NATIXIS -2020 Universal Registration Document

5 FINANCIAL DATA

Consolidated financial statements and notes

5.7

Property, plant and equipment,

Credit Valuation Adjustment (CVA) This adjustment applies to valuations that do not account for the counterparty’s credit quality. It corresponds to the expected loss related to the risk of default by a counterparty and aims to account for the fact that Natixis cannot recover all of the transactions’market value. The method for determiningthe CVA is primarily based on the use of market inputs in connection with professional market practices for all counterpartysegments included in this calculation. In the absence of liquid market inputs, proxies by type of counterparty, rating and geographic area are used. Debit Valuation Adjustment – DVA The DVA is symmetrical to the CVA and represents the expected loss, from the counterparty’s perspective, on liability valuations of derivative financial instruments. It reflects the impact of Natixis’ credit quality on the valuation of these instruments. The adjustment is made by observing “zero-coupon” spreads on a sample of comparable entities, taking into account the liquidity of BPCE’s “zero coupon” spread over the period. The funding valuation adjustment (FVA) is taken into account in the DVA calculation. Identifying an active market The following criteria are used to determine whether a market is active: the level of activity and trend of the market (including the level of V activity on the primary market); the length of historical data of prices observed in similar market V transactions; scarcity of prices recovered by a service provider; V large bid-ask price spread; V steep price volatility over time or between different market V participants. The valuation control procedures are presented in section 3.2.5 “Market risks” of Chapter [3] “Risk factors, risk management and Pillar III”. Financial assets and liabilities measured and presented at fair value are categorized based on the following scale: level 1: market value is determined directly using prices quoted on V active markets for identical assets and liabilities; level 2: market value is determined using valuation techniques V based on significant data that may be directly or indirectly observed on the markets; level 3: market value is determined using unrecognized models V and/or models based on non-observablemarket data, where they are liable to materially impact the valuation. Financial assets and liabilities categorizedaccording to the fair value hierarchy and a description of the key models are presented in Note 7.5.

intangible assets (excluding goodwill) and investment property

Fixed assets recognizedon thebalancesheetincludeproperty,plantand equipment,intangibleassets,and investmentproperty.The rightsof use in respect of leased assets (of which the main items are describedin Note 5.2)are presented under fixedasset lines correspondingto similar assets owned of which Natixis has full ownership. Measurement on initial recognition Investment property, shown separately from other on the balance sheet, consists of property held with the aim of generating leasing revenues rather than for operating purposes. On the first-time adoptionof IFRS, property, plant and equipment and investment property were maintained at historical cost as permitted by the options available under IFRS 1, except for property held by insurance companies which is carried at fair value through profit or loss. Property, plant and equipment and investment property are recorded at their purchase price at the acquisition date, including directly attributable costs (transfer duties, fees, commissions and registration expenses) as well as borrowing costs when these meet the criteria forcapitalization set out in IAS 23 “Borrowing Costs”. Computer software developed in-house is recognized under “Intangible assets” at its direct cost of development, which includes the related hardware costs, service costs, payroll costs directly attributable to the production and preparation of the software for use, and borrowing costs when these meet the criteria for capitalization set out in IAS 23 “Borrowing Costs”. Expenses incurred during the development phase are capitalized if they meet the criteria for recognition as intangible assets set out in IAS 38: these include technical feasibility, the intention to complete the asset and use or sell it, the probability that the asset will generate future economic benefits, the availability of resources, and the ability to reliably measure the expenditure attributable to the asset’s development. Costs incurred during the research phase are not capitalized but are recognized in expenses. Subsequent measurement After initial recognition, assets are measured at cost less accumulated depreciation, amortization and impairment losses. Investmentpropertyheld by insurancecompaniesis measuredat fair value through profit or loss in accordance with IAS 40 anIdFRS 4. For both, the fair value is obtained using a multi-criteria approach based on the capitalizationof rents at the market rate combinedwith a comparison with market transactions. In accordance with Article R.332-210-1 of the French Insurance Code, a five-year appraisal is conducted by an independent expert approved by the ACPR. Between two appraisals, the market value of property is certified by experts on a half-yearly basis.

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NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2020