BPCE_REGISTRATION_DOCUMENT_2017

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

at-risk loans correspondto the loan outstandingsgranted but not ● yet due at the calculation date plus statistically probable loan outstandings based on historical customer behavior patterns as well as earned and future rights relating to regulated home savingsaccounts and plans. Earningsfor future periods from the savings phase are estimated,for a given generation of contracts, as the difference between the regulated rate offered and the expected interest accruing on a comparable savingsproduct onthe market. Earningsfor future periods from the loan phase are estimatedas the difference between the fixed rate agreed at inception for PEL contracts or a rate contingent on the savings phase for CEL contracts, and the expected interest rate accruing on home loans in the non-regulated sector. Where the algebraic sum of the Group’s estimated future commitments in respect of the savings and loan phases of any generationof contracts indicates a potentiallyunfavorablesituation for the Group, a provision is recognized,with no offset between the different generations. The commitments are estimated using the Monte Carlo method in order to reflect the uncertainty of future interest rate trends and their impact on customer behavior models and at-risk outstandings. The provision is recognizedunder liabilitiesin the balance sheet and changes are recorded innet interest income. 4.6 Interest income and expenses are recognized on all financial instruments measured at amortized cost using the effective interest method. The same is true for interest income and expenses relating to available-for-salefinancial assets and to loan commitments,and accrued interest onhedging derivatives. The effective interest rate is the rate that exactly discounts estimatedfuture cash paymentsor receiptsthroughthe expectedlife of the financial instrument to the net carrying amount of the financial asset or financialiability. The effective interest rate calculation takes account of all transactionfees paid or received as well as premiumsand discounts. Transaction fees paid or received that are an integral part of the effective interest rate of the contract, such as loan set-up fees and commissions paid to financial partners, are treated as additional interest. The Group has chosen the following option to account for negative interest: when income from a financialasset debt instrumentis negative,it ● is deducted from interest incomein the income statement; when income on a financial liability debt instrumentis positive, it ● is deducted from interest expenses inthe incomestatement. 4.7 Commissionsare recordedin the incomestatementby type of service provided, and according to the method used to recognize the associated financial instrument: commissions payable on recurring services are deferred over the ● period in which the service is provided (payment processing, securities depositfees, etc.); commissionspayable on occasional services are recognized in full ● in income when the service is provided (fund transfers, payment penalties,etc.); INTEREST INCOME AND EXPENSES COMMISSIONS ON SERVICES

commissionspayable on executionof a significanttransactionare ● recognized infull in income oncompletion of the transaction. Fees and commissions that form an integral part of the effective yield on an instrument,such as fees on loan commitmentsgiven or loan set-up fees, are recognizedand amortized as an adjustmentto the effective interest rate over the estimated term of the applicable loan. These fees and commissions are recognized as “Interest income” rather than“Fee and commission income”. Fiduciary and similar fees and commissionsare those that result in assets being held or invested on behalf of individual customers, pension schemes or other institutions. Trust-managementservices mainly cover asset management business and custody services on behalf of third parties. 4.8 The method used to account for assets and liabilities relating to foreign currency transactions entered into by the Group depends upon whether the asset or liability in question is classified as a monetary or anon-monetaryitem. Monetaryassets and liabilitiesdenominatedin foreign currenciesare translatedinto the functionalcurrencyof the Group entity on whose balancesheet they are recognized,at the exchangerate prevailingat the balance sheet date. All resulting foreign exchange gains and losses arerecognized inincome, exceptin two cases: only the portion of the foreign exchange gains and losses ● calculated based on the amortized cost of available-for-sale financial assets is recognizedin income, with any additionalgains and losses being recognized in “Gains and losses recognized directly inother comprehensive income”; foreign exchange gains and losses arising on monetary items ● designatedas cash flow hedges or as part of a net investmentin a foreign operation are recognized in “Gains and losses recognized directly inother comprehensive income”. Non-monetaryassets carried at historical cost are translated using the exchange rate prevailing at the transactiondate. Non-monetary assets carried at fair value are translatedusing the exchangerate in effect at the date on which the fair value was determined. Foreign exchangegains and losses on non-monetaryitems are recognizedin income if gains and losses relating to the items are recorded in income, and in “Gains and losses recognized directly in other comprehensiveincome” if gains and losses relating to the items are recorded in “Gains and losses recognized directly in other comprehensive income”. FOREIGN CURRENCY TRANSACTIONS TRANSACTIONS Leases are analyzed to determine whether in substance and economic realitythey are financeleases or operating leases. 4.9.1 A finance lease is a lease that transfers to the lessee substantially most of the risks and rewards incidentalto ownershipof an asset. It is treated as a loan granted by the lessor to the lessee in order to finance thepurchaseof an asset. IAS 17 gives five examples of situations that lead to a lease being classified as afinancelease: Finance leases FINANCE LEASES AND SIMILAR 4.9

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Registration document 2017