NATIXIS_REGISTRATION_DOCUMENT_2017

5 FINANCIAL DATA

Consolidated financial statements and notes

Revenues under the finance lease are recognized as income at the interest rate implicit in the lease so as to producea constant periodic rate of return on the lessor’s net investment. The interest rate implicit in the lease is the discount rate that, at the inceptionof the lease, causes: the aggregate present value of the minimum lease payments a receivableby the lessor and the non-guaranteedresidualvalue, to be equal to the sumof; the fair value of the leased asset and any initial direct costs of a the lessor, i.e., the costs incurred specifically by the lessor during the set-up of the leasing contract. These two items form the initial value of the asset. IAS 17 requires that non-guaranteedresidual value be reviewed on a regular basis. If there has been a reductionin the estimated non-guaranteed residual value, the allocation of revenues over the lease term is revised (reviseddepreciationschedule)and any reduction in respect of amounts accrued is recognized immediately. Finance lease contract revenues corresponding to interest are recognized in the income statement under “Interest and similar income”. Provisions for finance leases are determined using the same methodas that describedfor loans and receivables. Assetsprovidedunder operatingleases are shown in the balance sheet under property,plant and equipmentor intangibleassets in the case of equipment leases, and investment property in the case of property leases. Lease income from operating leases is recognizedin the income statementon a straight-linebasis over the lease term, under “Income or expenses from other activities”. Transactions where Natixis is a lessee For consolidationpurposes, property, plant and equipmentused in the business and held under finance leases is restated and reportedunder “Property,plant and equipment”wherematerial. At the inception of the lease term, leased property, plant and equipment is recognized at the lower of fair value and the presentvalue of minimumlease payments,with a corresponding entry under debt on the liabilitiesside of the balancesheet. Leasedassets are depreciatedin the sameway as ownedassets of the same nature. For operatingleases, the leased assets are not recognizedin the lessee’s assets. Payments made for operating leases are recognizedin the income statementon a straight-linebasis over the lease termunder “expensesfromother activities”. Credit risk on assets classified as loans 5.3 and receivables a) Assets individually assessed for impairment At each reportingdate, Natixis reviews assets classifiedas loans and receivables to determine whether there is any objective evidence of impairment arising from one or more events occurring after initial recognition and having an impact on estimatedfuture cash flows. This generallyconcernsreceivables for which an event of default has been identified as defined in

Article 178 of the EU regulation of June 26, 2013on regulatory requirements for credit institutions. Objective evidence of impairment, notwithstandingthe existence of security, includes any payments that are past due by at least three months, or regardless of whether any payment has been missed, the observation of difficulties experienced by the counterparty leading to the expectationthat some or all of the amountsowed may not be recovered. When evidence of impairment exists, Natixis calculates the estimated recoverable amount discounted at the original effective interest rate, taking into account the impact of any available guarantees.Impairmentis recognizedas the difference between the net carrying amount of the loan and its estimated recoverableamount. The impairment loss is recorded against the line on which the asset was initially shown for its net amount.Impairmentcharges and reversals are recorded in the income statement under “Provisionfor credit losses”. Loans in default are reclassified as performing loans once a normal businessrelationshiphas resumedwith the counterparty. However, this may not occur before the end of the observation periodduringwhichpaymentsmay have resumed. b) Assets collectively assessed for impairment Financial assets measured at amortized cost for which there is no objective evidence of impairment are included in a group of assetswith similar risk characteristics.Whereobjectiveevidence of impairment is found to exist for a given group of assets, a collective impairmentloss is recorded regardlessof whether the risk has yet affectedone or more individualloans. Financial assets are grouped according to three characteristics: credit rating for loans to individualand small businesscustomers, and sector risk and geographicrisk for corporate, sovereign and other similarcounterparties. In the first risk group comprising individual and small business customers,pre-disputedloans are recognizedas impaired. For the other two risk classes (industry and geographic risk), objective evidence of impairment is based on in-depth analysis and monitoringof businesssectorsand countries.Such evidence typically arises from a combination of micro or macroeconomic factorsspecificto the industryor countryconcerned. For industry risk, the Sector Risk section of the Risk Division preparesa segmentanalysis included in a rating scale equivalent to the one used for rating major corporations. The rating procedure is based on the determination of an inherent score that is adjusted according to the position in the cycle, inherent fragility, whether or not there is an outside threat, and the positioningof the Natixisportfolio.Sectorswhoserating is BB- or lower are automaticallyreviewedfor their potentialprovisioning. For geographicrisk, the analysistakes into accountthe sovereign rating, which itself includes a number of inputs such as the country’s political situation, its ability to withstand a severe shock, and the fundamentals of the economy (e.g. GDP per capita, external debt), government efficiency, economic performanceand economicoutlook.In turn, each of these inputs is itself measured by one or more indicators. Qualitative information from specialist independent agencies is also considered.

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Natixis Registration Document 2017