BPCE_REGISTRATION_DOCUMENT_2017

FINANCIAL REPORT IFRS Consolidated Financial Statements of BPCE SA group as at December 31, 2017

PHASE-IN MEASURES Under the option available in IFRS 9, the Group does not intend to restate previousfiscal years publishedas comparativeinformationfor its financial statements. Regulation (EU) 2017/2395 dated December 12, 2017 relating to transitional arrangements for mitigating the impact of the introduction of IFRS 9 on capital and for the large exposures treatmentof certain public sector exposureswas published in the OJ on December 27, 2017. BPCE SA group has decided not to opt to neutralize IFRS 9 transitional impacts at the prudential level due to the limitedimpact expected when applying the standard. IFRS 15 IFRS 15 “Revenue from contracts with customers” will replace the current standards and interpretations related to the recognition of income.IFRS 15 was adoptedby the EuropeanUnion and publishedin the OJ on October 29, 2016. It will be applicableretrospectivelyas of January 1, 2018. The amendment“Clarificationson IFRS 15” publishedby the IASB on April 12, 2016 was adopted by the European Commission on October 31, 2017. It should also be applicable retrospectivelyas of January 1, 2018. Under this standard, recognition of revenue from ordinary activities must now reflect the transfer of control of goods and services promised to customers in an amount corresponding to the considerationthat the entity expects to receive in exchangefor these goods and services. IFRS 15 thus introducesa new five-stagegeneral approach forthe recognitionof income: identification of contractswith customers; ● identification of specific performance obligations (or items) to be ● recognized separately from one another; determination of overall transactionprice; ● allocation of transaction price to the various specific performance ● obligations; recognitionof revenue when performance obligations are met. ● IFRS 15 applies to contracts entered into by an entity with its customers,with the exception of leases (covered by IAS 17), insurance contracts (covered by IFRS 4) and financial instruments (covered by IFRS 9). If specific stipulations relating to revenue or contract costs are given under adifferentstandard, these willfirst be applied. The impact analysis of the applicationof this new standard began in 2016 and notably drew on self-assessmentscarried out by certain pilot institutionsand subsidiaries,which were then transposedby all the Group’s significantinstitutionsand subsidiaries.This work helped identifythe mainitems potentiallyconcerned, inparticular: fee and commission income, notably that relating to banking ● services when this income is not included in the effective interest rate, or that relating to asset managementor financial engineering services; income from other activities, in particular for services included in ● leases.

This work also confirmedthat the Group is either only slightly or not affected by certain first-time application of IFRS 15 issues such as real estate development, loyaltyprogramsand telephony. Based on the work performed,the Group does not expect any material impact upon the application of IFRS 15, on either opening equity at January 1, 2018 or onincomeand expenseitems infiscal 2018. Under the option available in IFRS 15, the Group does not intend to publish comparative information for its financial statements. IFRS 16 IFRS 16 “Leases” will replace IAS 17 “Leases” and the interpretations related to the accounting of such contracts. The standard was adopted by the EuropeanCommissionon October 31, 2017. It will be applicable as of January1, 2019. As defined under IFRS 16, leases shall identify an asset and convey the right to use this asset for a period of time. From the lessor's perspective, the impact is expected to be limited, as the provisions will not changesubstantially inrelation to the current IAS 17. Under the current IAS 17, operatingleases are not recognizedon the balance sheet, only the corresponding rental income is recorded in income. In contrast,for lessees,IFRS 16 requiresthat leases be recordedin the balance sheet such that they convey the right to use the leased asset presented,as the case may be, among property,plant & equipmentor investment property, and a lease liability. The lease liability correspondsto the discountedvalue of lease paymentsthat have not yet been paid. The Group has decided to opt for the exception included in the standardof not modifyingthe accountingmethod for short-termleases (less than 12 months)or leases related to low value underlying assets. The right to use the asset will be amortized on a straight-line basis and the lease liability will be calculated on an actuarial basisover the termof the lease. The expenseon the lease debt will thus be includedin interestincome under net banking income and the amortizationexpense on the right to use the asset willbe recognized inoperating expenses. The Group began to analyze the impact of the applicationof this new standard following its publication by the IASB at the start of 2016. This work continued during 2017 and entered the stage where structural choices to be made in terms of organization and information systems were analyzed. RegardingBPCE SA group’s activities, the implementationof IFRS 16 will mainly affect real estate assets leased for operationalpurposesas offices and sales branches.A materialimpact is thereforeexpectedon “Property, plant & equipment” without modifying in itself the relatively weak weighting of property, plant & equipment in total assets. For the first-time applicationof this standard, the Group has chosen the modified retrospectivemethod, which recognizes the cumulative impact at January 1, 2019, with no comparisonwith 2018, and listing in the Notes to the financialstatementsany of the standard’simpacts on the various items insaid financialstatements.

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Registration document 2017