BPCE_REGISTRATION_DOCUMENT_2017

5 FINANCIAL REPORT

BPCE parent company financial statements

Trading securities are recorded in the accounts at cost on their acquisitiondate, less transactioncosts and includingaccruedinterest, where applicable. In the event of a short sale, the debt is recorded under liabilities in the amount of the selling price of the securities, less transaction costs. They are marked to market at the end of the fiscal year based on the market price on the most recent trading day. The overall balance of differences resulting from fluctuations in prices is taken to the income statement. For UCITS and investment funds, market value corresponds to net asset values reflecting available market information as of the balance sheet date. Securities classified as trading securities cannot be transferred to another accountingcategory(except in exceptionalmarket situations requiring a change of strategy or in the absence of an active market for fixed-incomesecurities), and the rules for their presentationand measurementcontinue to apply until they are sold, redeemed in full or writtenoff. Securities available for sale Securities that do not qualify for recognition in any other category are considered as securities available for sale. Securities available for sale are recorded in the accounts at cost on their acquisition date, less transactioncosts. Where applicable, for fixed-income securities, accrued interest is recognized in the income statement under “Interest and similar income”. Any difference between the acquisition price and the redemption value (premiumor discount)for fixed-incomeinstrumentsis recorded in the income statement over the remaining term of the security using theactuarial method. Securitiesavailablefor sale are valued at the lower of acquisitioncost or market price. For UCITS and investment funds, market value corresponds to net asset values reflecting available market information as of the balance sheet date. Unrealizedcapital losses are subject to an impairmentprovision that can be estimated by groups of similar securities, with no offsetting againstcapitalgains recorded onother categories of securities. Gains generatedby hedging instruments,if any, as defined by Article 2514-1 of ANC regulation No. 2014-07, are taken into account for the calculation of impairment. Unrealized capital gains are not recognized. Gains and losses on disposals of available-for-salesecurities, as well as impairmentcharges and reversalsare recordedunder “Net gains or losses onavailable-for-sale securities and similaritems”. Held-to-maturity securities These include fixed-incomesecurities with fixed maturity that were acquired or have been reclassified from “Trading securities” or “Available-for-salesecurities”and which the company intends and is able to hold to maturity. The securities should not be subject to an existing restriction, legal or otherwise, which may have an adverse effect on the company’s intention to hold the securities to maturity. Classificationas held-to-maturitysecurities is not incompatiblewith their designation as items hedged against interestrate risk. Debt securities held to maturity are recorded in the accounts at cost as of their acquisition date, less transaction costs. When previously classified as available for sale, they are recorded at cost and the previously recognized impairment charges are reversed over the residual life of the relevant securities.

The differencebetweenthe acquisitioncost and the redemptionvalue of the securities, and the corresponding interest are recorded according to the same rules as those applicable to fixed-income securities available for sale. An impairmentloss may be recognizedif there is a strong probability that the institution will not hold the securities to maturity due to new circumstances or if there is a risk of default by the issuer. Unrealized capital gainsare not recognized. Debt securities held to maturity cannot be sold or transferred into another categoryof securities,with certainexceptions. However, pursuant to the provisions of ANC regulationNo. 2014-07, fixed-incometrading or available-for-salesecurities reclassified into the category of debt securitiesheld to maturity as a result of market illiquidity may be sold when the market on which they are traded becomes activeagain. Equity securities available for sale in the medium term Equity securities available for sale in the medium term comprise securities invested in with the sole objective of obtaining capital gains in the mediumtermwithoutthe intent of long-terminvestment to develop the business activities of the issuing company or to actively participate in its operational management. In theory, these are always variable-incomesecurities.This investmentactivity has to be significantand continuous,carried out in a structuredframework, and must generate regular returns derived primarily from capital gains on disposals. Equity securitiesavailablefor sale in the mediumterm are recognized at cost ontheir acquisitiondate, less transaction costs. On the balance sheet date, they are included in the balance sheet at the lower of historical cost or value in use. An impairmentcharge is recognized for any unrealized capital losses. Unrealized capital gains are not recognized. Securities recorded under equity securities available for sale in the medium termcannotbe transferred to anyother accountingcategory. Investments in associates and affiliates Securities falling within this category are securitieswhose long-term holdingis deemeduseful for the activityof the company,in particular by permittingthe exercise of significantinfluenceor control over the governance bodies of the issuing companies. Investmentsin associatesand affiliatesare recordedat cost, including transaction costs,if the amountsare significant. They are individuallyvalued at the balance sheet date at the lower of acquisition cost or value in use. Value in use is determined, in particular,on the basis of criteria such as the strategic nature of the investment, the intention to provide assistance or retain the investment,share price performance,net assets or revaluednet assets and forecasts. Impairment is recognized for any unrealized capital losses, calculated for each line of securities, and is not offset with unrealizedcapital gains. Unrealized capital gains are not recognized. Securities recorded under investments in associates and affiliates cannot be transferredto any other accounting category. Other long-term investments Other long-term investments are securities acquired with the intention of promoting the development of lasting business relationships,by creating special ties with the issuer, without taking an active part in its management due to the small percentage of voting rights that the investment represents.

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Registration document 2017