NATIXIS_REGISTRATION_DOCUMENT_2017

FINANCIAL DATA Consolidated financial statements and notes

other disposals may also be compatible with the “hold to j collect” model’s objectives if they are infrequent (even if their value is significant)or if their value is insignificantwhen considered both individually and overall (even if they are frequent); For Natixis, the “hold to collect” model would apply to financing activities (excluding the loan syndication activity) carriedout by Corporate& InvestmentBankingand Specialized FinancialServices; a mixed businessmodel under which assets are managedwith a the objective of both receiving contractual cash flows and disposingof financial assets (“hold to collect and sell” model). Natixis would apply the “hold to collect and sell” model primarilyto portfoliomanagementactivitiesfor securitiesin the liquidityreserve;and a model intended for other financial assets, especially those a held for trading, for which the collection of contractual cash flows is incidental. This business model would apply to the loan syndication activity and the capital markets activities carriedout by Corporate& InvestmentBanking. The SPPI test A financial asset is considered as basic if its contractual terms give rise, on specific dates, to cash flows that are solely payments of principal and interest on the outstanding amount due. The principal amount is defined as the financial asset’s fair value at its acquisition date. Interest is the considerationfor the time value of money and the credit risk incurred on the principal amount, as well as other risks such as liquidity risk, administrativecosts and the profitmargin. The instrument’scontractual terms must be taken into account to assesswhethercontractualcash flows are solely paymentsof principal and interest. All elements that may cast doubts as to whether only the time value of money is represented must thereforebe analyzed.For example: events that would change the amount and date of the cash a flows; For the borrower or lender, a contractual option permitting prepayment of financial instruments does not violate the SPPI test for contractualcash flows if the prepaymentamount mainly represents the unpaid amounts of principal and interest and, if applicable, a reasonable additional compensation for the early terminationof the contract. If a clear determination cannot be made through qualitative analysis,quantitativeanalysis(a “benchmarktest”) is carriedout. This test involves comparing the contractual cash flows for the asset in questionwith the contractualcash flows of a benchmark asset. Basic assets (i.e., those with SPPI cash flows) are debt instrumentssuch as fixed-rate loans, variable-rateloans without an interest rate tenor mismatch or that are not linked to a security or to a market index, and fixed-rateor variable-ratedebt securities. Any contractual option that creates risk exposure or cash-flow volatility that is not consistentwith a basic lending arrangement, such as exposure to fluctuations in the price of stocks or of a market index, or the introduction of leverage, would make it impossibleto categorizecontractualcash flows as “SPPI”. the applicableinterestrate features; a prepaymentand extensionoptions. a

Non-basic(“non-SPPI”)financialassets includemutualfund units and convertible bonds or mandatory convertible bonds with a fixed conversionratio. Debt instruments (loans, receivablesor debt securities)may be valued at amortized cost or at fair value through other comprehensiveincomeor at fair value throughprofit and loss. A debt instrument is valued at amortized cost if it meets the followingtwo conditions: the asset is held in a business model whose objective is to a collectcontractualcash flows;and the contractualterms of the financial asset, on specific dates, a give rise to cash flows that are solely paymentsof principaland intereston the outstandingamountdue. In this case, the asset is consideredbasic and its cash flows are categorizedas SPPI. A debt instrument is valued at fair value through other comprehensiveincomeif it meetsthe followingtwo conditions: the asset is held in a businessmodel whose twofold objective a is to collect contractual cash flows and sell financial assets; and the contractualterms of the financial asset, on specific dates, a give rise to cash flows that are solely paymentsof principaland intereston the outstandingamountdue. In this case, the asset is consideredbasic and its cash flows are categorizedas SPPI. Debt instruments that are held under the “hold to collect” and “hold to collect and sell” models but do not meet SPPI criteria are measuredat fair value throughprofit or loss. Debt instrumentsheld under a businessmodel for other financial assets, especially those held for trading, are measured at fair value throughprofit or loss. SPPI debt instrumentsheld under the “hold to collect”and “hold to collect and sell” business models can only be designated at fair value through profit or loss if doing so reduces an inconsistency in profit or loss (known as an “accounting mismatch”under IAS 39). Finally, if a renegotiationor other modificationof a contract does not result in derecognition, the standard requires that it be identified.In the event of modification,any profit or loss must be recognizedas income.The gross carryingamountof the financial asset must be recalculatedso that it is equal to the renegotiated or modified contractual cash flows discounted to their present value using the originaleffectiveinterestrate. Equity instruments are recordedby default at fair value through profit or loss unless the entity has irrevocable elected to value them at fair value through other comprehensive income (provided they are not held for trading purposes and accordingly classified as financial assets at fair value through profit or loss), without the option of subsequentlyreclassifyinggains or losses to profit or loss (i.e., with no recycling). Embeddedderivatives will no longer be recognized separately from their host contractwhen these are financialassets For financial liabilities , the classification and measurement rules set out in IAS 39 are carried forward to IFRS 9 unchanged, with the exception of those applicable to financial liabilities that the entity chooses to record at fair value through profit or loss (fair value option), for which revaluation adjustments related to changes in own credit risk are recorded under gains and losses recognized directly in other comprehensive income, without being subsequentlyreclassifiedto profit or loss.

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Natixis Registration Document 2017