AFD - 2018 Registration document

AFD’S ANNUAL FINANCIALS STATEMENTS Accounting principles and assessment methods

ASSET RESTRUCTURING: Restructuring for the borrower’s financial difficulties results in a change to the terms of the initial contract to allow the borrower to contend with the financial difficulties it is having. If, in view of the change in the borrowing terms, the present value of these new expected future flows at the original effective interest rate of the asset is lower than its book value, a discount must be booked to bring the book value back to the new present value. At 31 December 2018, restructured loans had a balance of €109.9M. Discounts of €2.9M related to seven restructured loans were recognised. 7.2.4 Short-term and long-term investments Depending on the purpose of the transaction, the following rules apply: P Short-term investment securities intended to be held for six months or more are recorded at the date of their acquisition, at the purchasing price, excluding accrued interest. Premiums or discounts are amortised on an actuarial basis. At each monthly account closing, the coupon accrued since the last period is reported as income. Impairment for unrealised losses, calculated as the difference between book value and market price, is made monthly on a line-by-line basis, without offsetting unrealised gains. Unrealised gains are not shown in the financial statements. P Long-term investment securities (mainly bonds), purchased with the intention of holding them for a long time, until maturity, are recorded at the date of their acquisition, at the purchase price, excluding accrued interest. They may be subject to impairment in case of counterparty risk. Premiums or discounts (the difference between purchase price and redemption price) are spread on an actuarial basis over the residual life of the investment. At each monthly account closing, the coupon accrued since the last period is reported as income. AFD has secured resources allocated to funding its long-term securities investments. 7.2.5 Shares in related businesses, equity stakes and long-term investments SHARES IN RELATED BUSINESSES Shares in related businesses are those held in exclusively controlled companies that can be fully consolidated.

EQUITY STAKES These are securities for which long-term retention is deemed useful to the company’s activities, particularly because it enables influence or control to be exercised over the issuing company. This relates especially to interests that meet the following criteria: P interests in the form of securities issued by equity-accounted companies; P interests in companies with directors or managers who are also in the holding company, under terms that enable influence to be exercised over the company whose shares are held; P interests in companies belonging to the same Group controlled by individuals or corporate entities with control over the whole Group and thus demonstrating centralised decision-making; P interests representing over 10% of rights in the capital issued by a credit institution or a company that is in the same line of business as the holding company. OTHER LONG-TERM INVESTMENTS This category includes investments in securities designed to promote the development of lasting business relations by creating a special link with the issuing company, but with no influence on the management of the companies in which the shares are held given the small percentage of voting rights they represent. In view of its negligible impact, this last item is not included separately in the notes to the financial statements. For these three categories: P Shares are recorded at acquisition cost. Impairment is recorded when the estimated value, assessed according to the company’s net position and its prospects (which are estimated based on economic and financial information gathered on the company, particularly on conditions in its country) or its stock market valuation, as the case may be, is lower than the acquisition cost. P A 100% provision for foreign exchange loss is made in the case of conversion differentials if the currency concerned is devalued. P Dividends are recorded as income on receipt of the minutes of the general meetings held until 31 December of the financial year. Capital gains or losses on disposal of these shares are recorded under “gains or losses on fixed assets”. AFD also has interests in 26 companies via a number of managed funds (Cidom, Fides and Fidom) or via funds contributed by the French State. These holdings, recorded at cost, do not appear on the publishable off-balance sheet. Details of the amounts involved are provided in Note 35. These holdings, which were subscribed to on behalf of the French State with public funds made available to AFD, are not included in ownership or control percentages and are therefore not consolidated in the financial statements.

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REGISTRATION DOCUMENT 2018