BPCE_REGISTRATION_DOCUMENT_2017

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

Transactions leading to substantial changes in financial assets When an asset is subject to substantial changes (in particular following a renegotiation or a remodeling due to financial difficulties)there is derecognition,as the rights to initial cash flows have essentially expired. The Group considers that this is the case for: changes leading to a change of counterparty,especiallyif the new ● counterpartyhas a very different credit quality than the previous counterparty; changes intended to move from a very structured to simple ● indexing, as the two assets are not exposed to the same risks. Transactions leading to substantial changes in financial liabilities A substantial change to the terms of a lending instrumentmust be recorded as the extinguishmentof former debt and its replacement with a new debt. To assess the substantial nature of the change, IAS 39 includes a thresholdof 10% based on discountedcash flows, integrating potential costs and fees: when the difference is greater than or equal to 10%, all of the costs or fees incurredare recognized as profitor loss ondebt extinguishment. The Group may consider other changes to be substantial, such as a change of issuer (even within the same group) or a change in currency. Offsetting financial assets and financial liabilities 4.1.10 In accordance with IAS 32, the Group offsets financial assets and liabilities, and a net balance is presented on the balance sheet, on the twofold condition that it has the legally enforceable right to offset the recorded amounts, and the intention either to settle the net amount or to simultaneously realize the asset and settle the liability. Transactions on derivatives and repurchase agreements carried out with clearing houses, whose operating principles meet the two criteria mentioned above, are offset in the balance sheet (see Note 5.24). 4.2 In accordancewith IAS 40, investment property is property held to earn rent or for capital appreciation, or both. The accountingtreatmentfor investmentpropertyis identicalto that used for property, plant and equipment (see Note 4.3) for all Group entities except for certain insurance entities, which recognize the property they hold as investments in connection with insurance policies at fair value, with any adjustment to fair value recorded in income. Fair value is calculated using a multi-criteriaapproach, by capitalizing rent at market rates and through comparisons with market transactions. The fair value of the Group’s investmentpropertyis based on regular expert valuations, except in special cases significantlyaffecting the value of the relevant asset. Investment property leased under an operating lease may have a residual valuethat willreduce the depreciableamount of the asset. Gains or losses on the disposalof investmentpropertyare recognized in income on the “Net income or expenses on other activities” line. INVESTMENT PROPERTY

In the event of impairmentsubsequentto the reclassificationdate of an instrumentpreviously recorded under available-for-salefinancial assets, the unrealized loss recorded under gains and losses recognized directly in other comprehensive income at the reclassification date and taken to the income statement on an actuarial basisis immediately writtenback to income. 4.1.9 A financialasset (or group of similar financialassets) is derecognized when the contractual rights to the asset’s future cash flows have expired or when such rights are transferredto a third party, together with virtually all of the risks and rewards associatedwith ownership of the asset. In such case, rights and obligationscreated or retained as a result of the transfer are recorded in a separate line under financial assets and liabilities. When a financial asset is derecognized,a gain or loss on disposal is recorded in the income statement reflecting the difference between the carryingamount of the asset and the consideration received. In the event that the Group has neither transferred nor retained virtually all of the risks and rewards, but has retained control of the asset, the asset continues to be recognizedon the balance sheet to the extent of theGroup’scontinuinginvolvement. In the event that the Group has neither transferred nor retained virtually all of the risks and rewards and has not retained control of the asset, the asset is derecognized and all of the rights and obligations created or retained as a result of the transfer are recorded ina separate lineunder financialassets and liabilities. If all the conditionsfor derecognizinga financial asset are not met, the Group keeps the asset in the balancesheet and records a liability representing the obligations arising when the asset is transferred. The Group derecognizesa financial liability (or a part of a financial liability) only when it is extinguished, i.e. when the obligation specified inthe contract is discharged, terminated or expires. Repurchase agreements Securitiessold under repurchaseagreementsare not derecognizedin the vendor’s accounts. A liability representing the commitment to return the funds received is identified and recognized under “Securities sold under repurchase agreements”. This represents a financial liability recorded at amortized cost or at fair value if this liability has been classified as “Designated at fair value”. The assetsreceived are notrecognized inthe purchaser’sbooks, but a receivable is recorded with respect to the vendor representing the funds loaned. The amount disbursed in respect of the asset is recognized under “Securities bought under repurchase agreements”. On subsequent balance sheet dates, the securities continue to be accountedfor by the vendor in accordancewith the rules applicable to the category in which they were initially classified.The receivable is valued accordingto methodsspecific to its category:at amortized cost when classifiedin “Loans and receivables”,or at fair value when classified as “Designatedat fair value”. Outright securities lending Securities loaned under outright securities lending transactions are not derecognized in the vendor’s accounts. They continue to be recognized in their original accounting category and are valued accordingly. For the borrower, the securities borrowed are not recognized. Derecognition of financial assets and liabilities

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Registration document 2017