BPCE_REGISTRATION_DOCUMENT_2017

5 FINANCIAL REPORT

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

The discretionary profit-sharing feature grants life insurance policyholdersthe right to receive a share of the financial income generated,in additionto guaranteedbenefits.For these contracts,in accordancewith shadowaccountingprinciplesdefinedby IFRS 4, the provision for deferred profit sharing is adjusted to include the policyholders’ sharein the unrealizedcapitalgainsor losseson financial instrumentsmeasuredat fair value in applicationof IAS 39. The share of the gainsor lossesattributableto policyholders is determinedon the basisof the characteristicsof contractslikelyto generatesuchgainsor losses. Any change in deferred profit sharing is taken to equity where it results from changes in the value of available-for-sale financial assets and to income where it arises from changes in the value of financial assets at fair value throughprofit or loss. At each balance sheet date, the Group assesses whether its recognizedinsuranceliabilitiesare adequate,based on the estimated present value of future cash flows from its insurance policies and investment contracts containing a discretionary profit sharing feature. The liability adequacytest shows the economicvalue of the liabilities corresponding to the average derived from stochastic analyses. If the sum of the surrender value and deferred profit sharing is lower than the fair value of the technical reserves, the shortfallis recognized inincome. REAL ESTATE DEVELOPMENT 4.14 Real estate development projects in progress at the end of the fiscal year are recognizedon a percentageof completionbasis in line with the latestoperatingbudgets. When the outcome of a project cannot be reliably estimated, revenues are recognized only to the extent of costs incurred as revenue thatare expectedto be fullyrecoverable. Operatingincome from all real estate developmentdeals includes all project-related costs: land acquisition; ● site preparation and construction; ● planning taxes (taxesd’urbanisme); ● preliminary surveys (these are only charged to the project if the ● completion probability is high); internal projectmanagementfees; ● project-related marketing costs (internal and external sales ● commissions, advertising expenses, on-site sales office,etc.); financial expenses attributed to the deals. ●

Inventories andworkin progresscomprise landmeasuredat cost,workin progress (sitepreparation andconstruction costs),attributable commercial expenses (internal and external sales commissions,temporary sales offices, etc.)anddeliverablesmeasuredat primecost.Borrowing costsare not included in inventories. Preliminarysurveys commissionedin the pre-developmentphase are only included in inventories if there is a high probability that the project will actually go ahead. If this is not the case, these costs are expensedto the period. When the net realizablevalue of inventoriesand work in progress is less thantheir cost, aprovision for impairment loss is recognized. The procedure for financing the deposit and resolution guarantee fund was changedby a MinisterialOrder dated October 27, 2015. For the DepositGuaranteeFund, the cumulativeamountof contributions made to the fund by the Group for deposit, collateral and securities guaranteemechanismsamount to € 18 million. Contributions(which are non-refundable in the event of a voluntary withdrawal of approval to operate) represent € 3 million. Contributionspaid in the form of partner or associationcertificatesand cash security deposits recognized as assets on the balance sheet total € 15 million. Directive 2014/59/EU (BRRD – Bank Recovery and Resolution Directive) which establishes the framework for the recovery and resolution of banks and investment firms and European regulation 806/2014 (SRM regulation) established the introduction of a resolution fund as of 2015. In 2016, this fund became a Single Resolution Fund (SRF) between the member States participating in the Single Supervisory Mechanism (SSM). The SRF is a resolution financing mechanism available to the resolution authority (Single Resolution Board), which may use this fund when implementing resolutionprocedures. In accordancewith delegated regulation2015/63 and implementing regulation 2015/81 supplementing the BRRD directive on ex-ante contributionsto financingmechanismsfor the resolution,the Single Resolution Board set the level of contributions to the Single Resolution Fund for 2017. The amount of contributionspaid by the Group for the fiscal year totaled € 234 million, of which € 199 million recognized as an expense and € 35 million in cash security deposits recognized as assets on the balance sheet (15% of funds in cash security deposits). The cumulative amount of contributions recognized as assets on the balance sheet totaled € 92 million at December31, 2017. CONTRIBUTIONS TO BANKING 4.15 RESOLUTION MECHANISMS

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Registration document 2017