BPCE_REGISTRATION_DOCUMENT_2017

5 FINANCIAL REPORT

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

USE OF ESTIMATES 2.3 Preparation of the financial statements requires Management to make estimates and assumptions in certain areas with regard to uncertain future events. These estimates are based on the judgment of the individuals preparingthese financialstatementsand the informationavailableat the balancesheet date. Actual future resultsmay differ from these estimates. With respect to the financial statements for the period ended December 31, 2017 in particular, accounting estimates requiring assumptions were mainlyused for the following measurements: the fair value of financial instruments determined on the basis of ● valuation models (Note4.1.6); the amount of impairmentof financialassets, and more specifically ● permanent impairment losses on available-for-sale assets and impairment losses applicable to loans and receivables on an individual basisor calculated onthe basis of portfolios (Note 4.1.7); provisions recorded under liabilities in the balance sheet and more ● specifically the provision for regulated home savings products (Note 4.5) andprovisionsfor insurancepolicies (Note4.13); The Group’s financial statements include the financial statements of all the entities over which it exercisescontrol or significantinfluence, whose consolidation had a material impact on the aforementioned financial statements. The scope of entities consolidatedby BPCE SA group is described in Note 17 – Scope of consolidation. 3.1.1 The subsidiaries controlled by BPCE SA group arefully consolidated. Definition of control Control exists when the Group has the power to govern an entity’s relevant activities, when it is exposed to or is entitled to variable returns due to its links with the entity and has the ability to exercise its power over the entity to influence the amount of returns it obtains. The existence and effect of potential voting rights that are currently exercisable or convertible are consideredwhen assessing the control exercised.These potential voting rights may result, for example, from share call options traded on the market, debt or equity instruments that are convertibleinto ordinary shares, or equity warrants attached to other financial instruments. However, potential voting rights are not taken into account o calculatethe percentage of ownership. Exclusive control is presumed to exist when the Group holds directly or indirectlyeither the majorityof the subsidiary’svoting rights, or at least half of an entity’s voting rights and a majority within the management bodies, or is in a position to exercise significant influence. Entities controlled by the Group Note 3 SCOPE OF CONSOLIDATION – CONSOLIDATION AND VALUATION METHODS 3.1

calculations related to the cost of pensions and future employee ● benefits (Note4.10);

deferredtax assets and liabilities (Note 4.12); ● goodwill impairment testing (Note 5.15). ●

PRESENTATION OF THE CONSOLIDATED FINANCIAL STATEMENTS AND BALANCE SHEET DATE As no specificformatis requiredunderIFRS,the presentationusedby the Groupfor summarized statementsfollowsRecommendation No. 2013-04 issued by the Autoritédes normescomptables (ANC – French national accounting standardsauthority)onNovember 7, 2013. The consolidated financial statements are based on the financial statementsat December 31, 2017. The Group’s consolidatedfinancial statements for the period ended December 31, 2017 were approved by the Management Board on February 5, 2018. They will be presented to the Annual General Shareholders’ Meeting on May 25, 2018. 2.4

Consolidation principles and methods

Specific case of structured entities Entities describedas structuredentities are those organizedin such a way that voting rights are not a key criterionwhen determiningwho has control. This is the case in particular when voting rights only apply to administrative duties and relevant activities are managed throughcontractual agreements. A structured entity frequently exhibits some or all of the following characteristics: well-defined activities; (a) a specific and well-defined aim, for example: implementing a (b) tax-efficient lease, carrying out research and development, providing an entity with a source of capital or funding, or providing investors with investment options by transferring associated risk and advantages to the structuredentity’sassets; insufficientequity for the structuredentity to finance its activities (c) without subordinated financial support; financing through the issue, to investors, of multiple instruments (d) inter-related by contract and which create concentrations of credit risk or other credit (“tranches”). The Group therefore uses, among others, collective investment vehicles within the meaning of the French Monetary and Financial Code and equivalent bodies governed by foreign law as structured entities. Full consolidation method The full consolidation of a subsidiary in the Group’s consolidated financial statements begins at the date on which the Group takes control and ends on the day on which the Group loses control of this entity. The portion of interest which is not directly or indirectly attributable to the Group corresponds to a non-controlling interest.

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Registration document 2017