BPCE_REGISTRATION_DOCUMENT_2017

5 FINANCIAL REPORT

Statutory auditors’ report on the consolidated financial statements

Determination of goodwill and impairment tests

Risk identified and main judgements

Our response

The external growth operationscarried out by Groupe BPCE lead it to define the control methods implemented over the acquired entities and to carry out an allocation test of the purchase price from which goodwill and intangible assets recorded in the consolidated balance sheet of Groupe BPCE is derived. Goodwill and intangible assets has been impairment-testedannually at least, based on the assessment of the value in use of the cash-generatingunits (CGU) to which it is attached or at the first signs of impairmentloss. The valuationof the value in use is based on the estimateddiscountedcash flow of the CGU as resulting from the medium-termplans prepared in accordance with the Groupe BPCE’s strategic planfor the period 2018-2020 (TEC 2020). We deemed that the treatment of business combinations and goodwill impairment tests to be a key audit matter by their very nature as they require the exercise of judgment regarding the structuring assumptions used especially for the determination of economicscenarios,financialtrajectoriesor discountlevels. Following the announcementof the TEC 2020 strategic plan, we paid particular attention to the impact of this plan on the medium-termplans used to determine value in use and more specifically those with a minor difference with thebook value. At December 31, 2017, gross value of goodwill amounted to € 4,961 million and accumulated impairment losses stood at € 657 million. The terms of the impairmenttest implementedby BPCE as well as the key assumptionsused to determinethe recoverablevalue and sensitivities of the recoverable amounts are described in note 5.14 to the consolidatedfinancial statements.

We reviewed the structural transactions made during the year to check the consolidation method used in the Groupe BPCE’s consolidated financial statements and the purchase price allocation work performedby BPCE during the2017 financialyear. With the help of our experts, we evaluated the procedure implementedby the group to identify signs of potential impairment loss and carried out a critical review of the method used for implementingimpairmenttests. In particular,our workincludes: comparison of assumptions and parameters withexternal sources; ● review of the reasonableness of the medium-termplans retained ● for each concerned entity involving: the confrontationwith the strategic plan of the group approved - by the governing bodies (supervisory or administrative) of the entities, the assessment of the consistency and reliabilty of the main - assumptionsused to prepare the plans, particularlyregardingthe financial trajectories developed during past financial ‍ years and actually carried out, the analysis of the sensitivity to different valuation parameters - (equity, discount rate…); the verification of the consistency of the information published ● on the results ofthese impairmenttests.

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Registration document 2017