BPCE_REGISTRATION_DOCUMENT_2017

FINANCIAL REPORT Statutory auditors’ report on the consolidated financial statements

Groupe BPCE tax expense and recognition of current and deferred taxes

Risk identified and main judgements

Our response

The tax charge of Groupe BPCE includes either the one relative to tax payable or thedeferredtax. Groupe BPCE records deferred tax when temporary differences arise between the carrying amount of assets and liabilities on the balance sheet and their tax base, irrespectiveof when the tax is expected to be recoveredor settled.Deferredtax assets are recognizedfor tax loss carryforwards to the extent that it is probable that the entity in question will generate future taxable profits against which these tax losses can be utilized only to the extent that it is probable that the entity willbe able to recoverthem inthe foreseeable future. Estimates of the ability to create future profits taxable in this future requires the Management to exercise judgement when deciding whether to assessing the recoverability of recognized deferred tax assets but also thedate, the expectedswitchand the tax rate implied. We deemed this subject to be akey audit matterbecauseof: the significant changes in the tax rate in the different tax ● jurisdictions where Groupe BPCE operates; the sensitivity of the deferred tax to the assumptionsand choices ● made by the Management. At December 31, 2017, the tax expense amounted to € 1,811 million of which € 675 million for current tax and € 1,136million for deferred tax. € 3,081 million was recordedwith respect to deferred tax assets and € 687 million under deferred tax liabilities. See notes 4.12, 5.9 and 6.9 to the consolidated financial statements for furtherdetails.

We acknowledgethe changesin laws passed in the jurisdictionwhere Groupe BPCE operates and we checked the compliance of the methods of valuation of the tax payable and deferred tax with these changes. We reviewedthe process of valuationof deferred tax assets and, as a consequence,the tax rates in force. Considering estimates of future taxable profits, we assessed the reliabilityof the process of determinationof tax businessplans which are the basis for the Group to assesses the probability of recovering these deferred tax assets. Assisted by our tax experts, our audit approach consisted in assessing the probability of Groupe BPCE recovering these. We challenged, with the help of our experts, the methods chosen by the Management, to identify existing tax loss carry-forwards,to be used, regardingeither deferred tax liabilitiesor, future taxable profits, fits. On the basis of Managementforecasts, we performed some tests to check the appropriatenessof deferred tax assets basis as well as the relevance of the tax rate used. Our work also focused on the accounting records of significant operations especiallythe one impacting current ax and differed tax.

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Registration document 2017