BPCE_REGISTRATION_DOCUMENT_2017

FINANCIAL REPORT Statutory Auditors’ report on the consolidated financial statements

BPCE SA group tax expense and recognition of current and deferred taxes

Risk identified and main judgements

Our response

The tax charge of BPCE SA group includes either the one relative to tax payable or the deferred tax. BPCE SA group records deferredtax when temporarydifferencesarise between the carrying amount of assets and liabilities on the balance sheet and their tax base, irrespectiveof when the tax is expected to be recoveredor settled.Deferredtax assets are recognizedfor tax loss carryforwards to the extent that it is probable that the entity in question will generate future taxable profits against which these tax losses can be utilized only to the extent that it is probable that the entity willbe able to recoverthem inthe foreseeable future. Estimates of the ability to generate future taxable profits within this timeframe requires Management to exercise judgement when deciding whether to assessing the recoverability of recognized deferredtax assets but also the date, the expectedswitch and the tax rate implied. We deemed this subject to be akey audit matterbecauseof: the significant changes in the tax rate in the different tax ● jurisdictions where BPCESA group operates; the sensitivity of the deferred tax to the assumptionsand choices ● made by the Management. At December 31, 2017, the tax expense amounted to € 611 million of which € 286 million for current tax and € 897 millionfor deferredtax. € 1,698 million was recordedwith respect to deferred tax assets and € 663 millionunderdeferredtax liabilities. See notes 4.12, 5.9 and 6.9 to the consolidated financial statementsfor furtherdetails.

We acknowledgethe changesin laws passed in the jurisdictionwhere BPCE SA group operates and we checked the compliance of the methods of valuation of the tax payable and deferred tax with these changes. We reviewedthe process of valuationof deferred tax assets and, as a consequence,the tax rates in force. Considering the estimates of future taxable profits, we assessed the reliabilityof the process of determinationof tax businessplans which are the basis for the Group to assess the probability of recovering these deferred tax assets. Assisted by our tax experts, our audit approach consisted in assessing the probability of BPCE SA group recovering these. We challenged, with the help of our experts, the methods chosen by the Management, to identify existing tax loss carry-forwards,to be used, regardingeither deferred tax liabilitiesor, future taxable profits, fits. On the basis of Managementforecasts, we performed some tests to check the appropriatenessof deferred tax assets basis as well as the relevance of the tax rate used. Our work also focused on the accounting records of significant operations especiallythe one impacting current ax and differed tax.

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Registration document 2017