables	-		24,183		-		-		-		-		24,183		24,183		-		24,183
Other financial assets	-		9,271		-		-		-		-		9,271		9,271		-		9,271
Cash and cash equivalents	-		112,613		-		-		-		-		112,613		112,613		-		112,613
Total financial assets	$	-	$	398,81	$	1,777	$	15,847	$	-	$	-	$	416,434	$	395,142	$	21,292	$	416,434

Liabilities
Financial liabilities	$	-	$	-	$	-	$	-	$	113,034	$	-	$	113,034	$	21,243	$	91,791	$	114,116
Other liabilities	-		-		-		-		7,047		-		7,047		-		7,047		7,047
Trade payables	-		-		-		-		106,258		-		106,258		106,258		-		106,258
Other payables	-		-		-		-		45,865		-		45,865		45,865		-		45,865
Financial derivative liabilities	1,571		-		-		-		-		2,037		3,608		1,815		1,793		3,608
Other financial liabilities	-		-		-		-		62,487		-		62,487		62,487		-		62,487
Total financial liabilities	$	1,571	$	-	$	-	$	-	$	334,691	$	2,037	$	338,299	$	237,668	$	100,631	$	339,381

Classification of financial instruments at 24 April 2015
	CLASSIFICATION												CARRYING AMOUNT
	FINANCIAL ASSETS/ LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS		RECEIVABLES AND LOANS		FINANCIAL ASSETS HELD TO MATURITY		AVAILABLE-FOR-SALE FINANCIAL ASSETS		FINANCIAL LIABILITIES AT AMORTISED COST		HEDGING DERIVATIVES		TOTAL		CURRENT PORTION		NON-CURRENT PORTION		*FAIR VALUE*
Assets
Financial assets	$	-	$	-	$	-	$	17,127	$	-	$	-	$	17,127	$	-	$	17,127	$	17,127
Other assets	-		1,563		-		-		-		-		1,563		-		1,563		1,563
Trade receivables	-		50,569		-		-		-		-		50,569		50,569		-		50,569
Other receivables	-		4,51		-		-		-		-		4,51		4,51		-		4,51
Other financial assets	-		27,02		-		-		-		-		27,02		27,02		-		27,02
Cash and cash equivalents	-		124,187		-		-		-		-		124,187		124,187		-		124,187
Total financial assets	$	-	$	207,849	$	-	$	17,127	$	-	$	-	$	224,976	$	206,286	$	18,69	$	224,976

Liabilities
Trade payables	$	-	$	-	$	-	$	-	$	7,251	$	-	$	7,251	$	7,251	$	-	$	7,251
Other payables	-		-		-		-		13,331		-		13,331		13,331		-		13,331
Total financial liabilities	$	-	$	-	$	-	$	-	$	20,582	$	-	$	20,582	$	20,582	$	-	$	20,582

Classification of financial instruments at 26 April 2014
	CLASSIFICATION												CARRYING AMOUNT
	FINANCIAL ASSETS/ LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS		RECEIVABLES AND LOANS		FINANCIAL ASSETS HELD TO MATURITY		AVAILABLE-FOR-SALE FINANCIAL ASSETS		FINANCIAL LIABILITIES AT AMORTISED COST		HEDGING DERIVATIVES		TOTAL		CURRENT PORTION		NON-CURRENT PORTION		*FAIR VALUE*
Assets
Financial assets	$	-	$	-	$	-	$	15,944	$	-	$	-	$	15,944	$	-	$	15,944	$	15,944
Other assets	-		856		-		-		-		-		856		-		856		856
Trade receivables	-		50,674		-		-		-		-		50,674		50,674		-		50,674
Other receivables	-		3,629		-		-		-		-		3,629		3,629		-		3,629
Other financial assets	-		25,029		-		-		-		-		25,029		25,029		-		25,029
Cash and cash equivalents	-		103,299		-		-		-		-		103,299		103,299		-		103,299
Total financial assets	$	-	$	183,487	$	-	$	15,944	$	-	$	-	$	199,431	$	182,631	$	16,8	$	199,431

Liabilities
Trade payables	$	-	$	-	$	-	$	-	$	7,57	$	-	$	7,57	$	7,57	$	-	$	7,57
Other payables	-		-		-		-		11,46		-		11,46		11,46		-		11,46
Total financial liabilities	$	-	$	-	$	-	$	-	$	19,03	$	-	$	19,03	$	19,03	$	-	$	19,03

Note 7. Business Combinations

On 19 October 2015, and pursuant to the terms of the Merger Agreement, Sorin merged with and into LivaNova, with LivaNova continuing as the surviving company, immediately followed by the merger of Merger Sub with and into Cyberonics, with Cyberonics continuing as the surviving company and as a wholly owned subsidiary of LivaNova. Following the completion of the Mergers, LivaNova became the holding company of the combined businesses of Cyberonics and Sorin, and LivaNova's ordinary shares were listed under the ticker symbol "LIVN", on NASDAQ and admitted for listing on the standard segment of the U.K. Financial Authority's Official List and to trading on the LSE. As a result of the Mergers on 19 October 2015, LivaNova issued approximately 48.8 million ordinary shares.

On 19 October 2015, each ordinary share of Sorin was converted into the right to receive 0.0472 ordinary shares of LivaNova, ("Sorin Exchange Ratio"), and each share of common shares of Cyberonics was converted into the right to receive one ordinary share of LivaNova. The fair value of the shares issued as total consideration of the Mergers is based on Cyberonics' closing share price of $69.95 per share on 16 October 2015, the last business day prior to the close of the Mergers. Based on the number of outstanding shares of Sorin and Cyberonics as of 19 October 2015, former Sorin and Cyberonics shareholders held approximately 46 percent and 54 percent, respectively, of LivaNova's ordinary shares after giving effect to the Mergers.

Based on the relative voting rights of Cyberonics and Sorin shareholders immediately following completion of the Mergers and the premium paid by Cyberonics for Sorin ordinary shares, and after taking into consideration all relevant facts, Cyberonics was considered to be the acquirer for accounting purposes. LivaNova accounted for the acquisition of Sorin as a business combination using the acquisition method of accounting. Under the acquisition method of accounting, the tangible and identifiable intangible assets acquired and liabilities assumed are recorded based on their fair values at the acquisition date with the excess over the fair value of consideration recognised as goodwill.

The purchase price allocation presented below is based on a preliminary acquisition valuation and includes the use of estimates based on information that was available to management at the time these audited consolidated financial statements were prepared. Management is in the process of finalizing appraisals and estimates that may result in a change in the valuation of assets acquired, liabilities assumed, goodwill recognised and the related impact on deferred taxes and cumulative translation adjustments. These changes may have a material impact on the results of operations and financial position. As management finalizes the valuation of assets acquired and liabilities assumed, additional purchase price adjustments may be recorded during the measurement period. Fair value estimates are based on a complex series of judgements about future events and uncertainties and rely heavily on estimates and assumptions. The judgements used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed can materially impact the results of operations.

The following table summarises the fair value of consideration transferred and preliminary fair values of Sorin's assets acquired and liabilities assumed:

(in thousands)
Consideration transferred:
Fair value of common shares issued to Sorin shareholders ⁽¹⁾	$	1,577,603
Fair value of common shares issued to Sorin share award holders ⁽²⁾	9,231
Fair value of LivaNova share appreciation rights issued to Sorin share appreciation rights holders ⁽³⁾	2,249
Total fair value of consideration transferred	$	1,589,083
Estimated fair value of assets acquired and liabilities assumed:
Cash and cash equivalents	$	12,495
Accounts receivable	224,466
Inventories	233,832
Other current assets	60,674
Property, plant and equipment	192,503
Intangible assets	703,865
Equity investments	67,059
Other assets	7,483
Deferred tax assets	135,517
Total assets acquired	$	1,637,894

Short-term debt	$	110,601
Other current liabilities	237,855
Long-term debt	128,458
Deferred tax liabilities	278,940
Other long-term liabilities	57,674
Total liabilities assumed	$	814,304
Goodwill	$	764,717

1. To record the fair value of LivaNova ordinary shares issued to Sorin shareholders (in thousands except for ratio):

Total Sorin shares outstanding as of 16 October 2015	477,824
Sorin Exchange Ratio	0.0472
Shares of LivaNova issued	22,553
Value per share of Cyberonics as of 16 October 2015	$	69.95
Fair value of ordinary shares transferred to Sorin shareholders	$	1,577,603

2. Each Sorin share award (other than a Sorin share appreciation right) granted prior to the Sorin merger was accelerated, vested and was converted into the right to receive LivaNova ordinary shares based on the Sorin Exchange Ratio. The total fair value of the replacement awards is $25.2 million, including $9.2 million attributable to pre-combination services and allocated to consideration transferred to acquire Sorin. Of the remaining $16.0 million, $8.3 million was recognised immediately in the post-combination period and $7.7 million will be recognised over the post-combination service period to 28 February 2017 due to the service period requirements of the awards. Refer to "Note 21. Share-Based Incentive Plans " for further discussion of treatment of equity awards.

The consideration transferred in the Mergers was measured using the fair-value-based measure of the share awards as of the closing date. For purposes of calculating the consideration transferred, the fair-value-based measure of the Sorin share awards was determined to be the opening market price of LivaNova's ordinary shares of $69.39 on 19 October 2015.

3. As of 16 October 2015 there were 3,815,824 Sorin share appreciation rights. Each Sorin share appreciation right granted prior to the Sorin merger effective was accelerated, vested and was converted into the right to receive 0.0472 LivaNova share appreciation right based on the Sorin Exchange Ratio. The total fair value of the replacement share appreciation rights is $3.8 million, including $2.2 million attributable to pre-combination services and allocated to consideration transferred to acquire Sorin. The remaining $1.6 million was recognised immediately in the post-combination period. Refer to "Note 21. Share-Based Incentive Plans " for further discussion of treatment of equity awards.

Based upon a preliminary acquisition valuation, LivaNova acquired $464.0 million of customer-related intangible assets, $211.1 million of developed technology intangible assets, $13.6 million related to the Sorin trade name and $15.1 million related to software, with weighted average estimated useful lives of 17, 14, 4 and 3 years, respectively. Other long-term liabilities include $2.7 million of unfavorable leases with weighted average remaining lives of 5 years.

Goodwill has been allocated to Cardiac Surgery, Cardiac Rhythm Management and Neuromodulation operating segments. Goodwill is calculated as the excess of the consideration transferred over the net assets recognised and represents growth opportunities and expected cost synergies of the combined company. The Mergers are expected to provide both short-term and long-term revenue enhancements and cost savings and synergy opportunities, increase the diversity of LivaNova's business mix, and accelerate the entry into three emerging market opportunities in the areas of heart failure, sleep apnea and less invasive mitral valves. The Mergers are also expected to allow LivaNova to utilize and integrate certain Sorin technologies into its existing and future product lines for epilepsy. LivaNova expects all of its operating segments to benefit, directly or indirectly, from the synergies arising from the business combination. As a result, as at 31 December 2015, the Company has provisionally assigned the goodwill arising from the Sorin acquisition to all three operating segments. This assignment was made by taking into consideration market participant rates of return for each acquired operating segment (Cardiac Surgery and Cardiac Rhythm Management) in order to assess the respective fair values. The remaining goodwill, allocated to Neuromodulation, which is the accounting acquirer's existing business unit, is supported by the synergies deriving from the Mergers. Goodwill recognised as a result of the acquisition is not deductible for tax purposes.

The fair value of accounts receivable and other current assets is $285.1 million and includes trade receivables with a fair value of $224.5 million. The gross amount of trade receivables is $243.9 million. However, none of the trade receivables have been impaired and it is expected that the contractual amounts can be collected.

Contingent liabilities assumed includes $9.2 million related to uncertain tax positions. Contingent liabilities also include $3.4 million for contingent payments at fair value related to two acquisitions completed by Sorin prior to the closing of the Mergers. The contingent payments for one acquisition are based on achievement of sales targets by the acquiree through 30 June 2018 and the contingent payments for the second acquisition are based on sales of cardiopulmonary disposable products and heart lung machines through 2019 of the acquiree.

LivaNova's consolidated financial statements for the transitional period 25 April 2015 to 31 December 2015 include Sorin's results of operations from the acquisition date through 31 December 2015. Revenue and operating loss attributable to Sorin during this period were $200.1 million and $5.9 million, respectively. In relation to the Mergers, we incurred $42.1 million of transaction costs and $13.7 million of integration costs during the transitional period 25 April to 31 December 2015. The transaction costs primarily relate to advisory, legal and accounting fees and are included in the merger-related expenses line item in the consolidated statement of income (loss). The integration costs are included as a separate line item on the consolidated statement of income (loss).

Pro forma results of operations (unaudited)

The following unaudited pro forma information presents the results of the Company as if the Mergers were consummated on 26 April 2014, and had been included in our consolidated statements of income (loss) for the transitional period 25 April 2015 to 31 December 2015 and the fiscal year ended 24 April 2015:

(in thousands, except per share data )	Transitional Period 25 April 2015 to 31 December 2015 (unaudited)			Fiscal Year Ended 24 April 2015 (unaudited)
(in thousands, except per share data )				Fiscal Year Ended 24 April 2015 (unaudited)
Revenue	$	837,241		$	1,236,477
Net Income	(30,515		)	11,947
Basic and diluted net income per share	$	(0.93	)	$	0.45

The unaudited pro forma combined results of operations for the transitional period 25 April 2015 to 31 December 2015 and the fiscal year ended 24 April 2015 have been prepared by adjusting the historical results of Cyberonics to include the historical results of Sorin. The unaudited pro forma information for the fiscal year ended 24 April 2015 is based on the accounts of Cyberonics presented on the fiscal year ending 24 April 2015 and of Sorin presented on the twelve months ended 30 June 2015. There were no material intervening events that occurred involving either company between 24 April 2015 and 30 June 2015. The unaudited pro forma information for the transitional period from 25 April 2015 to 31 December 2015 is based on the accounts of LivaNova from 25 April 2015 through 31 December 2015 (which consists of legacy Cyberonics operations through 18 October 2015 and combined Cyberonics and Sorin operations thereafter) and the accounts of Sorin from 25 April 2015 through the 18 October 2015.

The unaudited pro forma information reflects adjustments that are expected to have a continuing impact on our results operations and are directly attributable to the Mergers. The unaudited pro forma results include, but are not limited to, the incremental depreciation expense associated with the step-up fair value adjustments to property, plant and equipment of $1.6 million for the transitional period 25 April 2015 to 31 December 2015, $3.2 million for the fiscal year ended 24 April 2015 and the incremental intangible asset amortization to be incurred based on the preliminary values of each identifiable intangible asset of $13.8 million for the transitional period 25 April 2015 to 31 December 2015 and $26.2 million for the fiscal year ended 24 April 2015.

As a result of the Mergers, LivaNova recorded a $56.8 million step-up of inventory and recognised an incremental cost of sales expense of $20.8 million from 19 October 2015 to 31 December 2015 associated with amortization of the step-up in inventory. The unaudited pro forma results include an adjustment to eliminate the $20.8 million in expense from the transitional period 25 April 2015 to 31 December 2015 and reflect amortization expense of $56.8 million in the results of the fiscal year ended 24 April 2015 because the expected inventory usage period is less than 12 months.

The statutory tax rate was applied to unaudited pro forma adjustments, as appropriate, to each adjustment based on the jurisdiction in which the adjustment was expected to occur.

The pro forma net loss for the transitional period 25 April 2015 to 31 December 2015 includes the following non-recurring items directly attributable to the merger: $48.8 million of merger-related transaction expenses and $19.3 million of non-cash share-based compensation charges. The pro forma net loss for the fiscal year ended 24 April 2105 includes non-recurring merger-related transaction expenses directly attributable to the Mergers of $35.9 million.

This supplemental pro forma information has been prepared for comparative purposes and does not purport to be indicative of what would have occurred had the acquisition been made on 26 April 2014, and it is not indicative of any future results.

Note 8. 2015 Restructuring Plans

We initiated several restructuring plans after the consummation of the Mergers in October 2015. LivaNova incurred restructuring expenses triggered by the Mergers and on plans following efforts to eliminate duplicate corporate expenses and also on plans intended to leverage economies of scale and streamline distributions, logistics and office functions in order to reduce overall costs. The restructuring provision is based on the information available at the closing of the period and is subject to periodic review.

The restructuring plan's liabilities for the transitional period 25 April 2015 to 31 December 2015 are as follows (in thousands):

	Employee severance and other termination costs		Supply chain contract termination costs		Total
Beginning liability balance	$	-	$	-	$	-
Charges	4,720		-		4,720
Cash payments	-		-		-
Currency translation gains (losses)	-		-		-
Ending liability balance	$	4,720	$	-	$	4,720

Note 9. Property, Plant and Equipment

	Land		Building and building improvements			Equipment, other, furniture, fixtures			Capital investment in process		Total
At 26 April 2014
Gross amount	$	1,644	$	26,839		$	27,237		$	6,926	$	62,646
Accumulated depreciation and impairment	-		(5,180		)	(19,938		)	-		(25,118		)
Net amount	1,644		21,659			7,299			6,926		37,528

At 24 April 2015
Gross amount	1,644		28,048			28,788			6,695		65,175
Accumulated depreciation and impairment	-		(6,084		)	(20,715		)	-		(26,799		)
Net amount	1,644		21,964			8,073			6,695		38,376

At 31 December 2015
Gross amount	15,662		82,014			123,799			42,210		263,685
Accumulated depreciation and impairment	-		(7,346		)	(27,348		)	-		(34,694		)
Net amount	$	15,662	$	74,668		$	96,451		$	42,210	$	228,991

Changes during the year in the net amount of each category of property, plant and equipment are indicated below:

	Land			Building and building improvements			Equipment, other, furniture, fixtures			Capital investment in process			Total
Net amount at 26 April 2014	$	1,644		$	21,659		$	7,299		$	6,926		$	37,528
Purchases	-			1,315			4,509			115			5,939
Increases for internal work	-			-			-			-			-
Disposals	-			-			(640		)	-			(640		)
Impairment	-			-			-			(346		)	(346		)
Depreciation	-			(923		)	(3,012		)	-			(3,935		)
Reclassifications	-			-			-			-			-
Other changes	-			(87		)	(83		)	-			(170		)
Net amount at 24 April 2015	1,644			21,964			8,073			6,695			38,376

Purchases	-			437			3,970			11,650			16,057
IFRS 3 business combinations	14,391			54,284			93,511			30,317			192,503
Disposals	-			(44		)	(584		)	(226		)	(854		)
Impairment				-			-			-			-
Depreciation				(1,356		)	(7,472		)	-			(8,828		)
Currency translation gains/losses	(373		)	(2,030		)	(4,691		)	(1,169		)	(8,263		)
Reclassifications	-			1,413			3,644			(5,057		)	-
Other changes	-			-			-			-			-
Net amount at 31 December 2015	$	15,662		$	74,668		$	96,451		$	42,210		$	228,991

A building in Cantù, Italy with a net book value of $1.2 million as at 31 December 2015 was provided as collateral to secure a long-term loan taken out by Sorin Group Italia S.r.l. Refer to "Note 24. Commitments and Contingencies " for further information. As part of the acquisition, we acquired Sorin's PP&E with a carrying value of $192.5 million equal to their fair value.

Note 10. Goodwill and Intangible Assets

	Goodwill		Developed technology			Customer relationships			Trademarks and trade names			Other intangible assets			Software			Total
At 26 April 2014
Gross amount	$	-	$	13,964		$	-		$	-		$	1,148		$	9,843		$	24,955
Accumulated amortisation and impairment	-		(3,229		)	-			-			(228		)	(7,836		)	(11,293		)
Net amount	-		10,735			-			-			920			2,007			13,662

At 24 April 2015
Gross amount	-		13,204			-			-			1,023			10,537			24,764
Accumulated amortisation and impairment	-		(3,713		)	-			-			(347		)	(8,625		)	(12,685		)
Net amount	-		9,491			-			-			676			1,912			12,079

At 31 December 2015
Gross amount	746,860		213,873			444,472			13,030			11			25,821			697,207
Accumulated amortisation and impairment	-		(6,493		)	(5,291		)	(660		)	-			(10,225		)	(22,669		)
Net amount	$	746,860	$	207,380		$	439,181		$	12,370		$	11		$	15,596		$	674,538

During the transitional period 25 April 2015 to 31 December 2015 we purchased a patent license for $1.0 million related to the integration of conditionally safe MR technologies with our leads. This patent license has an amortization period of 15 years. In connection with the Mergers and based upon the preliminary acquisition valuation, we acquired certain finite-lived intangible assets which included $464.0 million of customer relationships, $211.1 million of developed technology, $13.6 million of trade names and $15.1 million of software. In addition, in connection with the Mergers, we recorded $764.7 million of goodwill.

The changes in the net carrying value of each class of intangible assets during the year are indicated below:

	Goodwill			Developed technology			Customer relationships			Trademarks and trade names			Other intangible assets			Software			Total
Net amount at 26 April 2014	$	-		$	10,735		$	-		$	-		$	920		2,007			$	13,662
Purchases	-			-			-			-			-			694			694
Increases for internal work	-			-			-			-			-			-			-
Disposals	-			-			-			-			-			-			-
Amortisation	-			(876		)	-			-			(163		)	(789		)	(1,828		)
Impairment	-			(368		)	-			-			(81		)	-			(449		)
Reclassifications	-			-			-			-			-			-			-
Other changes	-			-			-			-			-			-			-
Net amount at 24 April 2015	-			9,491			-			-			676			1,912			12,079
Purchases	-			1,000			-			-			-			229			1,229
Increases for internal work	-			-			-			-			-			-			-
IFRS 3 business combinations	764,717			211,102			463,996			13,619			12			15,136			703,865
Disposals	-			(155		)	-			-			-						(155		)
Amortisation	-			(3,660		)	(5,317		)	(661		)	(75		)	(1,600		)	(11,313		)
Impairment	-			(1,088		)	-			-			(601		)	-			(1,689		)
Currency translation gains/losses	(17,857		)	(9,310		)	(19,498		)	(588		)	(1		)	(81		)	(29,478		)
Reclassifications	-			-			-			-			-			-			-
Other changes	-			-			-			-			-			-			-
Net amount at 31 December 2015	$	746,860		$	207,380		$	439,181		$	12,370		$	11		$	15,596		$	674,538

Amortisation costs charged to the consolidated statement of income (loss) totaled $11.3 million and $1.8 million for the transitional period 25 April 2015 to 31 December 2015 and for the fiscal year ended 24 April 2015, respectively.

The amortisation periods for our finite-lived intangible assets as at 31 December 2015 was as follows:

	Minimum Life in years	Maximum life in years
Developed technology	5	18
Customer relationships	16	18
Trademarks and trade names	4	4
Other intangible assets	5	5
Software	1	10

Note 11. Investments in Associates, Joint Ventures and Subsidiaries

Equity investments in associates and joint ventures measured at equity . In connection with the Mergers, refer to "Note 7. Business Combinations ", we acquired equity investments which are accounted for under the equity method.

Prior to the Mergers, Cyberonics did not have any investments accounted for under the equity method. The table below lists the investments in associates and joint ventures and the balance as at 31 December 2015 (in thousands except percentage ownership):

	Nature of relationship	% Ownership	31 December 2015
La Bouscarre S.C.I.	Associate	50.0	$	16
LMTB - Laser und Medizin Technologie Gmbh	Associate	22.5	3
MD START S.A.	Associate	20.9	-
MD START I K.G.	Associate	23.4	-
Enopace Biomedical Ltd.	Associate	31.8	-
Cardiosolutions Inc.	Associate	35.3	-
Caisson Interventional LLC ⁽¹⁾	Associate	43.7	13,712
Highlife S.A.S. ⁽¹⁾	Associate	38.0	8,363
MicroPort Sorin CRM (Shanghai) Co. Ltd.	Joint venture	49.0	8,959
Respicardia Inc. ⁽²⁾	Associate	19.7	30,586
Total			$	61,639

We have outstanding loans to Caisson Interventional LLC and to Highlife S.A.S for $3.6 million included in non-current financial assets on the consolidated balance sheet.
Although the Company holds less than 20% of the ownership interest and voting control of Respicardia Inc., the Company has the ability to exercise significant influence through both its shareholding and its nominated director's active participation on the Respicardia Inc. Board of Directors.

Summarized financial information for all individually not material associates and joint ventures not adjusted for the percentage of ownership held by the Company, is presented below:

(in thousands)	Revenue		Net Profit (Loss)			Total Assets		Equity
MD START S.A.	$	3	$	(237	)	$	9	$	6
MD START I K.G.	$	-	$	(364	)	$	3,767	$	3,744
Enopace Biomedical Ltd.	$	-	$	(4,600	)	$	315	$	(7,422	)
Cardiosolutions Inc.	$	-	$	(2,124	)	$	1,080	$	(1,494	)
Caisson Interventional LLC	$	-	$	(7,883	)	$	3,308	$	434
Highlife S.A.S.	$	-	$	(4,283	)	$	906	$	(1,314	)
MicroPort Sorin CRM (Shanghai) Co. Ltd.	$	2,121	$	(7,375	)	$	10,326	$	9,311
Respicardia Inc.	$	514	$	(10,516	)	$	14,681	$	3,049

The summarised financial information of the associates and joint ventures include adjustments made by the Company when using the equity method, such as fair value adjustments made at the time of acquisition and adjustments for differences in accounting policies. Therefore, the Company has presented the above disclosures on this basis.

Refer to "Note 27. Related Parties" for details of transactions and balances between the Company and its associates and joint ventures. The associates and joint ventures had no contingent liabilities or capital commitments as at 31 December 2015. The Company has no contingent liabilities relating to its interests in the associates and joint ventures.

Principal subsidiaries. The Company had the following subsidiaries as at 31 December 2015:


	REG. OFFICE	CURRENCY	% CONSOLIDATED GROUP OWNERSHIP
LivaNova Plc (Italian Branch)	Italy	EUR	100
Alcard Indústria Mecânica Ltda	Brazil	BRL	100
Caisson Interventional LLC	USA	USD	100
California Medical Laboratories (CalMed) Inc.	USA	USD	100
Cardiosolutions Inc.	USA	USD	100
Cellplex PTY LTD	Australia	AUD	100
Cyberonics Europe BV / BA	Belgium	EUR	100
Cyberonics France SARL	France	EUR	100
Cyberonics Holdings LLC	USA	USD	100
Cyberonics Inc.	USA	USD	100
Cyberonics Latam SRL	Costa Rica	CRC	100
Cyberonics Netherlands CV	Netherlands	EUR	100
Cyberonics Spain SL	Spain	EUR	100
Enopace Biomedical Ltd	Israel	USD	100
Highlife SAS	France	EUR	100
Imthera Medical, Inc	USA	USD	100
La Bouscare S.C.I.	France	EUR	100
LivaNova Canada Corp	Canada	CAD	100
Livn Irishco 2 UC	Ireland	EUR	100
Livn Irishco Unlimited Company	Ireland	EUR	100
Livn Luxco Sarl	Luxembourg	EUR	100
Livn Luxco 2 Sarl	Luxembourg	EUR	100
Livn UK Holdco Limited	United Kingdom	EUR	100
Livn UK Limited 2 Co	United Kingdom	EUR	100
Livn UK Limited 3 Co	United Kingdom	EUR	100
Livn US Holdco, Inc.	USA	USD	100
Livn US Lp	USA	USD	100
Livn US 1, LLC	USA	USD	100
Livn US 3 LLC	USA	USD	100
LMTB - Laser - und Medizin - Technologie Gmbh	Germany	EUR	100
MD Start I KG	Germany	EUR	100
MD Start SA	Suisse	CHF	100
MicroPort Sorin CRM (Shanghai) Co. Ltd	China	CNY	100
Reced Indústria Mecânica Ltda	Brazil	BRL	100
Respicardia, Inc	USA	USD	100
Sobedia Energia	Italy	EUR	100
Sorin CP Holding S.r.l.	Italy	EUR	100
Sorin CRM Holding SAS	France	EUR	100
Sorin CRM SAS	France	EUR	100
Sorin CRM USA	USA	USD	100
SorinCardio - Comercialização e Distribuição de Equipamentos Medicos, Lda	Portugal	EUR	100
Sorin Group Asia Pte Ltd	Asia	USD	100
Sorin Group Australia PTY Limited	Australia	AUD	100
Sorin Group Austria GmbH	Austria	EUR	100
Sorin Group Belgium SA	Belgium	EUR	100
Sorin Group Colombia Sas	Colombia	COP	100
Sorin Group Czech Republic	Czech Republic	EUR	100
Sorin Group Deutschland GmbH	Germany	EUR	100
Sorin Group DR, S.r.l.	Dominican Republic	USD	100
Sorin Group Espana S.L.	Spain	EUR	100
Sorin Group Finland OY	Finland	EUR	100
Sorin Group France SAS	France	EUR	100
Sorin Group India Private Limited	India	INR	100
Sorin Group International SA	Suisse	EUR	100
Sorin Group Italia S.r.l.	Italy	EUR	100
Sorin Group Japan K.K	Japan	JPY	100
Sorin Group Nederland	Netherlands	EUR	100
Sorin Group Norway AS	Norway	NOK	100
Sorin Group Polska Sp. Z.o.o.	Poland	PLN	100
Sorin Group Rus LLC	Russia	RUB	100
Sorin Group Scandinavia AB	Scandinavia	EUR	100
Sorin Group UK Limited	United Kingdom	EUR	100
Sorin Group USA Inc.	USA	USD	100
Sorin Medical Devices (Suzhou) Co. Ltd	China	CNY	100
Sorin Medical (Shanghai) Co. Ltd	China	CNY	100
Sorin Site Management S.r.l.	Italy	EUR	100

All subsidiary undertakings are included in the consolidation. The proportion of the voting rights in the subsidiary undertakings held directly by the parent company do not differ from the proportion of ordinary shares held. The parent company does not have any shareholdings in the preference shares of subsidiary undertakings included in the group.

Note 12. Financial Assets

Non-current financial assets.

(in thousands)	31 December 2015		24 April 2015		26 April 2014
Investments in preferred shares of private companies	$	15,847	$	17,127	$	15,944
Financial receivables due from associated companies	2,041		-		-
Corporate owned life insurance policies	1,777		-		-
Other	164		-		-
Total non-current financial assets	$	19,829	$	17,127	$	15,944

Our non-current financial assets in the consolidated balance sheets include investments in equity instruments in privately held companies classified as available-for-sale.

(in thousands)	31 December 2015		24 April 2015		26 April 2014
ImThera Medical, Inc. - convertible preferred shares and warrants ⁽¹⁾	$	12,000	$	12,000	$	12,000
Cerbomed GmbH - convertible preferred shares ⁽²⁾	-		5,127		3,944
Rainbow Medical Ltd. ⁽³⁾	3,847		-		-
	$	15,847	$	17,127	$	15,944

ImThera Medical, Inc. is a U.S. company developing a neurostimulation device system for the treatment of obstructive sleep apnea.
Cerbomed GmbH is a European company developing a transcutaneous vagus nerve stimulation device for the treatment of epilepsy. During the transitional period 25 April 2015 to 31 December 2015, the Company recorded an impairment of $5.1 million against the investment in Cerbomed. Refer to "Note 5. Fair Value Measurements " for more details.
Rainbow Medical Ltd. is an Israeli company that seeds and grows companies developing medical devices in a diverse range of medical fields.

Current financial assets.

(in thousands)	31 December 2015		24 April 2015		26 April 2014
Certificates of deposits ⁽¹⁾	$	-	$	20,023	$	20,031
Commercial paper	6,997		6,997		4,998
Financial receivables vs associated companies	1,632		-		-
Other	642		-		-
Total current financial assets	$	9,271	$	27,020	$	25,029

During the transitional period 25 April 2015 to 31 December 2015, our six-month CD matured, was re-invested in a three-month CD and was classified with cash equivalents in the consolidated balance sheets.

Certificates of deposits and commercial paper are held-to-maturity investments with maturity of three and four months.

Note 13. Inventories

Inventories consisted of the following (in thousands):

	31 December 2015		24 April 2015		26 April 2014
Raw materials	$	52,482	$	11,118	$	7,290
Work-in-process	44,369		5,653		4,438
Finished goods	115,597		7,192		5,902
	$	212,448	$	23,963	$	17,630

Inventories are reported net of the provision for obsolescence which totaled $3.6 million, $2.3 million and $1.1 million as at 31 December 2015, 24 April 2015 and 26 April 2014, respectively. As part of the acquisition, we acquired Sorin's inventory with a carrying value of $233.8 million. Sorin's inventory was recorded at fair value, which was measured considering any provision for obsolescence previously recognised by Sorin.

The write-down of inventories to net of the provision for obsolescence was $0.8 million for the fiscal year ended 24 April 2015, respectively. There were no write-down of inventories to net of the provision for obsolescence for the transitional period 25 April 2015 to 31 December 2015. There were no reversal of the provision for obsolescence during the transitional period 25 April 2015 to 31 December 2015 and the fiscal year ended 24 April 2015.

Note 14. Trade Receivables and Allowance for Bad Debt

Trade receivables, net, consisted of the following (in thousands):

	31 December 2015			24 April 2015			26 April 2014
Trade receivables from third parties	$	250,728		$	51,233		$	51,359
Allowance for bad debt	(1,653		)	(664		)	(685		)
	$	249,075		$	50,569		$	50,674

Our customers consist of hospitals, other healthcare institutions, distributors, organized purchase groups and government and private entities. Actual collection periods for trade receivables vary significantly as a function of the nature of the customer (e.g. government or private) and its geographic location. We acquired carrying value of $224.5 million of trade receivables from Sorin in the Mergers. As part of the acquisition accounting, trade receivables were recorded at fair value, which was measured considering any allowance for bad debt previously recognised by Sorin.

Trade receivables are reported net of the allowance for bad debt provision, the changes in which are provided below (in thousands):

	31 December 2015			24 April 2015
Beginning of period	$	(664	)	$	(685	)
Additions to provision	(1,337		)	(101		)
Utilisation	-			-
Release of provisions	347			105
Reclassifications	-			-
Currency translation gains/losses	1			17
End of period	$	(1,653	)	$	(664	)

Actual collection periods for trade receivables vary significantly due to the nature of a customer (e.g. government or private) and its geographic location. LivaNova utilizes non-recourse and with-recourse factoring arrangements as a part of its funding policy. Prior to the date of the Mergers, LivaNova had no factoring arrangements.

Factoring agreements

At 31 December 2015 LivaNova had the factoring agreements with the following third parties that qualify for derecognition:

Ifitalia (BNP Paribas Group) for the non-recourse sale of receivables from Italian customers
Mediofactoring for the non-recourse sale of receivables from French customers
Unicredit Factoring for the non-recourse sale of receivables from Italian customers
BNP Paribas Fortis Factor for the non-recourse sale of receivables from Belgian customers
Banca Farmafactoring for the non-recourse sale of receivables from Italian government customers.

At 31 December 2015 the total outstanding amount of trade receivables sold with non-recourse to factoring companies was $23.3 million. The total amount of loss recognized on derecognition of trade receivables was less than $0.1 million at 31 December 2015.

At 31 December 2015 LivaNova had the factoring agreements with the following third parties that do not qualify for derecognition:

Ifitalia (BNP Paribas Group) for the with-recourse sale of receivables from Italian customers
Unicredit Factoring for the with-recourse sale of receivables from Italian customers.

At 31 December 2015 trade receivables included an amount of $1.2 million for trade receivables sold, on a with recourse basis, through factoring agreements. Payables were recorded for advances in the same amount as a balancing item to these sales.

Below is a summary of trade receivables sold:

(in thousands)	31 December 2015
Trade receivables sold with recourse:
Recorded in financial statements:
Sold to Ifitalia/BNP Paribas	$	20
Sold to UniCredit Factoring	1,198

Trade receivables sold with non-recourse:
Sold to Ifitalia/BNP Paribas	6,310
Sold to UniCredit Factoring	10,671
Sold to Mediofactoring	1,817
Sold to Banca Farmafactoring	4,478
	$	24,494

Below is a summary of other receivables:

(in thousands)	31 December 2015		24 April 2015		26 April 2014
Prepaid assets	$	19,036	$	3,503	$	3,365
Other receivables	2,832		1,309		325
Guarantee deposits	2,437		-		-
Total	$	24,305	$	4,812	$	3,690

Note 15. Derivative Financial Instruments

We enter into derivative instruments, principally foreign exchange forward and interest rate swaps contracts for the purpose of hedging the risk of fluctuations in foreign exchange and interest rates. For additional details refer to our accounting policy " Derivatives " included within "Note 2. Basis of Preparation, Use of Accounting Estimates and Significant Accounting Policies " accompanying the consolidated financial statements.

Freestanding derivative forward contracts

Freestanding derivative forward contracts are used to offset the exposure to the change in value of our foreign currency denominated financial intercompany transactions (current accounts and loans), certain long-term loans and certain revenue transactions. The gross notional amount of these contracts not designated as hedging instruments, outstanding at 31 December 2015 was $254.4 million. We did not engage in freestanding derivative forward contracts prior to the Mergers.

The amount and location of the gains (losses) in the consolidated statements of income (loss) related to derivative instruments, not designated as hedging instruments, for the transitional period 25 April 2015 to 31 December 2015 are as follows:

(in thousands)
Derivatives Not Designated as Hedging Instruments	Location	Transitional Period 25 April 2015 to 31 December 2015
Foreign currency exchange rate contracts	Foreign exchange	$	(12,813	)

Foreign currency exchange differences include the losses, realised and unrealised, related to the forward contracts, not qualifying for hedge accounting, put in place since the date of the Mergers, for the hedging of the following:

intercompany financial accounts and loans not denominated in U.S. dollars, recording a loss for $5.1 million;
short and long-term loans denominated in Euro, recording a loss for the amount of $7.9 million, of which $4.8 million relates to a foreign exchange derivative arrangement on the EIB long-term loan. Such derivative arrangements have been discontinued in January 2016;
revenues denominated in British pounds and Japanese yen for the period from date of the Mergers to 31 December 2015, recording a gain for $0.2 million.

The Foreign currency exchange losses on the above mentioned forward contracts are mainly due to the revaluation of the U.S. dollar against the euro and other currencies.

Forward foreign exchange contracts

Due to the global nature of our operations, we are exposed to foreign currency exchange rate fluctuations. We generally utilize foreign exchange forward contracts that are designed to hedge the variability of material cash flows associated with forecasted revenue and costs denominated in a currency different from the functional currency of the transaction that will take place in the future. In most cases, these derivative instruments are designated as cash flow hedges and are carried at fair value. The effective portion of the gain or loss on these derivative contracts is reported as a component of accumulated other comprehensive income (loss). The effective portion of the gain or loss on the derivative instrument is reclassified into earnings and is included in the line item "Foreign exchange" in the consolidated statements of income (loss), depending on the underlying transaction that is being hedged, in the same period or periods during which the hedged transaction affects earnings. There was no hedge ineffectiveness at 31 December 2015. No components of the hedge contracts were excluded in the measurement of hedge ineffectiveness and no hedges were derecognised or discontinued during the transitional period 25 April 2015 to 31 December 2015. The fair value of all cash flow foreign exchange hedging forward contracts, related to revenue denominated in British pounds and Japanese yen of year 2016 is reported in accrued liabilities line item in the consolidated balance sheets.

The gross notional amount of foreign currency exchange contracts designated as cash flow hedges outstanding at 31 December 2015 was $66.9 million, related to forward contracts of respectively British pounds 8.5 million and Japanese yen 6.4 billion, maturing at various dates through December 2016. The contracts have average maturities from 6 to 12 months and are regularly renewed to provide a continuing coverage throughout the year. There was no hedge ineffectiveness at 31 December 2015. We did not engage in hedging activities prior to the Mergers.

Interest rate swaps

In July 2014, Sorin entered into a European Investment Bank ("EIB") long-term loan agreement with floating-rate interest payments. To minimize the impact of changes in interest rates on its interest payments under the EIB loan, on 30 June 2014 and 7 July 2014 Sorin entered into interest rate swap agreements to swap floating-rate interest payments for fixed-rate interest payments on a notional amount of Euro 80.0 million, for the amount of Euro 60.0 million effective on 30 June 2014 and for the amount of Euro 20.0 million effective on 7 July 2014. The outstanding notional amount at 31 December 2015 is Euro 73.3 million (equivalent to $79.6 million). The interest rate swap agreements mature in June 2021 and have periodic interest settlements. The interest rate swap agreements were designated as a cash flow hedge of the variability of interest payments under the EIB long-term loan agreement due to changes in the floating interest rates by converting from Euribor 3 month floating-rate to a fixed-rate loan.

In April 2013 Sorin entered into a Unicredit AG New York branch ("Unicredit NY") long-term agreement with floating-rate interest payments, refer to "Note 17 . Financial Liabilities " for further discussion. To minimize the impact of changes in interest rates on its interest payments under the Unicredit NY loan, on July 2013 Sorin entered into an interest rate swap agreement to swap floating-rate interest payments for fixed-rate interest payments on a notional amount of $20.0 million, effective in 12 July 2013. Initially the interest rate swap agreement matured in April 2016 and had periodic interest settlements. We repaid the Unicredit NY loan in December 2015. At 31 December 2015 due to the prepayment of the underlying hedged loan, this interest rate swap is not treated as a hedging instrument. This interest swap will mature on 12 April 2016 and its fair value, inclusive of accrued interest, at 31 December 2015 of $24,000 is accounted in the consolidated statement of income (loss).

The swaps fixed rates were structured to mirror the payment terms of the loan. The effective portion of the gain or loss on these derivatives is reported as a component of accumulated other comprehensive income. On interest rate swap contracts we had an effective portion equivalent at $83,000 in after-tax net unrealised gains, and an ineffective portion for the amount of $25,000 reported in the line item interest expense in consolidated statement of income (loss).

As of 31 December 2015, we had $0.8 million in after-tax net unrealised gains associated with the cash flow hedging instruments recorded in accumulated other comprehensive income. The Company expects that $0.8 million of after-tax net unrealised gains as at 31 December 2015 will be reclassified into the line item interest expense, net in the consolidated statements of income (loss) over the next 12 months.

If, at any time, the swap is determined to be ineffective, in whole or in part, due to changes in the interest rate swap or underlying the debt agreement, the fair value of the portion of the swap determined to be ineffective will be recognised as a gain or loss in the consolidated statement of income (loss) for the applicable period. If the hedging instrument matures or is canceled, the amounts previously recorded in the statement of accumulated other comprehensive income are posted to the statement income (loss) statement.

We did not engage in interest rate swap contracts prior to the Mergers.

Presentation in Financial Statements

The amount of gains (losses) and location of the gains (losses) in the consolidated statements of income (loss) and accumulated other comprehensive income ("OCI") related to foreign currency exchange rate contract and interest rate swap derivative instruments designated as cash flow hedges for the transitional period 25 April 2015 to 31 December 2015 are as follows:

(in thousands)	Gross Gains Recognised in OCI on Effective Portion of Derivative		Effective Portion of Gains (Losses) on Derivative Reclassified from:
Derivatives in Cash Flow Hedging Relationships	Amount		Location	Amount
Foreign currency exchange rate contracts	$	1,150	Foreign exchange	$	1,150
Interest rate swap contracts	124		Interest expense	124
Total	$	1,274		$	1,274

The following tables summarize the location and fair value amounts of derivative instruments reported in the consolidated balance sheets as at 31 December 2015. The fair value amounts are presented on a gross basis and are segregated between derivatives that are designated and qualify as hedging instruments and those that are not, and are further segregated by type of contract within those two categories.

(in thousands)	Asset Derivatives			Liability Derivatives
Derivatives designated as hedging instruments	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Interest rate contracts	Current financial assets	$	-	Current financial derivative liabilities	$	1,083
Interest rate contracts	Non-current financial assets	-		Non-current financial derivative liabilities	1,793
Foreign currency exchange rate contracts	Current financial assets	-		Current financial derivative liabilities	(839		)
Total derivatives designated as hedging instruments		-			2,037
Derivatives not designated as hedging instruments
Interest rate contracts	Current financial assets	-		Current financial derivative liabilities	24
Foreign currency exchange rate contracts	Current financial assets	-		Current financial derivative liabilities	1,547
Total derivatives not designated as hedging instruments		-			1,571
Total derivatives		$	-		$	3,608

Note 16. Shareholders' Equity

Common share of Cyberonics and ordinary shares of LivaNova . Prior to the Mergers, shares of Cyberonics common shares were registered pursuant to Section 12(b) of the Exchange Act and listed on NASDAQ under the ticker symbol "CYBX," and Sorin Ordinary Shares were listed on the Mercato Telematico Azionario organized and managed by Borsa Italiana S.p.A. (the "Italian Stock Exchange"). Shares of Cyberonics common shares and the Sorin ordinary shares were suspended from trading on NASDAQ and the Italian Stock Exchange, respectively, prior to the open of trading on 19 October 2015. NASDAQ filed a Form 25 on Cyberonics' behalf to provide notice to the SEC regarding the withdrawal of shares of Cyberonics common shares from listing and to terminate the registration of such shares under Section 12(b) of the Exchange Act.

Following the completion of the Mergers, LivaNova became the holding company of the combined businesses of Cyberonics and Sorin, and LivaNova's ordinary shares were listed on NASDAQ and listed on the Official List of the U.K.'s Financial Conduct Authority and admitted to trading on the Main Market of the London Stock Exchange under the ticker symbol "LIVN."

LivaNova is incorporated in England and Wales as a public company limited by shares. The principal legislation under which LivaNova operates is the Companies Act 2006, and regulations made thereunder. LivaNova ordinary shares were registered under the Securities Act, pursuant to the Registration Statement on Form S-4 (File No. 333-203510), as amended, filed with the SEC by LivaNova and declared effective on 19 August 2015.

The Company's authorised share capital is as following:

(in number of shares)	31 December 2015	24 April 2015	26 April 2014
Authorised share capital, ordinary shares of £1 each, unlimited shares authorized
Issued - fully paid	48,868,305
Outstanding	48,868,305

Common shares $0.01 each, cancelled 19 October 2015
Issued - fully paid		32,054,236	31,819,678
Outstanding		25,996,102	26,745,713

Preferred shares . LivaNova is not authorised to issue preferred shares and no Cyberonics' preferred shares were outstanding at the consummation of the Mergers on 19 October 2015.

Share repurchase plans prior to the Mergers . Common shares were repurchased on the open market pursuant to the Cyberonics' Board of Directors-approved repurchase plans during the year ended 24 April 2015 and prior. In January 2013, December 2013 and November 2014, the Cyberonics Board of Directors authorized repurchase programs of its common shares of up to one million shares under each program. However, on 27 February 2015, the Cyberonics treasury share purchase plan under Rule 10b5-1 under the Exchange Act terminated, and Cyberonics stopped repurchasing its shares of common share. During the fiscal year ended 24 April 2015, pursuant to the approved plans, Cyberonics repurchased 875,121 shares of its common share at an average price of $55.94.

Group reconstruction reserve. Group reconstruction reserve represents the excess of value attributed to the shares issued during the Mergers over the nominal value of those shares and relates to LivaNova ordinary shares and replacement share appreciation rights issued in the Mergers in exchange for Cyberonics and Sorin equity shares. See "Note 7. Business Combinations " for discussion of the Mergers.

Comprehensive income .

The table below presents the change in each component of accumulated other comprehensive income (loss), net of tax and the reclassifications out of accumulated other comprehensive income into net earnings.

Taxes were not provided for foreign currency translation adjustments for the transitional period ended 31 December 2015 as translation adjustment related to earnings that are intended to be reinvested in the countries where earned.

For Cyberonics historical fiscal years ended 24 April 2015, no reclassifications were transferred out of other comprehensive income and all changes in comprehensive income were related to foreign currency translation adjustments.

	Change in unrealised gain (loss) on derivatives			Foreign currency translation adjustments			Revaluation of net liability (asset) for defined benefits			Total
Beginning Balance - 26 April 2014	$	-		$	455		$	-		$	455
Other comprehensive income (loss) before reclassifications, before tax	-			(3,856		)	-			(3,856		)
Beginning Balance - 25 April 2015	-			(3,401		)	-			(3,401		)
Other comprehensive income (loss) before reclassifications, before tax	1,274			(51,716		)	(180		)	(50,622		)
Tax benefit (expense)	(386		)	-			50			(336		)
Other comprehensive income (loss) before reclassifications, net of tax	888			(51,716		)	(130		)	(50,958		)
Reclassification of (gain)/loss from accumulated other comprehensive income, before tax	-			-			-			-
Tax effect	-			-			-			-
Reclassification of (gain)/loss from accumulated other comprehensive income, after tax	-			-			-			-
Net current-period other comprehensive income (loss), net of tax	888			(51,716		)	(130		)	(50,958		)
Ending Balance - 31 December 2015	$	888		$	(55,117	)	$	(130	)	$	(54,359	)

Note 17. Financial Liabilities

In connection with the Mergers, LivaNova acquired all of the outstanding debt of Sorin. As of the Mergers date, Sorin had $203.0 million aggregate principal amount due to various financial and non-financial institutions (collectively, the "Sorin Loans"). We recorded an aggregate foreign exchange adjustment of $5.7 million to decrease the carrying value of the total long-term Sorin Loans since the date of the Mergers. Additionally, we made principal payments of $32.0 million post-merger to reduce long-term debt to $113.0 million.

The outstanding principal amount of long-term debt at 31 December 2015 and as of the date of the Mergers, 19 October 2015, consisted of the following (in thousands, except interest rates):

	Principal Amount at		Principal Amount at			Effective Interest Rate
	31 December 2015		19 October 2015		Maturity	Effective Interest Rate
European Investment Bank	$	99,426	$	113,490	June 2021	1.15	%
Unicredit AG New York	-		20,000		October 2017	1.89	%
Banca del Mezzogiorno	8,851		10,283		December 2019	0.50% - 3.35%
Bpifrance (ex-Oséo)	2,621		2,914		October 2019	2.58	%
Banca Regionale Europea	-		1,686		January 2020	1.35	%
Novalia SA (Vallonie)	1,192		1,316		March 2020 - June 2033	0.00% - 3.42%
Mediocredito Italiano	944		987		September 2021-2026	1.05% - 1.55%
Total long-term facilities	113,034		150,676
Less current portion of long-term debt	21,243		22,218
Total long-term debt	$	91,791	$	128,458

We recorded an aggregate foreign exchange adjustment of $2.2 million to decrease the carrying value of the short-term facilities since the date of the Mergers. Subsequent to the Mergers, our net short-term facility debt has exceeded our repayments by $11.1 million.

The outstanding principal amount of short-term debt as of 31 December 2015, and as of the date of the Mergers, 19 October 2015, consisted of the following (in thousands, except interest rates):

	Principal Amount at		Principal Amount at		Effective Interest Rate
	31 December 2015		October 19, 2015		Effective Interest Rate
Intesa San Paolo Bank	$	20,630	-		0.25	%
BNL BNP Paribas	18,459		20,428		0.27	%
Unicredit Banca	15,201		17,024		0.45	%
BNP Paribas (Brazil)	2,225		4,400		15.95	%
French Government	2,030		2,121
Other short-term facilities	2,725		8,342
Total short-term facilities	$	61,270	$	52,315
Current portion of long-term debt	21,243		22,218
Total current debt	$	82,513	$	74,533
Total debt	$	174,304	$	202,991

There was no outstanding debt in the historic Cyberonics consolidated balance sheet as of 24 April 2015 or 25 April 2014.

The European Investment Bank ("EIB") loan was provided to Sorin to support research and development projects in Italy and France related to the development of new products or improvements in Sorin's products in Cardiac Surgery, Cardiac Rhythm Management and new therapeutic solutions aimed at treating heart failure and mitral valve regurgitation. The loan was issued in July 2014, has a seven-year term with interest paid in quarterly installments. The loan is guaranteed by Sorin Group Italia S.r.l. and Sorin CRM SAS, subsidiaries of LivaNova. In December 2015, we paid our scheduled semi-annual $9.0 million principal payment.

The EIB loan is subject to the various terms and conditions:

certain financial ratios calculated based on the Sorin consolidated financial statements;
subordination clauses, based on which the loan cannot be subordinated to other loans, with the exception of loans given preference deriving from legal obligations;
negative pledge clauses that place limits on the issue of collateral;
other customary clauses for loans of this type, including limits on LivaNova's asset disposals.

In April 2013, Sorin entered into a long-term loan agreement for $50.0 million with UniCredit (Unicredit Banca and Unicredit AG New York branch ) consisting of a term loan totaling $20.0 million and a revolving facility of $30 million.

In December 2014 the credit facility was renegotiated with the cancellation of the revolving facility, the decrease of the interest margin of the term loan and the extension of its maturity by 18 months from April 2016 to October 2017. In December 2015, we pre-paid this $20.0 million loan at par, without penalty.

In 2005 Sorin entered in two long-term loans that were to mature in 2020, with Banca Regionale Europea. These loans were pre-paid at the outstanding principal amount of $1.6 million in November 2015 by LivaNova's subsidiaries, Sorin Group Italia S.r.l. and Sorin Site Management S.r.l.

In January 2015, Sorin Group Italia S.r.l. was provided with loans specified to support research and development projects as a part of the Large Strategic Project program of the Italian Ministry of Education, Universities and Research ("MIUR"). One loan is subsidized by Cassa DepositiePrestiti at a fixed rate of 0.50% and a second loan, an ordinary bank loan, is provided by GE Capital Interbanca at a floating rate of 6-month Euribor plus a spread of 3.3%. At 31 December 2015, $8.9 million was outstanding on both of these loans. Both loans have an amortized repayment plan with final maturity on 31 December 2019. In December 2015, we paid our scheduled semi-annual payment of $1.1 million.

In 2012, Sorin entered into a long-term loan agreement for a total of €3.0 million with Bpifrance (formerly Oséo), a French government company that provides financial support for innovation and development projects. The loan is repayable in installments with final maturity on 31 October 2019. At 31 December 2015, $2.6 million was outstanding on this loan. In October 2015, we paid our scheduled $0.2 million quarterly payment.

In 2014, through an acquisition of the cannulae business, Sorin assumed mortgages due to Mediocredito Italiano totaling €1.0 million. At 31 December 2015, $0.9 million was outstanding. The loans are secured by a mortgage on a building located at Cantù manufacturing site in Italy.

Prior to the Mergers, Sorin Group Belgium received loans from Novalia SA, a finance company in the Wallonia Region in Belgium, to support several R&D projects. At 31 December 2015, $1.2 million was outstanding.

In December 2015, we utilized our uncommitted revolving credit facilities for certain short-term loans and entered into a $20.6 million short-term loan with Intesa San Paolo Bank, a $18.5 million short-term loan with BNL/BNP Paribas after repaying $19.5 million, a $15.2 million loan with UniCredit Banca after repaying $16.3 million, and a $2.2 million loan with BNP Paribas (Brazil) after repaying $4.3 million. During this period, we also reduced other short-term facilities by $5.3 million. These facilities are used for general corporate purposes.

Note 18. Other Non-Current Liabilities

(in thousands)	31 December 2015		24 April 2015		26 April 2014
Unfavorable operating leases	$	2,513	$	-	$	-
Other	4,534		-		-
Total	$	7,047	$	-	$	-

The unfavorable operating leases were acquired in the Mergers at 19 October 2015.

Note 19. Provisions

The provisions in the table below are expected to result in payments within the next year. In addition, the Restructuring reserve is expected to accrue activity over the next three years.

Current provisions

(in thousands)	31 December 2015		24 April 2015		26 April 2014
Advances received on customer receivables	$	1,218	$	-	$	-
Contractual warranty reserve	2,119		-		-
Restructuring reserve	4,720		-		-
Merger related expense	1,506		4,101		-
Clinical study costs	2,004		974		1,227
Other	1,313		3,259		3,542
Total	$	12,880	$	8,334	$	4,769

Non-Current provisions

(in thousands)	31 December 2015		24 April 2015		26 April 2014
Liability for uncertain tax provisions	$	13,048	$	5,782	$	4,257
Other	3,937		828		454
Total	$	16,985	$	6,610	$	4,711

Recorded with other non-current provisions is a contingent liability totaling $3.4 million incurred during the Mergers. Refer for details to "Note 7. Business Combinations."

Warranties. We offer a warranty on various products. We estimate the costs that may be incurred under the warranties and record a liability in the amount of such costs at the time the product is sold. The amount of the reserve recorded is equal to the cost to satisfy the claim. We include the costs associated with claims, if any, in cost of sales in the consolidated statements of income (loss). We acquired $2.1 million in warranty obligation from Sorin as part of the Mergers.

Restructuring reserve. Refer to Note 8. 2015 Restructuring Plans for more details.

The changes in the carrying value of current provisions during the year are indicated below (in thousands):

	Restructuring reserve			Warranties reserve			Other reserves			Total
26 April 2014	$	-		$	-		$	4,769		$	4,769
Additions to provision	-			-			6,378			6,378
Utilisation	-			-			(2,813		)	(2,813		)
Release of provisions	-			-			-			-
Reclassifications	-			-			-			-
24 April 2015	-			-			8,334			8,334
IFRS 3 Business Combination	4,320			2,069			5,646			12,035
Additions to provision	4,609			141			3,448			8,198
Utilisation	(3,608		)	(57		)	(11,194		)	(14,859		)
Release of provisions	(400		)	-			-			(400		)
Currency translation gains/losses	(201		)	(34		)	(193		)	(428		)
31 December 2015	$	4,720		$	2,119		$	6,041		$	12,880

The changes in the carrying value of non-current provisions during the year are indicated below (in thousands):

	Uncertain tax positions reserve			Other reserves			Total
26 April 2014	$	4,257		$	454		$	4,711
Additions to provision	1,525			374			1,899
Utilisation	-			-			-
Release of provisions	-			-			-
Reclassifications	-			-			-
24 April 2015	5,782			828			6,610
IFRS 3 Business Combination	9,158			3,839			12,997
Additions to provision	-			152			152
Utilisation	(1,523		)	(828		)	(2,351		)
Currency translation gains/losses	(369		)	(54		)	(423		)
31 December 2015	13,048			3,937			16,985

Note 20. Other Payables

(in thousands)	31 December 2015		24 April 2015		26 April 2014
Accrued expenses- employee-related charges	$	44,580	$	13,781	$	16,957
Other accrued expenses	30,602		-		-
Other current liabilities	10,941		-		-
Other amounts due to health and social security institution	9,649		-		-
Amounts due to employees	5,585		-		-
Current advances from customers	3,330		$	-	$	-
Deferred income	992		-		-
Total	$	105,679	$	13,781	$	16,957

Note 21. Share-Based Incentive Plans

Share-Based Incentive Plans

Sorin awards exchanged for LivaNova awards

Prior to the Mergers, the Sorin Board of Directors adopted the Long-Term Incentive 2012-2014 (the "2012-2014 Plan), 2013-2015 (the "2013-2015 Plan") and 2014-2016 (the "2014-2016 Plan") share grant plans in April 2012, April 2013 and April 2014, respectively. The share grant plans authorised the issuance of stock appreciation rights (2014-2016 Plan only), performance share units and restricted share units. The awards under these share grant plans were converted into LivaNova awards pursuant to the terms of the Transaction Agreement as described below and were accounted for as equity settled. Refer to "Note 1. Nature of Operations " for additional details related to the Mergers.

Pursuant to the Transaction Agreement, 3,815,824 share appreciation rights outstanding (2014-2016 Plan) and 3,365,931 restricted share units (2013-2015 and 2014-2016 Plans) and performance share units (2012-2014 Plan) that were unvested immediately prior to the Mergers were accelerated and vested upon the close of the Mergers and were converted into 180,076 LivaNova share appreciation rights and 158,716 LivaNova ordinary shares, respectively, in a manner designed to preserve the intrinsic value of such awards. The accelerated vesting and share conversion constituted a modification under the authoritative guidance for accounting for share-based compensation. The modification resulted in $8.8 million of incremental costs on the date of acquisition.

In addition, pursuant to the Transaction Agreement, 2,617,490 unvested performance share units granted under the 2014-2016 Plan and 2013-2015 Plan which were held by Sorin employees upon close of the Mergers were converted into 123,456 LivaNova ordinary shares in a manner designed to preserve the intrinsic value of such awards. For awards not yet earned based on performance achieved as of the date of the Mergers, a service requirement was added to the remaining awards and the performance conditions were removed, resulting in a modification to the award (see below for further details). A portion of the service awards vested on the date of the Mergers and of the remaining awards, 50% were paid on 26 February 2016 and 50% will be paid on 26 February 2017, in each case subject to continued employment. The awards will continue to be governed in accordance with the terms and conditions as were applicable immediately prior to the completion of the Mergers, with the exception of the modified terms pursuant to the Transaction Agreement. The modifications made to the performance share units granted under the 2014-2016 Plan and 2013-2015 Plan constituted modifications under the authoritative guidance for accounting for share compensation. The modification resulted in $8.6 million incremental costs of which $0.9 million was recognised on the acquisition date and the remaining $7.7 million will be recognised over the remaining service period of the award. We recognised $1.4 million share-based compensation expense related to these modifications from the date of the acquisition through the period ended 31 December 2015.

Further, pursuant to the Transaction Agreement, 1,721,530 deferred bonus shares held by Sorin employees that were outstanding immediately prior to the Mergers were accelerated and became vested upon the close of the Mergers, and were converted to 81,251 LivaNova ordinary shares in a manner designed to preserve the intrinsic value of such awards. The accelerated vesting and share conversion constituted a modification under the authoritative guidance for accounting for share-based compensation. This guidance requires the Company to revalue the award upon the transaction close and allocate the revised fair value between consideration paid and post-combination expense based on the ratio of service performed through the transaction date over the total service period of the award. The revised fair value allocated to post-combination services resulted in $0.3 million of incremental costs which was recognised on the acquisition date.

Cyberonics awards exchanged for LivaNova awards

Prior to the Mergers, Cyberonics issued share options and restricted share awards under its Amended and Restated New Employee Equity Inducement Plan and 2009 Stock Plan. All of the awards under these plans were accounted for as equity settled and were accelerated and vested as a result of the Mergers. Cyberonics share options (except as described below) and restricted shares were converted into 813,794 LivaNova share options and 209,043 LivaNova ordinary shares, respectively, in a manner designed to preserve the intrinsic value of such awards. The share options will continue to become exercisable in accordance with the terms and conditions as were applicable immediately prior to the completion of the Mergers. Additionally, 146,105 Cyberonics share options held by executive officers that were outstanding immediately prior to the Mergers were settled in cash in the amount of $5.0 million.

LivaNova awards

On 16 October 2015, the sole shareholder of LivaNova approved the adoption of the Company's 2015 Incentive Award Plan (the "2015 Plan"), which was previously approved by the Board of Directors of the Company on 14 September 2015 subject to such shareholder approval. The Plan was adopted in order to facilitate the grant of cash and equity incentives to non-employee directors, employees (including our named executive officers) and consultants of the Company and certain of our affiliates and to enable the Company and certain of our affiliates to obtain and retain services of these individuals. The Plan became effective as of 19 October 2015. Incentive awards may be granted under the 2015 Plan in the form of share options, share appreciation rights, restricted share, restricted share units, other share and cash-based awards and dividend equivalents. As of 31 December 2015, there were approximately 8,047,364 shares available for future grants under the 2015 Plan.

Share-Based Compensation

Amounts of share-based compensation recognised in the consolidated statement of income (loss), including the modification expense related to the Mergers, by expense category are as follows (in thousands):

	Transitional Period 25 April 2015 to 31 December 2015		Fiscal Year Ended 24 April 2015
Cost of sales	$	278	$	588
Selling, general and administrative	13,588		8,780
Research and development	511		3,189
Merger-related expense	13,010		-
Total share-based compensation expense	$	27,387	$	12,557

Amounts of share-based compensation expense recognised in the consolidated statement of income (loss), including the modification expense related to the Mergers, by type of arrangement are as follows, (in thousands):

	Transitional Period 25 April 2015 to 31 December 2015		Fiscal Year Ended 24 April 2015
Service-based share option awards	$	6,988	$	4,600
Service-based share appreciation rights	2,747		-
Service-based restricted and restricted share unit awards	5,672		6,453
Performance-based restricted share and restricted share unit awards	11,724		1,504
Other Awards	256		-
Total share-based compensation expense	$	27,387	$	12,557

The expense for the transitional period 25 April 2015 to 31 December 2015 and for the fiscal year ended 24 April 2015 related to awards that were accounted for as equity settled.

Share Options and Share Appreciation Rights

We use the Black-Scholes option pricing methodology to calculate the grant date fair market value of share option awards and share appreciation rights. The following table lists the assumptions we utilized as inputs to the Black-Scholes model:

	Transitional Period 25 April 2015 to 31 December 2015			Fiscal Year Ended 24 April 2015
Weighted average share price	$	69.39		$	57.29
Exercise price	51.34-69.39			53.90-57.39
Dividend Yield ⁽¹⁾	-			-
Risk-free interest rate - based on grant date ⁽²⁾	1.2% - 1.4%			1.60 - 1.98%
Expected option term - in years per group of employees/consultants ⁽³⁾	4 - 5			4.88 - 6.56
Expected volatility at grant date ₍₄₎	34		%	31.67% - 41.09%

We do not plan to pay dividends.
We use yield rates on U.S. Treasury securities for a period that approximated the expected term of the award to estimate the risk-free interest rate.
We estimated the expected term of the awards granted using historic data of actual time elapsed between the date of grant and the exercise or forfeiture of options or SARs for employees. For consultants, the expected term is the remaining time until expiration of the option or SAR.
Refer to "Note 2. Basis of Preparation, Use of Accounting Estimates and Significant Accounting Policies- Share-based Compensation " for further information regarding expected volatility.

The following tables detail the activity for service-based share option awards and share appreciation rights, including awards assumed or issued as a result of the Mergers:

	For the Transitional Period 25 April 2015 to 31 December 2015			Fiscal Year Ended 24 April 2015
Options and SARs	Number of Optioned Shares		Wtd. Avg. Exercise Price	Number of Optioned Shares	Wtd. Avg. Exercise Price
Outstanding - at beginning of period	1,125,738		41.33	1,012,387	$	35.25
Granted	677,560		69.39	273,445	57.29
Assumed in Merger	180,076		51.34	-	-
Exercised	(199,655	)	34.11	(127,379)	26.89
Forfeited	(45,553	)	61.27	(32,355)	42.44
Cashed-out in Merger	(146,105	)	31.67	-	-
Expired	(2,500	)	28.21	(360)	51.90
Outstanding - end of year	1,589,561		55.56	1,125,738	41.33
Fully vested and exercisable - end of year	935,586		45.90	509,136	30.15
Fully vested and expected to vest - end of year ⁽¹⁾	1,571,191		55.40	1,095,446	40.98

Factors in expected future forfeitures.

The weighted average remaining contractual life for the share options and SARs outstanding at 31 December 2015 and 24 April 2015 is 4.70 years and 6.97 years, respectively.

The aggregate intrinsic value of the options and SARs outstanding at 31 December 2015 and 24 April 2015 is $12.7 million and $24.3 million, respectively. The aggregate intrinsic value of options and SARs is based on the difference between the fair market value of the underlying share at the end of the period using the market closing share price, and exercise price for in-the-money awards.

The range of exercise prices for options and SARs outstanding at 31 December 2015 and 24 April 2015 are categorized in exercise price ranges as follows:

Outstanding Options	31 December 2015	24 April 2015
$10-20	94,021	131,652
$21-30	90,368	244,092
$31-40	20,481	35,623
$41-50	91,887	183,798
$51-60	633,329	525,073
$61-70	659,475	5,500
Total	1,589,561	1,125,738

	Transitional Period 25 April 2015 to		Fiscal Year Ended
	31 December 2015		24 April 2015
Weighted average grant date fair value of share option awards and SARs during the fiscal year ⁽¹⁾	$	21.05	$	18.64
Weighted average share price of share option exercises during the period	34.97		26.89
Aggregate intrinsic value of share option and SAR exercises during the fiscal year (in thousands)	$	5,464	$	3,973

Including weighted average Mergers date fair value of SARs assumed in the Mergers.

Restricted Share and Restricted Share Units Awards

The following tables detail the activity for service-based restricted share and restricted share unit awards, including activity from restricted share units assumed or issued as a result of the Mergers:

	For the Transitional Period 25 April 2015 to 31 December 2015				Fiscal Year Ended 24 April 2015
	Number of Shares		Wtd. Avg. Grant Date Fair Value		Number of Shares		Wtd. Avg. Grant Date Fair Value
Non-vested shares at beginning of period	279,818		$	50.70	348,725		$	40.65
Granted	99,870		57.55		102,652		56.85
Conversion of shares	213,038		69.39		-		-
Vested	(378,322	)	54.92		(158,257	)	33.27
Forfeited	(10,831	)	54.65		(13,302	)	42.25
Non-vested shares at end of year	203,573		$	63.57	279,818		$	50.70

	Transitional Period 25 April 2015 to		Fiscal Year Ended
	31 December 2015		24 April 2015
Weighted average grant date fair value of service-based share grants issued during the fiscal year	$	57.55	$	56.85
Aggregate fair value of service-based share grants that vested during the year (in thousands)	$	24,384	$	9,194

The following tables detail the activity for performance-based and market-based restricted share and restricted share unit awards:

	For the Transitional Period 25 April 2015 to 31 December 2015			Fiscal Year Ended 24 April 2015
	Number of Shares	Wtd. Avg. Grant Date Fair Value		Number of Shares	Wtd. Avg. Grant Date Fair Value
Non-vested shares at beginning of period	155,288	$	31.76	333,641	$	25.54
Granted	-	-		15,837	57.39
Conversion of shares	150,285	69.39		-	-
Vested	(245,466)	55.93		(194,190)	22.65
Forfeited	(60,107)	33.82		-	-
Non-vested shares at end of year	-	$	-	155,288	$	31.76

	Transitional Period 25 April 2015 to		Fiscal Year Ended
	31 December 2015		24 April 2015
Weighted average grant date fair value of performance-based share grants issued during the fiscal year	$	-	$	57.39
Aggregate fair value of performance-based share grants that vested during the year (in thousands)	$	9,648	$	10,519

Note 22. Employee Retirement Plans

We sponsor various retirement plans, including defined benefit pension plans (pension benefits), an employee retirement savings plan and a deferred compensation plan, covering U.S. employees and many employees outside the U.S. The expense related to these plans was $3.5 million for the transitional period 25 April 2015 to 31 December 2015.

As at 31 December 2015 the net underfunded status of our benefit plans was $31.0 million.

Defined Benefit Plan.

Prior to the Mergers, we did not sponsor any defined benefit pension plans.

As a result of the Mergers, we assumed several defined benefit pension plans which include plans in the U.S., Italy, Germany, Japan and France. In the U.S., we maintain a frozen cash balance retirement plan that is a contributory, defined benefit plan designed to provide the benefit in terms of a stated account balance dependent on the employer's promised interest-crediting rate. In Italy and France we maintain a severance pay defined benefit plan that obligates the employer to pay severance pay in case of resignation, dismissal or retirement. In other jurisdictions we sponsor non-contributory, defined benefit plans designated to provide a guaranteed minimum retirement benefits to eligible employees.

Risks Related to Defined-benefit Plans

The defined benefit plans expose the Company to various demographic and economic risks such as longevity risk, investment risks, currency and interest rate risk and in some cases inflation risk. The latter plans a role in the assumed wage increase and in some smaller plans where indexation is mandatory. Pension fund Trustees are responsible for and have full discretion over the investment strategy of the plan assets. In general Trustees manage pension fund risks by diversifying the investments of plan assets and by (partially) matching interest rate risk of liabilities.

The Company has an active de-risking strategy in which it constantly looks for opportunities to reduce the risks associated with its defined benefit plans. The plans are governed by Trustees who have a legal obligation to evenly balance the interests of all stakeholders and operate under the local regulatory framework.

The change in benefit obligations and funded status of our U.S. and non-U.S. pension benefits as of and for the transitional period 25 April 2015 to 31 December 2015 are as follows:

(in thousands)	U.S. Pension Benefits			Non-U.S. Pension Benefits			Total Pension Benefits
Accumulated benefit obligation at end of year:
Change in projected benefit obligation:
Projected benefit obligation at beginning of year	$	-		$	-		$	-
Service cost	-			155			155
Interest cost	86			117			203
Benefits obligations assumed in the Mergers	10,378			29,082			39,460
Employee contributions	-			-			-
Plan curtailments and settlements	(59		)	-			(59		)
Actuarial (gain) loss	(40		)	193			153
Benefits paid	(147		)	(232		)	(379		)
Foreign currency exchange rate changes and other	-			-			-
Projected benefit obligation at end of year	$	10,218		$	29,315		39,533
Change in plan assets:
Fair value of plan assets at beginning of year	$	-		$	-		$	-
Actual return on plan assets	(33		)	6			(27		)
Plan assets acquired in the Mergers	6,097			2,676			8,773
Employer contributions	-			83			83
Employee contributions	-			-			-
Plan settlements	(59		)	-			(59		)
Benefits paid	(147		)	(5		)	(152		)
Foreign currency exchange rate changes	-			-			-
Fair value of plan assets at end of year	$	5,858		$	2,760		$	8,618
Funded status at end of year:
Fair value of plan assets	$	5,858		$	2,760		$	8,618
Benefit obligations	10,218			29,315			39,533
Underfunded status of the plans	$	4,360		$	26,555		$	30,915
Recognised liability	$	4,360		$	26,555		$	30,915
Amounts recognised on the consolidated balance sheets consist of:
Non-current assets	$	-		$	-		$	-
Current liabilities	-			-			-
Non-current liabilities	4,360			26,555			30,915
Recognised liability	$	4,360		$	26,555		$	30,915

Major actuarial assumptions used in determining the benefit obligations and net periodic benefit (income) cost for our significant benefit plans are presented in the following table as weighted averages as at 31 December 2015.

	U.S. Pension Benefits		Non-U.S. Pension Benefits
Actuarial assumptions used to determine benefit obligation
Discount rate	3.79	%	0.48% - 2.00%
Rate of compensation increase	N/A		2.50% - 3.89%
Actuarial assumptions used to determine net periodic benefit cost
Discount rate	3.64	%	-
Expected return on plan assets	5.00	%	0.48% - 2.00%
Rate of compensation increase	N/A		0.48% - 2.00%

To determine the discount rate for our U.S. benefit plan, we used the Citigroup Above-median yield curve. For the discount rate used to determine the other non-U.S. benefit plans we consider local market expectations of long-term returns. The resulting discount rates are consistent with the duration of plan liabilities.

The expected long-term rate of return on plan assets assumptions are determined using a building block approach, considering historical averages and real returns of each asset class. In certain countries, where historical returns are not meaningful, consideration is given to local market expectations of long-term returns.

Retirement Benefit Plan Investment Strategy

In the U.S., we have an account that holds the defined benefit frozen balance pension plan assets. The Qualified Plan Committee (the "Plan Committee") sets investment guidelines for U.S. pension plans with the assistance of an external consultant. The plan assets in the U.S. are invested in accordance with sound investment practices that emphasize long-term fundamentals. The investment objectives for the plan assets in the U.S. are to achieve a positive rate of return that would be expected to close the current funding deficit and so enable us to terminate the frozen pension plan at a reasonable cost. These guidelines are established based on market conditions, risk tolerance, funding requirements and expected benefit payments. The Plan Committee also oversees the investment allocation process, selects the investment managers, and monitors asset performance. The investment portfolio contains a diversified portfolio of fixed income and equity index funds. Securities are also diversified in terms of domestic and international securities, short- and long-term securities, growth and value styles, large cap and small cap stocks.

Outside the U.S., pension plan assets are typically managed by decentralized fiduciary committees. There is a significant variation in policy asset allocation from country to country. Local regulations, local funding rules, and local financial and tax considerations are part of the funding and investment allocation process in each country. Pension plan assets outside of the U.S. were $2.8 million as of 31 December 2015 and were not material.

Our pension plan target allocations as of 31 December 2015, by asset category, are as follows:

	U.S. Pension Benefits
Equity Securities	30	%
Debt Securities	69	%
Other	1	%
	100	%

Retirement Benefit Fair Values

The following is a description of the valuation methodologies used for retirement benefit plan assets measured at fair value:

Equity Mutual Funds: Valued based on the year-end net asset values of the investment vehicles. The net asset values of the investment vehicles are based on the fair values of the underlying investments of the partnerships valued at the closing price reported in the active markets in which the individual security is traded. Equity mutual funds have a daily reported net asset value and we classify these investments as Level 2.

Fixed Income Mutual Funds: Valued based on the year-end net asset values of the investment vehicles. The net asset values of the investment vehicles are based on the fair values of the underlying investments of the partnerships valued based on inputs other than quoted prices that are observable.

Money Markets: Valued based on quoted prices in active markets for identical assets.

U.S. Pension Benefits

The following tables provide information by level for the retirement benefit plan assets that are measured at fair value, as defined by IFRS. Refer to "Note 2. Basis of Preparation, Use of Accounting Estimates and Significant Accounting Policies " for discussion of the fair value measurement terms of Levels 1, 2, and 3.

	Fair Value as at		Fair Value Measurement Using Inputs Considered as
(in thousands)	31 December 2015		Level 1		Level 2		Level 3
Equity mutual funds	$	1,727	$	-	$	1,727	$	-
Fixed income mutual funds	4,058		-		4,058		-
Money market funds	73		73		-		-
	$	5,858	$	73	$	5,785	$	-

Retirement Benefit Funding Plan

We have the policy to make the minimum required contribution to fund the U.S. pension plan as determined by MAP - 21 and the Highway and Transportation Funding Act of 2014 ("HAFTA").

During the transitional period 25 April 2015 to 31 December 2015, we did not make a material contribution to the U.S. pension plan or to the non-U.S. pension plan. The weighted average duration of the defined benefit plans is 8.6 years and about 10 years for U.S. plans and Non-U.S. plans respectively. We anticipate that we will make contributions to the U.S. pension plan of approximately $0.6 million during fiscal year 2016. Contributions to the non-U.S. pension plans in fiscal year 2016 are not expected to be material.

Benefit payments, including amounts to be paid from our assets, and reflecting expected future service, as appropriate, are expected to be paid as follows:

(in thousands)	U.S. Plans		Non-U.S. Plans
2016	$	481	$	1,244
2017	$	741	$	816
2018	$	908	$	1,018
2019	$	635	$	804
2020	$	1,050	$	902
Thereafter	$	6,404	$	24,535

Sensitivity analysis

The sensitivity analysis below indicates the main impact of an increase or decrease in the discount rate used to measures 2015 defined benefits obligations.

	Increase +0.50%	Decrease -0.50%
Discount rate	(5.25)%	5.73%
Interest rate	(6.95)%	6.95%
	Increase +10%	Decrease -10%
Employee turnover rate	(0.18)%	(0.08)%

The above sensitivity analysis are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected until credit method at the end of the reporting period) has been applied as when calculating the defined benefit liability recognised in the consolidated balance sheets.

The Employee Retirement Savings Plan. We sponsor the Cyberonics, Inc. Employee Retirement Savings Plan (the "Savings Plan"), which qualifies under Section 401(k) of the IRC. We match 50% of employees' contributions up to 6% of eligible compensation, subject to a five-year vesting period that starts on the date of employment. We incurred expenses for these contributions of approximately $1.5 million and $1.8 million for the transitional period 25 April 2015 to 31 December 2015 and fiscal year ended 24 April 2015, respectively.

The Deferred Compensation Plan. We sponsor the Cyberonics, Inc. Non-Qualified Deferred Compensation Plan (the "Deferred Compensation Plan") to a group consisting of certain members of middle and senior management. The Deferred Compensation Plan provides an opportunity for the group to defer up to 50% of their annual base salary and commissions and 100% of their bonus or performance-based compensation until the earlier of (i) termination of employment or (ii) an elected distribution date. In addition, effective 1 January 2014, we agreed to match 50% of the contributions of non-officer members of the group up to 6% of eligible compensation, subject to a five-year vesting period that starts on the date of employment. Employee deductions result in a liability; refer to "Note 11. Other Long-Term Liabilities. " We incurred expenses for this plan, based on the company match, of approximately $62,000, $76,000 and $22,000 for the transitional period 25 April 2015 to 31 December 2015 and the fiscal year ended 24 April 2015, respectively.

Severance Indemnity. In Italy, upon termination of employment for any reason, employers are required to pay a termination indemnity ( Trattamento di fine Rapporto or "TFR") to all employees as required by Italian legislation. The TFR serves as a backup in the event of redundancy or as an additional pension benefit after retirement. The TFR is considered a defined contribution plan with respect to amounts vesting after January 1, 2007 for employees who have opted for a supplementary pensions system or who have chosen to maintain the TFR at the company, for companies with more than 50 employees. A similar termination indemnity is required in France. In France the Indemnités de Fin de Carrière consists in a termination indemnity which must be paid by the employer to an employee in case of retirement, based on a number of monthly gross salary depending by seniority, type of contract and employee level. We have incurred expenses related to the Italian TFR and France severance indemnity of approximately $1.5 million and $0.1 million, respectively, for the transitional period 25 April 2015 to 31 December 2015.

Note 23. Income Taxes

Income tax expense (benefit) consists of the following (in thousands):

	Transitional Period 25 April 2015 to 31 December 2015			Fiscal Year Ended 24 April 2015
Current tax	$	28,481		$	21,744
Deferred tax	(35,021		)	10,641
	$	(6,540	)	$	32,385

The following is a reconciliation of the statutory income tax rate to our effective income tax rate expressed as a percentage of income before income taxes:

	Transitional Period 25 April 2015 to 31 December 2015		Fiscal Year Ended 24 April 2015
Statutory tax rate at U.S. Rate	-	%	35.0	%
Statutory tax rate at U.K. Rate	20.0		-
Change in tax Rate ⁽¹⁾	(8.2	)	-
Change in unrecognized deferred tax assets	(5.4	)	-
Reduced tax benefit due to non-deductible transaction costs ⁽²⁾	(13.2	)	-
State and local tax provision, net of federal benefit ⁽³⁾	-		2.7
Foreign tax rate differential	27.1		1.5
Notional interest deduction	7.6		-
U.S. Subpart F	(4.8	)	-
Research and development tax credits	3.8		(2.1	)
Equity compensation	(14.0	)	1.0
Reserve for uncertain tax positions	-		(1.5	)
Domestic manufacturing deduction	1.9		(2.9	)
Other, net	1.1		2.5
Effective tax rate	15.9	%	36.2	%

The Italian budget law for 2016 was published in the Official Gazette on 30 December 2015. For Fiscal Year 2017 onward, the law provides a reduction of the applicable corporate income tax rate from 27.5% to 24% resulting in an adjustment to deferred taxes and a corresponding increase to tax expense of approximately $3.4 million.
Included in this adjustment is the reversal of the deferred tax asset established during the fiscal year ended 24 April 2015 and the quarter ended 24 July 2015, based on the assumption that these otherwise non-deductible transaction costs would be deductible if the business combination was not consummated. Because the transaction was ultimately consummated, the deferred tax asset was reversed as a non-deductible transaction cost in the amount of $2.3 million.
State and local tax provision is included in other lines for the transitional period ended 31 December 2015.

The change in net deferred taxes recognized in the balance sheet can be analyzed as follows (in thousands):

	Transitional Period 25 April 2015 to 31 December 2015			Fiscal Year Ended 24 April 2015
At the beginning of the period	$	20,662		$	34,184
Deferred taxes recognized in equity	9,685			(2,881		)
Deferred tax income (expense) for the period, net	35,021			(10,641		)
Effect of business combination ^(a)	(134,981		)	-
At the end of the period	$	(69,613	)	$	20,662

(a) The increase in assets and liabilities recognized in an acquisition can be attributed for the most part to the Mergers (see "Note 7. Business Combinations" for more details).

Deferred income tax assets and liabilities on a gross basis are summarized as follows (in thousands):

	31 December 2015			24 April 2015			26 April 2014
Deferred tax assets:
Net operating loss carryforwards	$	81,058		$	1,906		$	3,534
Tax credit carryforwards	17,143			1,720			11,128
Deferred compensation	6,583			7,812			7,886
Accruals and reserves	21,635			8,837			12,029
Depreciation and amortisation	16,796			-			-
Inventory	19,001			384			94
Other	5,626			919			1,146
Deferred tax assets	167,842			21,578			35,817
Deferred tax liabilities:
Basis differences in subsidiaries	(13,555		)	-			-
Property and equipment and intangible assets	(223,715		)	(916		)	(1,633		)
Other	(185		)	-			-
Deferred tax liabilities:	(237,455		)	(916		)	(1,633		)
Total deferred tax assets (liabilities), net	$	(69,613	)	$	20,662		$	34,184
Reported in the consolidated balance sheet:
Deferred tax assets, net	$	165,729		$	20,662		$	34,184
Deferred tax liability, net	(235,342		)	-			-
Net deferred tax asset (liability)	$	(69,613	)	$	20,662		$	34,184

During the transitional period 25 April 2015 to 31 December 2015 we have recorded $14.0 million of foreign tax credits in the United States. We have $0.6 million in Canadian research and development credits, $2.1 million of U.S. State tax credits and $1.2 million of other U.S. credits. Lastly, we have 3.9 million Euros of French refundable research and development credits recognised as a deferred tax benefits in our balance sheet. We have net operating losses ("NOL") and carryforwards of the following amounts:

Region	Gross Amount		Gross Amount with No Expiration		With Expiration		Starting Expiration Year
Europe	$	200,751	$	186,122	$	14,630	2016
U.S. Federal	164,226		-		164,226		2020
U.S. State	141,083		-		141,083		2016
Far East	6,899		4,795		2,104		2017

As a result of the business combination, the historic net operating losses of Sorin U.S. are limited by IRC section 382. Before considering the adjustments for net unrealised and realised built in-gains, the annual limitation is approximately $12.5 million, which is sufficient to absorb the U.S. net operating losses prior to their expiration.

A significant portion of the net deferred tax liability included above relates to the tax effect of the step-up in value of the assets acquired in the combination with Sorin. Refer to "Note 7. Business Combinations " for additional information.

Deferred tax assets have not been recognized with respect of the following items in gross amounts (in thousands):

	31 December 2015		24 April 2015		26 April 2014
Tax loss carryforwards	$	150,949	$	5,653	$	7,077
Other	8,598		3,444		1,169
	$	159,547	$	9,097	$	8,246

Included in the table above are primarily tax loss carryforwards for which a tax benefit was not recorded due to the inability to utilize such losses. In addition, the items included in the other category relate to certain tax credits and capital losses that a tax benefit was not recorded.

As of the transaction close date, there were several investments in subsidiaries where the book basis was greater than the tax basis, whereby a deferred tax liability was recognised as part of the purchase accounting. The deferred tax liability recognised as part of the purchase accounting related to these subsidiaries was approximately $17 million. No further provision has been made for income taxes on undistributed earnings of foreign subsidiaries as of 31 December 2015 because it is our intention to indefinitely reinvest undistributed earnings of our foreign subsidiaries. In the event of the distribution of those earnings in the form of dividends, a sale of the subsidiaries, or certain other transactions, we may be liable for income taxes. There should be no material tax liability on future distributions as most jurisdictions with undistributed earnings have various participation exemptions / no withholding tax. As at 31 December 2015, it was not practicable to determine the amount of the income tax liability related to those investments.

Tax authorities may disagree with certain positions we have taken and assess additional taxes. We regularly assess the likely outcomes of our tax positions in order to determine the appropriateness of our reserves for uncertain tax positions. However, there can be no assurance that we will accurately predict the outcome of these audits and the actual outcome of an audit could have a material impact on our consolidated results of income, financial position or cash flows. If all of our unrecognised tax benefits as 31 December 2015 were recognised, $20.2 million would impact our effective tax rate. The liability for uncertain tax positions reserve in the balance sheet is $13.0 million, however the remaining amount up to the $20.2 million is included as an offset to the deferred tax asset account. We are unable to estimate the amount of change in the majority of our unrecognised tax benefits over the next 12 months; however, approximately $0.9 million will be resolved over the next 12 months due to the expected completion of an audit. Refer to "Note 16. Commitments and Contingencies " for additional information regarding the status of current tax litigation.

During fiscal year ended 24 April 2015, based upon our review and rework of certain prior-year R&D tax credits, we believe that the credits are more likely than not to be sustained upon examination and as a result we released the reserve against these R&D tax credits.

We record accrued interest and penalties related to unrecognised tax benefits in interest expense and operating expense, respectively.

The major jurisdictions where we are subject to income tax examinations are as follows:

Jurisdiction	Earliest year open
U.S. - federal and state	1992
Italy	2010
Germany	2010
England and Wales	2012
Canada	2011
France	2010

Note 24. Commitments and Contingencies

Litigation and Regulatory Proceedings

FDA Warning Letter . On 31 December 2015, LivaNova received a Warning Letter dated 29 December 2015 from the FDA alleging certain violations of FDA regulations applicable to medical device manufacturers at the Company's Munich, Germany and Arvada, Colorado facilities.

The FDA inspected the Company's Munich facility from 24 August 2015 to 27 August 2015 and its Arvada facility from 24 August 2015 to 1 September 2015. On 27 August 2015, the FDA issued a Form 483 identifying two observed non-conformities with certain regulatory requirements at the Munich facility. The Company did not receive a Form 483 in connection with the FDA's inspection of the Arvada facility. Following the receipt of the Form 483, the Company provided written responses to the FDA describing corrective and preventive actions that were underway or to be taken to address the FDA's observations at the Munich facility. The Warning Letter responded in part to LivaNova's responses and identified other alleged violations not previously included in the Form 483.

The Warning Letter further stated that the Company's 3T Heater Cooler devices and other devices manufactured by the Company's Munich facility are subject to refusal of admission into the United States until resolution of the issues set forth by the FDA in the Warning Letter. The FDA has informed the Company that the import alert is limited to the 3T Heater Cooler devices, but that the agency reserves the right to expand the scope of the import alert if future circumstances warrant such action. The Warning Letter did not request that existing users cease using the 3T Heater Cooler device, and manufacturing and shipment of all of the Company's products other than the 3T Heater Cooler remain unaffected by the import limitation. To help clarify these issues for current customers, the Company issued an informational Customer Letter in January 2016, and that same month agreed with the FDA on a process for shipping 3T Heater Cooler devices to existing U.S. users pursuant to a certificate of medical necessity program.

Lastly, the Warning Letter states that premarket approval applications for Class III devices to which certain Quality System regulation deviations identified in the Warning Letter are reasonably related will not be approved until the violations have been corrected. However, the Warning Letter only specifically names the Munich and Arvada facilities in this restriction, which do not manufacture or design devices subject to premarket approval.

The Company is continuing to work diligently to remediate the FDA's inspectional observations for the Munich facility as well as the additional issues identified in the Warning Letter. The Company takes these matters seriously and intends to respond timely and fully to the FDA's requests.

The Warning Letter had no impact on the Company's financial statements during 2015. The Company currently believes that less than 1% of 2016 consolidated sales could be impacted by this Warning Letter and that the FDA's concerns can be resolved without a material impact on the Company's financial results.

Baker, Miller et al v. LivaNova PLC . On 12 February 2016, LivaNova was alerted that a class action complaint had been filed in the U.S. District Court for the Middle District of Pennsylvania with respect to the Company's 3T Heater Cooler devices, naming as evidence, in part, the Warning Letter issued by the FDA in December 2015. The named plaintiffs to the complaint are two individuals who underwent open heart surgeries at WellSpan York Hospital and Penn State Milton S. Hershey Medical Center in 2015, and the complaint alleges that: (i) patients were exposed to a harmful form of bacteria, known as nontubercuous mycobacterium ("NTM"), from LivaNova's 3T Heater Cooler devices; and (ii) LivaNova knew or should have known that design or manufacturing defects in 3T Heater Cooler devices can lead to NTM bacterial colonization, regardless of the cleaning and disinfection procedures used (and recommended by the Company). Named plaintiffs seek to certify a class of plaintiffs consisting of all Pennsylvania residents who underwent open heart surgery at WellSpan York Hospital and Penn State Milton S. Hershey Medical Center between 2011 and 2015 and who are currently asymptomatic for NTM infection (approximately 3,600 patients).

The putative class action, which has not been certified, seeks: (i) declaratory relief finding the 3T Heater Cooler devices are defective and unsafe for intended uses; (ii) medical monitoring; (iii) general damages; and (iv) attorneys' fees. On 21 March 2016 the plaintiffs filed a First Amended Complaint adding Sorin Group Deutschland GmbH and Sorin Group USA, Inc. as defendants.

At LivaNova, patient safety is of the utmost importance, and significant resources are dedicated to the delivery of safe, high-quality products. The Company intends to vigorously defend against these claims. Given the early stage of this matter, we cannot, however, give any assurances that additional legal proceedings making the same or similar allegations will not be filed against LivaNova PLC or one of its subsidiaries, nor that the resolution of the complaint and any related litigation in connection therewith will not have a material adverse effect on the Company's business, results of operations, financial condition and/or liquidity.

SNIA Litigation. Sorin S.p.A. was created as a result of a spin-off (the "Sorin spin-off") from SNIA S.p.A. ("SNIA"). The Sorin spin-off, which spun off SNIA's medical technology division, became effective on 2 January 2004. Pursuant to the Italian Civil Code, in a spin-off transaction, the parent and the spun-off company can be held jointly liable for certain indebtedness or liabilities of the pre-spin-off company in two scenarios:

· The parent and the spun-off company can be held jointly liable, up to the actual value of the shareholders' equity conveyed or received, for "debt" ( debiti ) of the pre-spin-off company that existed at the time of the spin-off. This joint liability is secondary in nature and, consequently, arises only when such indebtedness is not satisfied by the company owing such indebtedness. We estimate that at the time of the spin-off, the value of the residual shareholders' equity received was approximately €573 million.

· The parent and the spun-off company can be held jointly liable, up to the actual value of the shareholders' equity conveyed or received, for "liabilities" ( elementi del passivo ) whose allocation between the parties to the spin-off cannot be determined based on the spin-off plan.

For purposes of the Italian Civil Code, Sorin believes and has argued that the term "debt" ( debiti ) is generally understood to refer to indebtedness as reflected on a debtor's balance sheet for accounting purposes in accordance with the European Union directive pursuant to which these provisions of the Italian Civil Code were enacted, which translates " debiti " as "obligations." The European Union directive uses "obligations" to refer to indebtedness owed to creditors and the term "liabilities" to refer to general liabilities. In connection with the Sorin spin-off, the assets and liabilities of SNIA's medical technology division were allocated to Sorin, and the remaining assets and liabilities of SNIA, including those related to the Caffaro chemical operations (as described below), were allocated to SNIA.

Between 1906 and 2010, SNIA's subsidiaries Caffaro Chimica S.r.l. and Caffaro S.r.l. and their predecessors (the "SNIA Subsidiaries"), conducted certain chemical operations (the Caffaro Chemical Operations"), at sites in Torviscosa, Brescia and Colleferro, Italy (the "Caffaro Chemical Sites"). These activities allegedly resulted in substantial and widely dispersed contamination of soil, water and ground water caused by a variety of hazardous substances released at the Caffaro Chemical Sites. In 2009 and 2010, SNIA and the SNIA Subsidiaries filed for insolvency. In connection with SNIA's Italian insolvency proceedings, the Italian Ministry of the Environment and the Protection of Land and Sea (the "Italian Ministry of the Environment"), sought compensation from SNIA in an aggregate amount of €3.4 billion for remediation costs relating to the environmental damage at the Caffaro Chemical Sites allegedly caused by the Caffaro Chemical Operations. The amount, which was based on certain clean-up activities and precautionary measures set forth in three technical reports prepared by ISPRA, the technical agency of the Ministry of Environment. Similar activities and precautionary measures have also been requested to the SNIA Subsidiaries by the Ministry of Environment and other competent authorities in the context of the administrative proceeding for the remediation of the Caffaro Chemical Sites. However, these administrative acts have been the invalidated in part by courts in Friuli Venezia Giulia (for the site of Torviscosa) and Brescia, which deemed them based on fact-finding. The administrative proceeding regarding the Torviscosa site is also currently subject to a criminal investigation by the Public Prosecutor of Udine. In addition, partial final remediation plans have been approved and implemented for the Colleferro site. These plans provide remediation activities significantly different, and entailing much lower expenses, from those included in the ISPRA's technical reports which ground the request for compensation of the abovementioned amount. Notwithstanding the above, that amount, remains in dispute, and no final remediation plan has been approved for the other site.

In September 2011, the Bankruptcy Court of Udine, and in July 2014, the Bankruptcy Court of Milan each held that the Italian Ministry of the Environment and other Italian government agencies were not creditors of SNIA and the SNIA Subsidiaries in connection with the agencies' claims against them in the context of their Italian insolvency proceedings. LivaNova (as the successor to Sorin in the litigation) believes these findings are influential but not binding in other Italian courts, including civil courts. The Italian Ministry of the Environment and the other Italian government agencies have appealed both decisions, but in January 2016, the Court of Udine rejected the appeal (with a decision which has been challenged before the Italian Supreme Court), while the appeal before the Court of Milan is currently pending. LivaNova (as the successor to Sorin in the litigation) believes these findings are influential but not binding in other Italian courts, including civil courts.

In January 2012, SNIA filed a civil action against Sorin in the Civil Court of Milan on the basis of the Italian Civil Code's provisions for potential joint liability of a parent and a spun-off company in the context of a spin-off, as described above, seeking to determine Sorin's joint liability with SNIA for damages allegedly related to the Caffaro chemical operations (as described below). SNIA's civil action against Sorin also named the Italian Ministry of the Environment and other Italian government agencies, as defendants, in order to have them bound to a potential ruling. The Italian Ministry of the Environment, together with the Italian Ministry of Economy and Finance and certain additional Italian government agencies that also sought compensation from SNIA for the alleged environmental damages, subsequently counterclaimed against Sorin, seeking to have Sorin found jointly liable to them with SNIA, on the same basis. SNIA and these government agencies asked the court to find inapplicable to the Sorin spin-off the Italian Civil Code's caps on potential joint liability of parties to a spin-off, which limit such joint liability to the actual value of the shareholders' equity received, on the basis that the Sorin spin-off was planned prior to the date such caps were enacted under the Italian Civil Code, and despite the fact that the Sorin spin-off became effective after such date. Sorin sought to contest SNIA's claims against Sorin, in their entirety, due to:

the Italian bankruptcy courts' previous findings that the Italian Ministry of the Environment and other Italian government agencies were not creditors of SNIA and the SNIA subsidiaries in connection with the agencies' claims against them;
Sorin's belief that the alleged liabilities related to the Caffaro chemical operations did not constitute indebtedness of SNIA at the time of the Sorin spin-off, and thus that Sorin should not be held liable under the Italian Civil Code's provisions relating to joint liability for indebtedness in the context of spin-offs, as described above; and
the allocation to SNIA of the assets and liabilities related to the Caffaro chemical operations in connection with the Sorin spin-off, and Sorin's belief that Sorin should therefore not be liable under the Italian Civil Code's provisions relating to joint liability in the context of spin-offs for liabilities of indeterminate allocation, as described above.

A hearing to submit final claims ( precisazione delle conclusioni ) in connection with SNIA's civil action was held in September 2015 and parties have since filed final defense briefs. A favourable decision pertaining to the case was delivered in judgement No. 4101/2016 of 1 April 2016 (the "Decision"). In its Decision the Court of Milan dismissed the legal actions of SNIA s.p.a. in Amministrazione Straordinaria (SNIA) and of the Italian Public Administration (the Public Administration) against Sorin (now LivaNova PLC), further requiring the Public Administration to pay Sorin Euro 300,000, as legal fees (of which Euro 50,000 jointly with SNIA). Neither of the losing parties has yet filed an appeal in this case.

LivaNova (as successor to Sorin in the litigation) continues to believe that the risk of material loss relating to the SNIA litigation is not probable as a result of the reasons and recent court decisions described above. We also believe that the amount of potential losses relating to the SNIA litigation is in any event not estimable given that the underlying damages and related remediation costs (and which party would be responsible for what portion or time period related to which) remain in dispute and that no final decision on a remediation plan has been approved. As a result, LivaNova has not made any accrual in connection with the SNIA litigation.

Pursuant to European Union, United Kingdom and Italian cross-border merger regulations applicable to the Mergers, legacy Sorin's liabilities, including any potential liabilities arising from the claims against Sorin relating to the SNIA litigation, are assumed by LivaNova as successor to Sorin. Although LivaNova believes the claims against Sorin in connection with the SNIA litigation are without merit and continues to contest them vigorously, there can be no assurance as to the outcome. A finding, during any appeal or novel proceedings, that Sorin or LivaNova is liable for the environmental damage at the Caffaro chemical sites could have a material adverse effect on the financial position, results of operations and/or cash flows of LivaNova.

Environmental Remediation Order. On 28 July 2015, Sorin and other direct and indirect shareholders of SNIA received an administrative order from the Italian Ministry of the Environment (the "Environmental Remediation Order"), directing them to promptly commence environmental remediation efforts at the Caffaro chemical sites (as described above). LivaNova believes that the Environmental Remediation Order is without merit. LivaNova (as successor to Sorin) believes that it should not be liable for damages relating to the Caffaro chemical operations pursuant to the Italian statute on which the Environmental Remediation Order relies because the statute does not apply to activities occurring prior to 2006, the date on which the statute was enacted, and Sorin was spun off from SNIA in 2004. Additionally, LivaNova believes that Sorin should not be subject to the Environmental Remediation Order because Italian environmental regulations only permit such an order to be imposed on an "operator" of a remediation site, and Sorin had never been identified in any legal proceeding as an operator at any of the Caffaro chemical sites, has not conducted activities of any kind at any of the Caffaro chemical sites and had not caused any environmental damage at any of the Caffaro chemical sites.

Accordingly, LivaNova (as successor to Sorin) alongside other parties, challenged the Environmental Remediation Order before the Administrative Court of Lazio in Rome (TAR). A hearing was held on February 3, 2016.

On March 21, 2016 the TAR issued several judgements, annulling the Environmental remediation Order, one for each of the addressees of the Environmental Remediation Order, including LivaNova. Those judgements were based on the fact that (i) the Order lacks any detailed analysis of the causal link between the alleged damage and the activities of the Company, which is a pre-condition to imposition of the measures proposed in the Order, (ii) the situation of the Caffaro site does not require urgent safety measures, because no new pollution events have occurred and no additional information/evidence of a situation of contamination exists and (iii) the Order was not enacted using the correct legal basis, and in any event the Ministry failed to verify the legal elements that could have led to a conclusion of legal responsibility of the addressees of the Order.

The TAR decision described above may be appealed by the Ministry before the Council of State (within 60 days from the notification of the TAR's judgement, or six months if the judgement has not been notified.)

Andrew Hagerty v. Cyberonics, Inc. On 5 December 2013, the United States District Court for the District of Massachusetts unsealed a qui tam action filed by former employee Andrew Hagerty against Cyberonics under the False Claims Act (the "False Claims Act") and the false claims statutes of 28 different states and the District of Columbia ( United States of America et al ex rel. Andrew Hagerty v. Cyberonics, Inc. Civil Action No. 1:13-cv-10214-FDS). The False Claims Act prohibits the submission of a false claim or the making of a false record or statement to secure reimbursement from, or limit reimbursement to, a government-sponsored program. A "qui tam" action is a lawsuit brought by a private individual, known as a relator, purporting to act on behalf of the government. The action is filed under seal, and the government, after reviewing and investigating the allegations, may elect to participate, or intervene, in the lawsuit. Typically, following the government's election, the qui tam action is unsealed.

Previously, in August 2012, Mr. Hagerty filed a related lawsuit in the same court and then voluntarily dismissed that lawsuit immediately prior to filing this qui tam action. In addition to his claims for wrongful and retaliatory discharge stated in the first lawsuit, the qui tam lawsuit alleges that Cyberonics violated the False Claims Act and various state false claims statutes while marketing its VNS Therapy System, and seeks an unspecified amount consisting of treble damages, civil penalties, and attorneys' fees and expenses.

In October 2013, the United States Department of Justice declined to intervene in the qui tam action, but reserved the right to do so in the future. In December 2013, the district court unsealed the action. In April 2014, Cyberonics filed a motion to dismiss the qui tam complaint, alleging a number of deficiencies in the lawsuit. In May 2014, the relator filed a First Amended Complaint. Cyberonics filed another motion to dismiss in June 2014, and the parties completed their briefing on the motion in July 2014. On 6 April 2015, the district court dismissed all claims filed by Andrew Hagerty under the False Claims Act, but did not dismiss the claims for wrongful and retaliatory discharge. On 28 July 2015, Cyberonics filed its answer to the surviving claims in Mr. Hagerty's first Amended Complaint and asserted its demand for arbitration pursuant to Mr. Hagerty's employment documents.

In August 2015, Mr. Hagerty filed a Motion Seeking Leave to file a Second Amended Complaint responding to certain deficiencies noted by the court when dismissing claims in his First Amended Complaint alleging that Cyberonics submitted, or caused the submission of false claims under the False Claims Act. On 4 September 2015, Cyberonics filed our Brief in Opposition to Hagerty's Motion for Leave to file a Second Amended Complaint. Mr. Hagerty filed a Reply Brief in support of his Motion for Leave to file a Second Amended Complaint on 11 September 2015. On 16 September 2015, the Court heard oral arguments on (a) Mr. Hagerty's motion seeking to amend his complaint, and (b) Cyberonics' pending motion demanding arbitration on the claims relating to wrongful and retaliatory discharge. On 17 November 2015, the court (1) denied Mr. Hagerty's Motion for Leave to File a Second Amended Complaint (accordingly, the previously dismissed claims remain dismissed); (2) granted Cyberonics' Motion to Compel Arbitration of the two remaining claims (for retaliatory discharge under the False Claims Act and for wrongful termination/retaliation under Massachusetts law); and (3) stayed the pending case (in order to consolidate all issues for appeal pending resolution of the arbitration). On or about 22 February 2016, Mr. Hagerty dismissed, without prejudice, his individual claims that were ordered to arbitration. Subsequently, on or about 21 March 2016, Mr. Hagerty filed an appeal of the previously dismissed FCA claims with the U.S. First Circuit Court of Appeals. The appeal is pending.

We believe that our commercial practices were and are in compliance with applicable legal standards, and we will continue to defend this case vigorously. We make no assurance as to the resources that will be needed to respond to these matters or the final outcome, and we cannot estimate a range of potential loss or damages.

Tax Litigation. In a tax audit report notified on October 30, 2009, the Regional Internal Revenue Office of Lombardy (the "Internal Revenue Office") informed Sorin Group Italia S.r.l. that, among several issues, it was disallowing in part (for a total of €102.6 million) a tax-deductible write down of the investment in the U.S. company, Cobe Cardiovascular Inc., which Sorin Group Italia S.r.l. recognised in 2002 and deducted in five equal installments, beginning in 2002. In December 2009, the Internal Revenue Office issued notices of assessment for 2002, 2003 and 2004. The assessments for 2002 and 2003 were automatically voided for lack of merit. In December 2010 and October 2011, the Internal Revenue Office issued notices of assessment for 2005 and 2006 respectively. The Company challenged all three notices of assessment (for 2004, 2005 and 2006) before the relevant Provincial Tax Courts.

The preliminary challenges filed for 2004, 2005 and 2006 were heard and all denied at the first jurisdictional level, and subsequently, the Company filed an appeal against the decisions in the belief that all the decisions are incorrect in their reasoning and radically flawed. The appeal submitted against the first-level decision for 2005 was rejected. The second-level decision (relating to the 2005 notice of assessment) was appealed to the Italian Supreme Court (Corte di Cassazione), where LivaNova will argue that the assessment should be deemed null and void and illegitimate because of a false application of regulations. This litigation is still pending before the Italian Supreme Court.

In November 2012, the Internal Revenue Office served a notice of assessment for 2007 and, in July 2013, served a notice of assessment for 2008, wherein the Internal Revenue Office claimed an increase in taxable income due to a reduction (similar to the previous notices of assessment for 2004, 2005 and 2006) of the losses reported by Sorin Group Italia S.r.l. for the 2002, 2003 and 2004 tax periods and utilized in 2007 and 2008. Both notices of assessment were challenged within the statutory deadline. The Provincial Tax Court of Milan suspended the decision until the litigation regarding years 2004, 2005 and 2006 are defined.

The total amount of losses in dispute is €62.6 million. At the time of Cyberonics-Sorin merger, LivaNova carefully reassessed its exposure, on this complex tax litigation, taking into account the recent general adverse trend to taxpayers on litigations with Italian tax authorities. Although the Company's defensive arguments are strong, the negative Court trend experienced so far by Sorin (four consecutive negative judgements received to date) as well as the fact of the ultimate outcome being dependent on the last possible Court level, i.e. the Italian Supreme Court, which is entitled to resolve only on procedural and legal aspects of the case but not on its substance, led LivaNova to recognise a risk provision of $18.3 million.

Other Litigation . Additionally, we are the subject of various pending or threatened legal actions and proceedings that arise in the ordinary course of our business. These matters are subject to many uncertainties and outcomes that are not predictable and that may not be known for extended periods of time. Since the outcome of these matters cannot be predicted with certainty, the costs associated with them could have a material adverse effect on our consolidated net income, financial position or cash flows.

Lease Agreements

We have operating leases for facilities and equipment. Rent expense from all operating leases amounted to approximately $5.2 million and $0.8 million for the transitional period 25 April 2015 to 31 December 2015 and fiscal year ended 24 April 2015, respectively.

Future minimum lease payments for operating leases as of 31 December 2015 are as follows (in thousands):

No later than 1 year	$	17,798
Later than 1 year and no later than 5 years	53,568
Later than 5 years	29,300
Present value of minimum lease payments	$	100,666

Other commitments and contingencies. Certain potential commitments of LivaNova related to the funding of equity method investments are such that LivaNova invests in minority shares of companies with assets still in development that often require milestone and/or royalty payments to a third party, contingent upon the occurrence of certain future events. Milestone payments may be required, and are contingent upon the successful achievement of an important point in the development life cycle of a product or upon certain pre-designated levels of achievement in clinical trials. A number of these arrangements give LivaNova the discretion to unilaterally make the decision to stop development of a product or cease progress of a clinical trial, which would allow LivaNova to avoid making the contingent payments. Although LivaNova is unlikely to cease development if a device successfully achieves clinical testing objectives, these are not considered contractual obligations because of the contingent nature of these payments and LivaNova's ability to avoid them if LivaNova decided to pursue a different path of development.

In the normal course of business, LivaNova periodically enters into agreements that require it to indemnify customers or suppliers for specific risks, such as claims for injury or property damage arising out of LivaNova's products or the negligence of LivaNova's personnel or claims alleging that its products infringe third-party patents or other intellectual property. LivaNova's maximum exposure under these indemnification provisions cannot be estimated, and LivaNova has not accrued any liabilities within LivaNova's consolidated financial statements, with the exceptions of those which will probably require the use of financial resources in an amount that can be estimated reliably.

Note 25. Earnings Per Share

Basic earnings per share (EPS) is calculated by dividing the profit for the year attributable to owners of the parent by the weighted average number of ordinary shares outstanding during the year. Diluted EPS is calculated by dividing the net profit attributable to attributable to owners of the parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.

The following table sets forth the computation of basic and diluted net earnings per share of common shares, (in thousands except per share data):

	Transitional Period 25 April 2015 to 31 December 2015			Fiscal Year Ended 24 April 2015
Numerator:
Profit (loss) attributable to owners of the parent	$	(29,116	)	$	57,003

Denominator:
Basic weighted average shares outstanding	32,741,357			26,391,064
Add effects of share options ^{(1) (2)}	-			234,657
Diluted weighted average shares outstanding	32,741,357			26,625,721
Basic earnings per share	$	(0.89	)	$	2.16
Diluted earnings per share	$	(0.89	)	$	2.14

Excluded from the computation of diluted EPS for the transitional period 25 April 2015 to 31 December 2015 were outstanding options to purchase 220,536 ordinary shares because to include them would be anti-dilutive due to the net loss during the period.
Excluded from the computation of diluted EPS for the year ended 24 April 2015 were outstanding options to purchase 56,547 common shares, because to include them would have been anti-dilutive due to the option exercise price exceeding the average market price of our common share during the period.

Note 26. Geographic and Segment Information

We identify operating segments based on the way we manage, evaluate and internally report our business activities for purposes of allocating resources and assessing performance.

Upon completion of the Mergers, we reorganized our reporting structure and aligned our segments and the underlying divisions and businesses. The historical Cyberonics operations are included in the Neuromodulation segment and the historical Sorin businesses are included in the Cardiac Surgery and the Cardiac Rhythm Management segments. This change had no impact on our consolidated results for prior periods presented.

The Cardiac Surgery segment generates its revenue from the development, production and sale of cardiovascular surgery products. Cardiac Surgery products include oxygenators, heart-lung machines, autotransfusion, mechanical heart valves and tissue heart valves. The Cardiac Rhythm Management segment generates its revenue from the development, manufacturing and marketing of products for the diagnosis, treatment, and management of heart rhythm disorders and heart failure. Cardiac Rhythm Management products include high-voltage defibrillators CRT-D and low-voltage pacemakers. The Neuromodulation segment generates its revenue from the design, development and marketing of neuromodulation therapy for the treatment of drug-resistant epilepsy and treatment resistant depression. Neuromodulation product include the VNS Therapy System, which consists of an implantable pulse generator, a lead that connects the generator to the vagus nerve, surgical equipment to assist with the implant procedure, equipment to enable the treating physician to set the pulse generator stimulation parameters for the patient, instruction manuals and magnets to suspend or induce stimulation manually.

Corporate expenses include shared services for finance, legal, human resources and information technology, together with corporate business development ("New Ventures"). New Ventures is focused on new growth platforms and identification of other opportunities for expansion.

Revenue and income (loss) before merger, integration and restructuring expenses by reportable segment are as follows (in thousands):

	Transitional Period 25 April 2015 to		Fiscal Year Ended
Revenue	31 December 2015		24 April 2015
Cardiac Surgery	$	147,635	$	-
Cardiac Rhythm Management	52,470		-
Neuromodulation	214,761		291,558
Corporate	841		-
Total Revenue	$	415,707	$	291,558

Income (loss) before merger, integration, restructuring expenses and impairment of AFS assets:	Transitional Period 25 April 2015 to 31 December 2015			Fiscal Year Ended 24 April 2015
Cardiac Surgery	$	7,441		$	-
Cardiac Rhythm Management	(13,293		)	-
Neuromodulation	87,845			97,438
Corporate	(38,592		)	-
Total reportable segments' income (loss) before merger, integration, restructuring expenses and impairment of AFS assets:	43,401			97,438
Merger-related expenses	(42,098		)	(8,692		)
Integration expenses	(13,689		)	-
Restructuring expenses	(11,323		)	-
Operating Profit (Loss)	$	(23,709	)	$	88,746

The following tables presents our assets by reportable segment (in thousands):

Total Assets	31 December 2015		24 April 2015		26 April 2014
Cardiac Surgery	$	1,459,978	$	-	$	-
Cardiac Rhythm Management	422,859		-		-
Neuromodulation	540,041		323,329		305,396
Corporate	112,301		-		-
Total	$	2,535,179	$	323,329	$	305,396

The following tables present the depreciation and amortization expense and capital expenditures by reportable segment (in thousands):

	Transitional Period 25 April 2015 to		Fiscal Year Ended
Depreciation and amortization expense	31 December 2015		24 April 2015
Cardiac Surgery	$	11,247	$	-
Cardiac Rhythm Management	4,292		-
Neuromodulation	4,103		6,807
Corporate	858		-
Total	$	20,500	$	6,807

	Transitional Period 25 April 2015 to		Fiscal Year Ended
Capital expenditures	31 December 2015		24 April 2015
Cardiac Surgery	$	10,402	$	-
Cardiac Rhythm Management	4,954		-
Neuromodulation	1,418		6,687
Corporate	512		-
Total	$	17,286	$	6,687

Revenue of our reportable segments include end-customer revenues from the sale of products they each develop and manufacture or distribute. The segment income represents operating income before merger, integration and restructuring expenses. This measurement is included in the reporting package for the CODM, and used by the CODM in evaluating performance and allocating resources.

The segment's assets included in management evaluations are those used by the segment in the performance of its ordinary activities, or those assets that may be reasonably allocated to the segment as a function of its ordinary activities. These include the following financial statement items: property, plant and equipment; intangible assets; goodwill; investments in associates measured at net equity; investments in other companies; and inventories.

Geographic Information

We operate under three geographic regions: United States, Europe, and Rest of World. Accordingly, the geographic information for the prior years has been restated to present these regions.

Net sales to external customers by geography are determined based on the country the products are shipped from and are as follows (in thousands):

	Transitional Period 25 April 2015 to 31 December 2015		Fiscal Year Ended 24 April 2015
United States	$	232,261	$	235,712
Europe ^{(1) (2)}	105,322		41,484
Rest of World	78,124		14,362
Total	$	415,707	$	291,558

Net sales to external customers includes $14.3 million in the United Kingdom for the transitional period ended 31 December 2015. Prior to the Mergers, we were domiciled in the United States.
Includes those countries in Europe where LivaNova has a direct sales presence. Countries where sales are made through distributors are included in Rest of World.

No single customer represented over 10 percent of our consolidated revenue in the transitional period 25 April 2015 to 31 December 2015 and the fiscal year ended 24 April 2015.

Property, plant, and equipment, net by geography are as follows (in thousands):

	31 December 2015		24 April 2015		26 April 2014
United States	$	54,935	$	26,577	$	27,397
Europe ⁽¹⁾	136,357		519		857
Rest of World	37,699		11,280		9,274
Total	$	228,991	$	38,376	$	37,528

Property, plant, and equipment, net includes $2.4 million in the United Kingdom for the period ended 31 December 2015. Prior to the Mergers, we were domiciled in the United States.

Note 27. Related Parties

Interests in subsidiaries are set out in "Note 11. Investments in associates, joint ventures and subsidiaries ". Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

In the normal course of business the Company issues loans, purchases and sells goods and services from or to various related parties in which the Company typically holds a 50% or less equity interest and has significant influence. These transactions are generally conducted with terms comparable to transactions with third parties.

Prior to the Mergers the Company did not carry any transactions with related parties. The following receivable balances arose from sale and financing transactions with associates (in thousands):

Balance Sheet	31 December 2015
Financial assets - non-current:
Caisson Interventional LLC	$	2,041
	$	2,041
Trade receivables - current:
Microport Sorin	$	1,204
Cardiosolution Inc	10
	$	1,214
Other financial assets - current:
Highlife SAS	$	1,632
	$	1,632

The following sales and financing transactions were entered into with associates during the transitional period (in thousands):

Income Statement	Transitional Period 25 April 2015 to 31 December 2015
Revenue:
Microport Sorin	$	565
Financial income:
Highlife SAS	$	3

Total compensation in respect of key management, who are defined as the Board of Directors and certain members of senior management, is considered to be a related party transaction.

The total compensation in respect of key management was as follows (in thousands):

	Transitional Period 25 April 2015 to 31 December 2015		Fiscal Year Ended 24 April 2015
Salaries and short term benefits	$	4,076	$	3,455
Post-employment benefits	112		40
Termination benefits	3,589		-
Share-based compensation	5,952		4,567
	$	13,729	$	8,062

There were no other material related party transactions in the period.

Note 28. Consolidated Statements of Income (Loss) - Expenses by Nature

(in thousands)	Transitional Period 24 April 2015 31 December 2015			Fiscal Year Ended 24 April 2015
Revenue	$	415,707		$	291,558

Other revenues and income	1,945			-
Change in inventories of work-in-process, semi-finished and finished goods	(39,450		)	6,333
Increase in fixed assets for internal work	1,623			-
Cost of raw materials and other materials	(53,808		)	(24,175		)
Cost of services used	(56,821		)	(51,608		)
Personnel expense	(166,662		)	(114,495		)
Other operating costs	(92,729		)	(11,609		)
Amortisation, depreciation and write-downs	(22,864		)	(7,258		)
Additions to provisions	(5,588		)	-
Interest expense	(1,509		)	(21		)
Interest income	392			184
Impairment of AFS assets	(5,062		)	-
Foreign exchange	(7,522		)	479
Share of profit (loss) from equity method investments	(3,308		)	-
Profit (loss) before tax	(35,656		)	89,388
Income tax expense (benefit)	(6,540		)	32,385
Profit (loss) attributable to owners of the parent	$	(29,116	)	$	57,003

Note 29. Employee and Key Management Compensation Costs

Employee costs

(in thousands)	Transitional Period 25 April 2015 to 31 December 2015		Fiscal Year Ended 24 April 2015
Wages and salaries	$	126,841	$	68,926
Share-based payments ⁽¹⁾	19,264		11,762
Other employee costs	20,557		33,807
	$	166,662	$	114,495

⁽¹⁾ Represents share-based payments included in personnel expense. Refer to Note 21. "Share-Based Incentive Plans" for total share-based compensation expense.

Details of Directors' remuneration are included in pages 61 to 84 of the Directors' remuneration report, which forms part of these financial statements.

Employee numbers

The average monthly employee numbers on a full-time equivalent basis, excluding employees of associated and joint venture undertakings and including executive directors were 4,660, 661 and 652 for the period 19 October 2015 to 31 December 2015 (transitional period subsequent to the Mergers), for the period 25 April 2015 to 18 October 2015 (transitional period prior to the Mergers) and the fiscal year ended 24 April 2015, respectively.

Note 30. Exceptional Items

The following exceptional items are included within operating profit (loss) (in thousands):

	Transitional Period 25 April 2015 to 31 December 2015		Fiscal Year Ended 24 April 2015
Merger related expenses	$	42,098	$	8,692
Integration expenses	13,689		-
Restructuring expenses	11,323		-
Impairment of AFS assets	5,062		-
Total exceptional items	$	72,172	$	8,692

Merger Expenses. Merger expenses consisted of expenses directly related to the Mergers, such as professional fees for legal services, accounting services, due diligence, a fairness opinion and the preparation of registration and regulatory filings in the United States and Europe, as well as investment banking fees. Refer to "Note 7. Business Combinations" for more details .

Integration Expenses. Integration expenses consisted primarily of consultation with regard to our systems integration, organization structure integration, finance, synergy and tax planning, the transition to U.S. GAAP for Sorin activity, our London Stock Exchange listing and certain re-branding efforts.

Restructuring Expenses . After the consummation of the Mergers between Cyberonics with Sorin in October 2015, we initiated several restructuring plans to combine our business operations. We identify costs incurred and liabilities assumed for the restructuring plans. The restructuring plans are intended to leverage economies of scale, eliminate duplicate corporate expenses, streamline distributions and logistics and office functions in order to reduce overall costs.

Impairment of AFS assets. During the transitional period 25 April 2015 to 31 December 2015 an impairment of $5.1 million in equity investment in Cerbomed GmbH was recorded. Refer for details to "Note 5. Fair Value Measurements" .

Note 31. Auditors' Remuneration

(in thousands)	Transitional Period 25 April 2015 to 31 December 2015		Fiscal Year Ended 24 April 2015
LivaNova auditors
Fees payable to the Company's auditor and its associates for the audit of parent company and consolidated financial statements	$	2,172	$	1,034
Fees payable to the Company's auditor and its associates for other services:
The audit of the Company's subsidiaries	1,613		-
Total audit fees payable to the Company's auditor	$	3,785	$	1,034

Taxation compliance services	$	-	$	220
Taxation advisory services	66		-
Other non-audit services	410		215
Total fees payable to the Company's auditor	$	4,261	$	1,469

Note 32. New Accounting Pronouncements

The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Company's financial statements are disclosed below. The Company intends to adopt these standards, if applicable, when they become effective.

IFRS 9 Financial Instruments. In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments that replaces IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. IFRS 9 brings together all three aspects of the accounting for financial instruments project: classification and measurement, impairment and hedge accounting. IFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early application permitted. Except for hedge accounting, retrospective application is required but providing comparative information is not compulsory. For hedge accounting, the requirements are generally applied prospectively, with some limited exceptions. The Company plans to adopt the new standard on the required effective date. The Company is evaluating the effect this standard will have on its financial statements and related disclosures.

IFRS 15 Revenue from Contracts with Customers. IFRS 15 was issued in May 2014 and establishes a five-step model to account for revenue arising from contracts with customers. Under IFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The new revenue standard will supersede all current revenue recognition requirements under IFRS. Either a full retrospective application or a modified retrospective application is required for annual periods beginning on or after 1 January 2018. Early adoption is permitted. The Company plans to adopt the new standard on the required effective date. The Company is evaluating the effect this standard will have on its financial statements and related disclosures.

IFRS 16 Leases. In January 2016, the IASB issued final accounting guidance on leases which provides a new model for lease accounting in which all leases, other than short-term and small-ticket-item leases, will be accounted for by the recognition on the balance sheet of a right-to-use asset and a lease liability, and the subsequent amortization of the right-to-use asset over the lease term. IFRS 16 will be effective for annual periods beginning on or after 1 January 2019. Early application is permitted, provided the new revenue standard, IFRS 15 Revenue from Contracts with Customers , has been applied, or is applied at the same date as IFRS 16. The Company is evaluating the effect this standard will have on its financial statements and related disclosures.

The Company does not expect to adopt IFRS 9 or IFRS 15 before 1 January 2018 and has not yet determined its date of adoption for IFRS 16. The Company has not yet completed its evaluation of the effect of adoption of these standards. The EU has not yet adopted IFRS 9, IFRS 15 or IFRS 16 and consequently these standards are not yet available for early adoption to the Company.

There are no other standards and interpretations in issue but not yet adopted that the management anticipate will have a material effect on the reported income or net assets of the Company.

Note 33. Events after the Reporting Period

Restructuring Plan

On March 10, 2016, the Company announced a reorganization plan for its Cardiac Rhythm Management Business Unit intended to strengthen its operational effectiveness and efficiency in response to changes in the global marketplace. The Company estimates that, net of new positions created, the reorganization plan will result in a reduction of around 140 in the workforce, primarily based at the Company's facility in Clamart, France. The plan also contemplates the closure of the Company's research and development facility in Meylan, France, and the consolidation of the Business Unit's research and development capabilities into the Clamart facility. In addition, the research and development team of the Company's New Ventures organization will be combined with those of the Cardiac Rhythm Management Business Unit. Although terms are not likely to be finalized until the second quarter of 2016, the Company believes that the reduction in force should be accomplished primarily through voluntary separation packages. The Company estimates that these actions will result in total pre-tax charges of approximately $16 million to $21 million in 2016, relating to non-recurring cash employee-related costs, including costs for severance and other employee-related assistance and other exit costs associated with the plan.

Capital Reduction

Subsequent to the year end, the majority of the merger relief reserve as at 31 December 2015 was capitalised by way of a bonus share issue, which gave rise to an increase in the company's share premium account. Having previously obtained shareholder approval on 16 October 2015, and following the approval of the High Court of Justice, Chancery Division on 6 April 2016, the share premium of the Company in the amount of $2,587 million was cancelled. The purpose of the cancellation of the share premium account was to create distributable reserves in the books of account of the Company to be used for any corporate purpose of the Company for which realised profits are required.

This announcement is distributed by NASDAQ OMX Corporate Solutions on behalf of NASDAQ OMX Corporate Solutions clients.

The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.

Source: LivaNova plc via GlobeNewswire

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