BPCE_REGISTRATION_DOCUMENT_2017

5 FINANCIAL REPORT

Statutory auditors’ report on the financial statements

Valuation of associates, equity interests and long-term investments

Risk identified and main judgements

Our response

As of December 31, 2017, associates, equity interests and long-term investmentsrecognized in BPCE SA’s financial statements amounted to € 23,816 million. The risk is mainly borne by the largest holdings (Natixis, Crédit Foncier, BPCE International, Banque Palatine and Holassure). The measurement of these securities has a material impact on the Company’sincome statement and is made by Financial Planning and Strategy onthe basis of theentities’business plans. As indicated in notes 2.3.3 and 3.4 to the financial statements,they are recognizedat their acquisitioncost and impaired on the basis of their valuein use. Estimating the value in use of these securities requires a significant degree of judgmentfrommanagementin terms of selectingthe items to consider depending on the investments in question; these items may correspondto past items and forecastitems (profitabilityoutlook and the economic environment,discountedmultiannual forecasts of expecteddividendflows, etc.) determinedon the basis of the strategic plan for the 2018-2020 period (TEC 2020). We deemed the correct measurementof equity interests to be a key audit matter, given the areas of judgment inherent to certain items, in particularthe likelihoodof achieving forecast results. As indicatedin notes 2.3.12 and 5.11 to the financialstatements,the Company’s tax expense includes corporate tax in relation to the tax consolidation group comprising the 14 Banques Populaires, the 16 Caisses d’Epargne and its subsidiaries (Crédit Foncier, Banque Palatine, BPCEInternational,BP Covered Bonds andBPCE SFH). The tax base of the tax consolidationgroup has significantlyreduced compared to December 31, 2016, in particular as a result of the applicationof decisions of the Conseil d’État (France’s highest public law court). We deemed the determinationof the tax expense to be a key audit matter due to: significant regulatory changes in France; ● significant change inthe tax base of the tax consolidation group. ● Tax Risk identified and main judgements

To assess the reasonablenessof the estimated value in use of equity interests, with the guidance of our experts we verified that the estimated values determined by management were based on an appropriate measurement method applied to correctly documented quantified data. Dependingon the securitiesin question, ouraudit work consisted in: examiningthe assumptionsand inputs used by comparingthem to ● external sources; examining the reasonablenessof the medium-termplans used for ● each entity inquestion, which entailed: comparingthese plans with the Group’s strategic plans validated - by the entities’ managementbodies (SupervisoryBoard or Board of Directors), evaluating the consistency and reliability of the main - assumptions used to develop the plans, particularly with regard to past years’ financialprojectionsand actual pastperformance, analyzing sensitivity to different valuation inputs (shareholders’ - equity, discount rates,etc.).

Our response

Our audit work on the tax base of the tax consolidationgroup mainly consisted in: analyzingthe change comparedto the previous year by taking into ● accountthe main impacts; examining the procedures and the controls carried out by ● managementon the overallprocess of producingthe tax returns. We gained an understandingof the regulatorychanges in France and assessed, with the guidance of our experts, the compliance of the calculation of the tax expense with these changes. We verified that the income tax expense had been properly allocated between the differentcontributors to the tax consolidation group.

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Registration document 2017