BPCE_REGISTRATION_DOCUMENT_2017

5 FINANCIAL REPORT

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

Debt and equity instruments 4.1.3 Financial instruments issued by the Group qualify as debt or equity instrumentsdependingon whetheror not the issuer has a contractual obligation to deliver cash or another financial asset to the holder of the instrument,or to exchange the instrumentunder conditionsthat are potentially unfavorable to the Group. This obligation must arise from specific contractualterms and conditions,not merely economic constraints. In addition, when an instrument qualifies as equity: its remuneration is treated as a dividend, and therefore impacts ● equity, along with the tax relating to this remuneration; it cannotbe an underlying eligible for hedge accounting; ● if the issue is in a foreign currency, the instrument is fixed at its ● historic value resulting from its conversion to euros at its initial date of transfer to equity. Finally, when these instruments are issued by a subsidiary, they are includedin “Non-controllinginterests”.When their remunerationis of a cumulative nature, it is charged to “Income attributable to equity holders of the parent” and increases the income of “Non-controlling interests”. However, when their remunerationis not of a cumulative nature, it is drawn from retained earnings attributable to equity holdersof the parent. Financial liabilities at fair value through profit or loss These are financial liabilities held for trading or classified in this category on a voluntary basis at initial recognition using the fair value option availableunder IAS 39. The qualifyingcriteria used when applying this option are describedin Note 4.1.4 “Financialassets and liabilitiesdesignated at fair value throughprofit or loss.” These liabilities are measured at fair value at the date of initial recognition and at each balance sheet date. Changes in fair value over the period, interest, gains or losses on these instruments are recognized in “Net gains or losses on financial instruments at fair value through profit or loss”, with the exception of changes in fair value attributable to changes in own credit risk which, since January 1, 2016 (see Note 2.2), are recorded under “Revaluation of own credit risk on financialliabilitiesdesignatedat fair value through profit or loss” within “Gains and losses recognizeddirectly in equity”. In the event of early redemption, fair value gains or losses attributableto own credit risk are directly transferredto consolidated reserves under equity. Debt securities Issues of debt securities (which are not classified as financial liabilities at fair value through profit or loss or as equity) are initially recognized at fair value less any transaction costs. They are subsequentlymeasured at amortizedcost at each balance sheet date using theeffectiveinterest method. These instruments are recognized on the balance sheet under “Amounts due to credit institutions”,“Amounts due to customers”or “Debt securities”. Subordinated debt Subordinateddebt differs from other debt and bonds in that it will be repaid only after all the senior and unsecuredcreditors,but before the repayment of participating loans and securities and deeply subordinated notes.

Held-to-maturity financial assets are recognized at fair value at inception, plus any transaction costs directly attributable to their acquisition.They are subsequentlymeasured at amortized cost using the effective interest method, includingany premiums,discountsand acquisition fees,where material. Loans and receivables The “Loans and receivables” portfolio comprises non-derivative financial assets with fixed or determinablepayments and which are not quoted in an active market. In addition, these assets must not be exposed to a risk of material losses unrelated to a deterioration in their credit quality. Some securities not quoted in an active market may be classified in this portfolio. These are initially recognized at fair value, plus any transaction costs and less any transaction income. Securities classified in this category comply with the rules for recognition, measurement and impairment applicable to loans and receivables. When a financial asset recorded under loans and receivables is sold before its maturity, the income from the disposal is recorded under “Net gainsor losses onavailable-for-sale financial assets”. Available-for-sale financial assets Available-for-salefinancial assets are all securities not classified in the previousthree categories. Available-for-sale financial assets are initially recognized at fair value, plus any transaction costs. On the balance sheet date, they are carried at their fair value and changesin fair value are recordedunder “Gains and losses recognized directly in other comprehensiveincome” (except for foreign currency money market assets, for which changes in the fair value of the foreigncurrencycomponentaffect net income).The principlesused to determine fair valueare described inNote 4.1.6. If they are sold,these changes infair valueare taken to income. Interest income accrued or received on fixed-income securities is recorded under “Interest or similar income”. Interest income accrued or receivedon variable-incomesecuritiesis recordedunder “Net gains or losses onavailable-for-sale financial assets”. Date of recognition Securities are recorded in the balance sheet on the settlement/delivery date. Temporary transfers of securities are also recorded on the settlement/delivery date. For repurchase or reverse repurchase transactions, a loan commitment given or received is recorded between the transactiondate and the settlement/deliverydate when such transactions are recorded as “Loans and receivables” or “Liabilities”.When such transactionsare recorded under “Assets and liabilities at fair value through profit or loss”, the commitment is recorded as an interest rate derivative. Rules applicable to partial disposals The first-in, first-out (FIFO) method is applied to any partial disposals of securities, except inspecialcases.

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Registration document 2017