BPCE_REGISTRATION_DOCUMENT_2017

5 FINANCIAL REPORT

BPCE parent company financial statements

Accrued interest payable on subordinateddebt is disclosedseparately as a related payable, as a balancing entry to the income statement entry. 2.3.7 This item includes provisionsset up to cover contingenciesand losses that are clearly identifiable but of uncertain timing or amount, that are either directly related or unrelated to banking transactions as defined under Article L. 311-1 of the French Monetary and Financial Code or from related transactions defined under Article L. 311-2 of the Code. Unless covered by a specific text, such provisionsmay only be recognizedif the companyhas an obligationto a third party at the end of the fiscal year and no equivalentconsiderationis expected in return, inaccordance withANC regulationNo. 2014-03. In particular, this item includes a provision for potential employee liabilitiesand a provision for counterparty risk. Employee benefits Provisions for employee benefits are recognized in accordance with ANC recommendation No. 2013-R-02. Employee benefits are classified into four categories: SHORT-TERM EMPLOYEE BENEFITS Short-term employee benefits mainly include wages, paid annual leave, incentive schemes, profit-sharing,and bonuses payable within 12 months of the end of the period in which the employee renders the service. They are recognized as an expense for the period, including amountsremainingdue at the balancesheet date. LONG-TERM EMPLOYEE BENEFITS Long-term employee benefits are generally linked to seniority accruing to current employees and payable 12 months or more after the end of the period in which the employee renders the related service.These consistmainly of long-serviceawards.A provisionis set aside for the valueof these obligationsat the balance sheet date. The obligations are valued using an actuarial method that takes account of demographic and financial assumptions such as age, length of service, the likelihood of the employee being employed by the Group at retirement and the discount rate. The valuation also allocates costs over the working life of each employee(projectedunit credit method). TERMINATION BENEFITS Terminationbenefitsare grantedto employeeson terminationof their employmentcontract before the normal retirement date, either as a result of a decisionby the Group to terminatea contractor a decision by an employee to accept voluntary redundancy. A provision is set aside for termination benefits. Termination benefits payable more than 12 months after the balance sheet date are discounted to present value. POST-EMPLOYMENT BENEFITS Post-employment benefits include lump-sum retirement bonuses, pensions and otherpost-employmentbenefits. These benefits can be broken down into two categories: defined-contributionplans, which do not give rise to an obligationfor the Group, and defined-benefitplans, which give rise to an obligation for the Group and are therefore measured and recognized by means of a provision. The Group records a provision in liabilities for employee benefit obligations that are not funded by contributionscharged to income and paidout to pension funds or insurance companies. Provisions

Post-employment benefits are measured in the same way as long-term employee benefits. The measurement of these obligations takes into consideration the value of plan assets as well as unrecognized actuarial gains and losses. Actuarial gains and losses on post-employmentbenefits, arising from changes in actuarial assumptions (early retirement, discount rate, etc.) or experience adjustments (return on plan assets, etc.) are amortizedunder the corridor method, i.e. for the portion exceedinga variation of +/-10% of the defined-benefit obligation or the fair value of planassets. The annual expense recognized in respect of defined-benefit plans includes the current service cost, net interest cost (the effect of discountingthe obligation)less hedging assets, and the amortization of any unrecognized items that are actuarial gains or losses. 2.3.8 This fund is intendedto cover risks inherentto the company’sbanking activities, in accordance with the provisions of Article 3 of CRBF regulation No. 90-02. It also includes the amounts allocated to the funds set up as part of the guaranteemechanism(see Note 1.2). 2.3.9 Trading and hedging transactionsin interest rate, currency or equity futures are recognized in accordance with the provisions of ANC regulation No. 2014-07. Commitmentson these instrumentsare recordedas off-balancesheet items at the notional value of the contracts. At the balance sheet date, the amount recognized for these commitments represents the volume of unwoundforward transactions at the balance sheet date. The accounting policies applied vary depending on the type of instrument and the original purpose of the transaction. Forward transactions Interest rate swaps and similar contracts (forward rate agreements, collars, etc.) are classified as follows according to their initial purpose: micro-hedging (assignedhedges); ● macro-hedging (overall asset and liability management); ● speculative positions/isolated open positions; ● for use witha trading book. ● Amounts received or paid in respect of the first two categories are recognized inincome on a pro rata basis. Incomeandexpensesrelatedto instruments usedforhedgingan assetor a groupof similarassetsare recognizedin incomesymmetricallywith the incomeand expensesfromthe hedgeditem.Gainsand losseson hedging instrumentsare recognizedin the same line item as the income and expensesfromthe hedgeditem,under“Interestand similarincome”and “Interestand similar expenses”.The line item “Net gains or losses on trading book transactions”is used when the hedged items are in the trading book. In the event of characteristicoverhedging,a provision may be made for the hedging instrument, for the overhedged portion, if the instrument shows an unrealized loss. In this case, the charge to provisions will affect “Net gains or losses on trading book transactions”. Fund for general banking risks Financial futures

476

Registration document 2017