BPCE_REGISTRATION_DOCUMENT_2017

5 FINANCIAL REPORT

Statutory Auditors’ report on the consolidated financial statements

Determination of goodwill and impairment tests

Risk identified and main judgements

Our response

The externalgrowthoperationscarriedout by the BPCE SA group lead it to define the control methods implemented over the acquired entities and to carry out an allocationtest of the purchaseprice from which goodwill and intangible assets recorded in the consolidated balance sheet of BPCESA group is derived. Goodwill and intangible assets has been impairment-testedannually at least, based on the assessment of the value in use of the cash-generatingunits (CGU) to which it is attached or at the first signs of impairmentloss. The valuationof the value in use is based on the estimateddiscountedcash flow of the CGU as resulting from the medium-termplans preparedin accordancewith the BPCE SA group’s strategic planfor the period 2018-2020 (TEC 2020). We deemed that the treatment of business combinations and goodwill impairment tests to be a key audit matter by their very nature as they require the exercise of judgment regarding the structuring assumptions used especially for the determination of economicscenarios,financialtrajectoriesor discountlevels. Following the announcementof the TEC 2020 strategic plan, we paid particular attention to the impact of this plan on the medium-termplans used to determine value in use and more specifically those with a small difference with thebook value. At December 31, 2017, gross value of goodwill amounted to € 4,247 million and accumulated impairment losses stood at € 519 million. The termsof the impairmenttest implementedby BPCE as well as the key assumptionsused to determinethe recoverablevalue and sensitivities of the recoverable amounts are described in note 5.14to the consolidatedfinancialstatements.

We reviewed the structural transactions made during the year to check the consolidationmethodused in BPCE SA group’sconsolidated financial statements and the purchase price allocation work performed by BPCESA group during the 2017 financial year. With the help of our experts, we evaluated the procedure implementedby the group to identify signs of potential impairment loss and carried out a critical review of the method used for implementingimpairmenttests. In particular,our workincludes: comparison of assumptions and parameters withexternal sources; ● review of the reasonableness of the medium-termplans retained ● for each concerned entity involving: the confrontationwith the strategic plan of the group approved - by the governing bodies (supervisory or administrative) of the entities, the assessment of the consistency and reliabilty of the main - asumptionsused to build them especially regarding the financial trajectoriesdevelopedduring the pastfinancial ‍ years and actually carried out, the analysis of the sensitivity to different valuation parameters - (equity, discount rate…); check of the consistency of the information published on the ● results of these impairment tests.

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Registration document 2017