BPCE - 2018 Registration document

FINANCIAL REPORT IFRS Consolidated Financial Statements of Groupe BPCE as at December 31, 2018

3.2.3 Definition

Investments in joint activities

the settlement method, transferred considerations are recognized against: capital and later price revisions will not be booked, - or debts and later adjustments are recognized against income - (financial debts) or according to the appropriate standards (other debts outside the scope of IFRS 9); on an entity’s acquisition date, non-controlling interests may be ● valued: either at fair value (method resulting in the allocation of a share - of the goodwill to non-controlling interests), or at the share in the fair value of the identifiable assets and - liabilities of the entity acquired (method similar to that applicable to transactions prior to December 31, 2009). The choice between these two methods must be made for each business combination. Whatever method is chosen when the acquisition is made, increases in the percentage of interest in an entity already controlled are systematically recognized in capital: when an entity is acquired, any share previously held by the Group ● must be revalued at fair value through profit or loss. Consequently, in the event of a step acquisition, goodwill is determined by referring to the fair value at the acquisition date; when the Group loses control of a consolidated company, any share ● previously held by the Group must be revalued at fair value through profit or loss. All business combinations that occurred prior to the revisions of IFRS 3 and IAS 27 are accounted for by applying the purchase method, except business combinations involving two or more mutual insurers or entities under joint control, as these transactions were explicitly excluded from the scope of application. shareholders of fully-consolidated subsidiaries The Group has entered into commitments with minority shareholders of certain fully consolidated Group subsidiaries to buy out their shares. These buyback commitments are optional commitments (sales of put options). The exercise price for these options may be an amount fixed contractually, or may be established according to a calculation formula pre-defined upon the acquisition of the subsidiary’s securities taking into account its future activity, or may be set as the fair value of the subsidiary’s securities on the day on which the options are exercised. For accounting purposes, these commitments are treated as follows: pursuant to the provisions of IAS 32, the Group recognizes a ● financial liability with respect to the put options sold to minority shareholders in fully-consolidated entities. This liability is initially recognized at the discounted value of the put option exercise price under “Other liabilities”; the obligation to record a liability even though the put options are ● not exercised means, for purposes of consistency, that the same accounting treatment as that for transactions related to non-controlling interests must be applied. As a result, the corresponding entry for this liability is deducted from “Non-controlling interests” underlying the options and the balance is deducted from “Retained earnings, attributable to equity holders of the parent”; Buyback commitments with the minority 3.3.4

A joint activity is a partnership where parties that have joint control over an entity have direct rights over the assets, and obligations for liabilities, of this entity. Accounting treatment of joint activities An investment in a joint enterprise is accounted for by integrating all interests held in the joint activity, i.e. the entitled share in each asset and liability and item of income. These interests are allocated by nature to the various lines of the consolidated balance sheet, consolidated income statement and the statement of net income and gains and losses recognized directly in other comprehensive income. 3.3 The consolidated financial statements are prepared using uniform accounting policies for reporting similar transactions in comparable circumstances. Where material, consolidation adjustments are made to ensure the consistency of the measurement methods applied by consolidated entities. 3.3.1 The consolidated financial statements are expressed in euros. Balance sheet items of foreign subsidiaries and branches whose functional currency is not the euro are translated using the exchange rate in force at the balance sheet date. Income and expense items are translated at the average exchange rate for the period, which is the approximate value of the transaction price if there are no significant fluctuations. Foreign exchange rate adjustments arise from a difference in: net income for the period translated at the average rate and at the ● closing rate; equity (excluding net income for the period) translated at the ● historic exchange rate and at the year-end rate. The portion attributable to equity holders of the parent is recorded in equity under “Foreign exchange rate adjustments” and the portion attributable to minority shareholders under “Non-controlling interests”. 3.3.2 The impact of intercompany transactions on the consolidated balance sheet and consolidated income statement is eliminated. Dividends, as well as gains and losses on intercompany asset disposals, are also eliminated. Where appropriate, capital losses from asset disposals resulting in impairment are maintained. 3.3.3 In accordance with revised IFRS 3, “Business Combinations” and IAS 27, “Consolidated and Separate Financial Statements”: combinations between mutual insurers are included within the ● scope of IFRS 3; costs directly linked to business combinations are recognized in net ● income for the period; contingent considerations payable are included in the acquisition ● cost at their fair value at the date of acquisition of a controlling interest in an entity, even if they are only potential. Depending on CONSOLIDATION RULES Foreign currency translation Elimination of intragroup transactions Business combinations

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Registration document 2018