Critical Accounting Estimates and Judgments Financial Risk Management

CEVA Holdings LLC – Quarter One 2017 Interim Financial Statements 12 impairment model and removes the need for a triggering event to be necessary for recognition of impairment losses. The new standard e ui es appli atio fo a ual pe iods egi i g o o afte Ja ua . The G oup is et to assess IF‘“ s full i pa t;  IFRS 15, ‘e e ue f o Co t a ts ith Custo e s – The new standard will be effective for annual periods beginning on or after 1 January 2018 with retrospective application. This new standard on revenue recognition supersedes IAS 18 Revenue, IAS 11 Construction Contracts and related interpretations. The Group is assessing the impact of the standard;  IF‘“ , Leases – The new standard addresses the definition of a lease, recognition and measurement of leases and establishes principles for reporting useful information to users of financial statements about the leasing activities of both lessees and lessors. A key change arising from IFRS 16 is that most operating leases will be accounted for on balance sheet for lessees such as CEVA. The standard replaces IAS 17 Leases , a d elated i te p etatio s. The sta da d is effective for annual periods beginning on or after 1 January 2019 and earlier appli atio is pe itted su je t to EU e do se e t a d the e tit adopti g IF‘“ ‘e e ue f o o t a ts ith usto e s at the same time. The Group is currently assessing the impact of IFRS 16;  IA“ , “tate e t of Cash flo s – The amendments clarify IAS 7 to improve information provided to users of financial statements about an entitys financing activities. They are effective for annual periods beginning on or after 1 January 2017, with earlier application being permitted, subject to EU endorsement;  IA“ , I o e Ta es – The amendments to IAS 12 clarify the treatment for the recognition of deferred tax assets for unrealized losses. They are effective for annual periods beginning on or after 1 January 2017, with earlier application being permitted, subject to EU endorsement;  IFRIC 22, Fo eig Cu e T a sa tio s a d Ad a e Co side atio - This interpretation addresses foreign currency transactions: the date of the transaction, for the purpose of determining the exchange rate, is the date of initial recognition of the non-monetary prepayment asset or deferred income liability. If there are multiple payments or receipts in advance, a date of transaction is established for each payment or receipt. The new interpretation, subject to EU endorsement, requires application for annual periods beginning on or after 1 January 2018. The Group is assessing the impact of the impact of IFRIC 22. There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.

4. Critical Accounting Estimates and Judgments

The preparation of financial statements in accordance with generally accepted accounting principles under IFRS requires the Group to make estimates, judgments and assumptions that may affect the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities in the financial statements. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The resulting accounting estimates will, by definition, rarely equal the related actual results. Actual results may differ significantly from these estimates, the effect of which is recognized in the period in which the facts that give rise to the revision, become known. In preparing these unaudited condensed consolidated interim financial statements, the significant judgments made by management in appl i g the G oup s a ou ti g poli ies a d the ke sou es of esti atio u e tai t , were the same being impairment of goodwill, income taxes, retirement benefits and provisions and contingent liabilities as those that applied to the consolidated financial statements of CEVA Holdings LLC as at, and for, the year ended 31 December 2016.

5. Financial Risk Management

The G oup s ope atio s a d fi a ial esults a e su ject to various risks and uncertainties that could adversely affect our business, financial positio , esults of ope atio s a d ash flo s. The G oup s isk a age e t o je ti es a d poli ies a e o siste t ith those disclosed in the consolidated financial statements as at, and for, the year ended 31 December 2016. The Group operates internationally and generates foreign currency exchange risks arising from future commercial transactions, recognized assets and liabilities, investments and divestments in foreign currencies other than the US dollar , the G oup s epo ti g u e . The ai exchange rates are shown below: As a result of our global operations, our business, results of operations and financial condition may be materially adversely affected by fluctuations in currency exchange rates. For example, we are subject to currency risks because our revenues may be generated in different currencies from the currencies in which our related costs are incurred, and because our cash flow may be generated in currencies that do not match our debt service obligations. In addition, our reporting currency is the U.S. dollar, and therefore our reporting results are subject to translational risks relating to currency exchange rate fluctuations. Given the volatility of exchange rates, our failure to effectively hedge or otherwise manage such currency risks effectively may materially adversely affect our financial condition and results of operations. 2017 2016 March closing Three Month Average March closing Three Month Average British pound 0.7971 0.8052 0.6965 0.6985 Euro 0.9391 0.9390 0.8787 0.9062 Chinese yuan 6.8832 6.8930 6.4591 6.5343 CEVA Holdings LLC – Quarter One 2017 Interim Financial Statements 13

6. Segment Information