BPCE - 2018 Registration document

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

Equity instruments designated at fair value through other comprehensive income

Accounting principles Equity instruments designated at fair value through other comprehensive income can include: investments in associates; ● shares and other equity securities. ● On initial recognition, equity instruments designated at fair value through other comprehensive income are carried at fair value plus any transaction costs. On following accounting dates, changes in the fair value of the instrument are recognized in other comprehensive income (OCI). These changes in fair value that accrue to other comprehensive income will not be reclassified to income in subsequent years (other comprehensive income not recyclable to income). Only dividends are recorded in income when they fulfill the required conditions.

12/31/2018

01/01/2018

Dividends recognized over the per50

iod Derecognition over the period

Equity instruments held at the end of the period

Total profit or loss at the disposal date

Fair value at the disposal date

Fair value

Fair value

in millions of euros

Investments in associates

2,167

107

42 18 60

(4) (5) (9)

2,098

Shares and other equity securities

513

12

431

5

TOTAL*

2,680

119

2,529

The total amount of changes in fair value reclassified to “Retained earnings” during the period that was related to disposals was -€9 million for fiscal year 2018. *

5.5

ASSETS AT AMORTIZED COST

Accounting principles Assets at amortized cost are SPPI financial assets managed under a hold to collect business model. Most loans originated by the Group are classified in this category. Information about credit risk is provided in Note 7.1. Financial assets at amortized cost include loans and receivables due from credit institutions and customers as well as securities at amortized cost such as treasury bills and bonds. Loans and receivables are initially recorded at fair value plus any costs directly related to their issuance, less any proceeds directly attributable to issuance. On subsequent balance sheet dates, they are measured at amortized cost using the Effective Interest method. The effective interest rate is the rate that exactly discounts estimated future cash flows (payments or receipts) to the carrying amount of the loan at inception. This rate includes any discounts recorded in respect of loans granted at below-market rates, as well as any external transaction income or costs directly related to the issue of the loans, which are treated as an adjustment to the effective yield on the loan. No internal cost is included in the calculation of amortized cost. When loans are extended under conditions that are less favorable than market conditions, a discount corresponding to the difference between the nominal value of the loan and the sum of future cash

flows discounted at the market interest rate is deducted from the nominal value of the loan. The market interest rate is the rate applied by the vast majority of local financial institutions at a given time for instruments and counterparties with similar characteristics. Loan renegotiations and restructuring IFRS 9 requires that modified contracts for financial assets that are renegotiated, restructured or adjusted (whether due to financial hardship or not), but not subsequently derecognized, be identified. Any profit or loss must be recognized as income in the event of modification. The gross carrying amount of the financial asset must be recalculated so that it is equal to the present value of renegotiated or amended contractual cash flows at the original effective interest rate. The materiality of the modifications is, however, analyzed on a case by case basis. The treatment of loans restructured due to financial hardship is identical to IAS 39: a discount is applied to loans restructured (impaired, Stage 3) following a credit loss event as defined by IFRS 9, to reflect the difference between the present value of the contractual cash flows expected at inception and the present value of expected principal and interest repayments after restructuring. The discount rate used is the original effective interest rate. This discount is expensed to “Cost of credit risk” in the income statement and offset against the corresponding item on the balance sheet.

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Registration document 2018