BPCE - 2018 Registration document

5 FINANCIAL REPORT

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

TRANSFERRED FINANCIAL ASSETS, OTHER FINANCIAL ASSETS PLEDGED AS COLLATERAL AND 5.19 ASSETS RECEIVED AS COLLATERAL THAT CAN BE SOLD OR REPLEDGED

Accounting principles A financial asset (or group of similar financial assets) is derecognized when the contractual rights to the asset’s future cash flows have expired or when such rights are transferred to a third party, together with virtually all of the risks and rewards associated with ownership of the asset. In such case, rights and obligations created or retained as a result of the transfer are recorded in a separate line under financial assets and liabilities. When a financial asset is derecognized, a gain or loss on disposal is recorded in the income statement reflecting the difference between the carrying amount of the asset and the consideration received. In the event that the Group has neither transferred nor retained virtually all of the risks and rewards, but has retained control of the asset, the asset continues to be recognized on the balance sheet to the extent of the Group’s continuing involvement. In the event that the Group has neither transferred nor retained virtually all of the risks and rewards and has not retained control of the asset, the asset is derecognized and all of the rights and obligations created or retained as a result of the transfer are recorded in a separate line under financial assets and liabilities. If all the conditions for derecognizing a financial asset are not met, the Group keeps the asset in the balance sheet and records a liability representing the obligations arising when the asset is transferred. The Group derecognizes a financial liability (or a part of a financial liability) only when it is extinguished, i.e. when the obligation specified in the contract is discharged, terminated or expires. Repurchase agreements Securities sold under repurchase agreements are not derecognized in the vendor’s accounts. A liability representing the commitment to return the funds received is identified and recognized under “Securities sold under repurchase agreements”. This debt is a financial liability recorded at amortized cost or at fair value through profit or loss when this liability is considered part of a trading business model. The assets received are not recognized in the purchaser’s books, but a receivable is recorded with respect to the vendor representing the funds loaned. The amount disbursed in respect of the asset is recognized under “Securities bought under repurchase agreements”. On subsequent balance sheet dates, the securities continue to be accounted for by the vendor in accordance with the rules applicable to the category in which they were initially classified. The receivable is valued according to methods specific to its category: at amortized cost when classified in “Loans and receivables,” or at fair value through profit or loss when it is considered part of a trading business model.

Outright securities lending Securities loaned under outright securities lending transactions are not derecognized in the vendor’s accounts. They continue to be recognized in their original accounting category and are valued accordingly. For the borrower, the securities borrowed are not recognized. Transactions leading to substantial changes in financial assets When an asset is subject to substantial changes (in particular following a renegotiation or a remodeling due to financial difficulties) there is derecognition, as the rights to the initial cash flows have essentially expired. The Group considers that this is the case for: changes leading to a change of counterparty, especially if the ● new counterparty has a very different credit quality than the previous counterparty; changes intended to move from a very structured to simple ● indexing, as the two assets are not exposed to the same risks. Transactions leading to substantial changes in financial liabilities A substantial change to the terms of a lending instrument must be recorded as the extinguishment of former debt and its replacement with a new debt. The amendment to IFRS 9 of October 12, 2017 clarified the treatment under IFRS 9 of modifications of liabilities recognized at amortized cost, if the modification does not result in derecognition: the profit or loss resulting from the difference between the original cash flows and the modified cash flows discounted at the original effective interest rate must be recognized in profit or loss. To assess the substantial nature of the change, IFRS 9 includes a threshold of 10% based on discounted cash flows, integrating potential costs and fees: when the difference is greater than or equal to 10%, all of the costs or fees incurred are recognized as profit or loss on debt extinguishment. The Group may consider other changes to be substantial, such as a change of issuer (even within the same group) or a change in currency.

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Registration document 2018