NATIXIS_REGISTRATION_DOCUMENT_2017

5 FINANCIAL DATA

Consolidated financial statements and notes

Financialassetsat fair value throughprofit and lossare measured on initial recognition at market value, with transaction costs recognizedin the incomestatement. The market value is reviewedat each subsequentreportingdate in line with the principles outlined in Note 5.6 “Fair value of financial instruments”.Any changesincludingaccrued interest are recorded in “Net gains or losses on financial instrumentsat fair value through profit or loss” in the consolidated income statement. Held-to-maturity financial assets These are non-derivative financial assets with fixed or determinablepayments and fixed maturitiesthat Natixis has the clear intention and ability to hold through to maturity, other than those that are designated on initial recognition as at fair value through profit or loss (fair value option) or available-for-sale,and those that meet the definitionof loans and receivables. On initial recognition, available-for-sale financial assets are measured at fair value including transaction costs. After initial recognition, loans and receivables are measured at amortized cost using the effective interest rate method and tested for impairment at each reporting date. Where necessary, an impairment charge is recorded in income under “Provision for credit losses”. Transactionsintended to hedge interest rate risk on these securitiesare not permittedunder IFRS. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinablepaymentsthat are not quoted on an active market, other than those designated as at fair value through profit or loss or available-for-sale.This excludesassets for which the holder cannot recover the majority of the initial investment other than because of a credit deterioration, which should be classifiedas available-for-sale.The vast majority of loans granted by the Group are classified in this category. Loans and receivablesalso include the fair value of the hedged component of assetsclassifiedin this category(fair value hedges). On initial recognition,loans and receivablesare measuredat fair value (i.e. face value) plus transaction costs and less any discount and transaction revenues. In the case of loans, transaction costs include fees and any expenses directly attributableto settingup the loan. After initial recognition, loans and receivables are measured at amortized cost using the effective interest rate method and tested for impairmentat each reporting date. Where necessary, an impairmentcharge is recordedin incomeunder “Provisionfor credit losses”. When loans are granted at below-market interest rates, a discountcorrespondingto the differencebetweenthe face value of the loan and the sum of future cash flows discountedat the market interest rate is deductedfrom the face value of the loan. The marketrate of interestis the rate appliedby the vast majority of financial institutions at any given time for instruments and counterpartieswith similarcharacteristics. Specific case of loans restructured due to the debtor’s financial situation “Restructured”loans correspond to loans with modified terms under which Natixis grants a concession to borrowers facing or likely to face financial difficulties. They are a combination of a concession granted by Natixis and financial difficulties experiencedby the borrower.

The modifiedterms of restructuredloans must put the borrower in a more favorable situation (e.g. suspension of interest or principal payment,extensionof term, etc.) and are confirmedby the use of amendments that modify the terms of an existing contractor by the full or partial refinancingof an existingloan. Financial difficulties are determined by observing a number of criteria such as amounts past due for over 30 days or an at-risk rating. The restructuringof a loan does not necessarilyresult in the counterpartybeing classifiedin the Basel defaultcategory,as the financial difficulty is addressed before the counterparty is downgradedinto the Basel defaultcategory. An outstandingis no longer consideredas restructuredonce the followingconditionsare met: a period of two years has passed since the date of the a restructuring; the outstanding is recognized as a performing loan at the a reportingdate; defaultson paymenthave occurredin the past 30 days; a regular and material repayments (principle and interest) have a beenmade over a periodof at least one year. For restructured loans either fully or partially converted into a substantially different asset (such as an equity instrument) or giving rise to a changeof counterparty: the new instrumentsare bookedat fair value; a the difference between the book value of the derecognized a loan (or portion of the loan) and the fair value of the assets received in exchange is entered as a loss under provision for credit losses; any previous provision created on the loan is adjusted on the a basis of the discountingof the new recoverableflows from the non-derecognizedportion of the loan and is reversed in full if the loan is convertedinto newassets. Available-for-sale financial assets Available-for-salefinancial assets include non-derivativefinancial assets that are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss. Assets in this category include Natixis’ investmentsin non-consolidatedcompanies.Securitiesclassified in this category are initially recognized at their market value. At the reporting date, they are remeasured at their market value determinedbasedon the marketprice for listed instruments. The fair value of listed non-consolidated investments correspondsto their last listed price prior to the reporting date. The fair value of unlisted non-consolidated investments is obtained using the P/E (price/earnings)ratio or DCF (discounted cash flow) valuation methods or share in (revalued on non-revalued)equity. Gains or losses arising from changes in the fair value (excluding revenues) of available-for-sale financial assets that are not hedgedare recognizeddirectly in equity under “Gains and losses recorded directly in equity”. Accrued or earned income is recognized in the income statement under “Interest and similar income” using the effective interest rate method. Available-for-sale financial assets are tested for impairment at each reporting date. Where there is objective evidence that an asset is impairedand a decline in the fair value has already been recognized directly in equity, the cumulative impairment loss is removed from equity and taken to income under “Provision for credit losses” (debt instruments) or “Net revenues” (equity instruments).

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Natixis Registration Document 2017