AFD_REGISTRATION_DOCUMENT_2017

AFD’S ANNUAL FINANCIAL STATEMENTS Statutory auditors’ report on the annual financial statements

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The determination of the collective provisions is based on the estimate of estimated residual losses (ERLs) based on qualitative and quantitative analyses of homogeneous credit portfolios obtained by type of borrower and country class. Individual provisions are determined on the basis of assumptions such as the counterparty’s financial position, the country risk associated with the counterparty, the valuation of any guarantees and expected future cash flows. As a result, there is a risk that the basis for the doubtful loans identified by AFD is not exhaustive and the provisions created do not adequately cover the credit risk of the loan portfolio. Consequently, we were of the opinion that the collective and individual provisioning of credit risk constitutes a key point of the audit because it is a significant area of accounting estimation that requires the exercise of the judgement of Management in the assumptions made. At 31 December 2017, AFD’s annual financial statements include €447 million for impairment of assets and €303 million in provisions for liabilities as indicated in Notes 2-3, 2-10, 3-3, 3-4, 3-15, 3-28 and 3-29 to the annual financial statements. P verified the consistency of data from the risk management systems with the accounting data. If the provision was calculated on a collective basis, we put in place the following substantive procedures: P verification of the comprehensiveness of the basis on which the calculation of the provision was made and assessment of the relevance of the assumptions of the provisioning model; P verification of the arithmetical accuracy of the calculations made; P assessment of the consistency of changes in provisions, receivables and the risk burden. When the provision was determined on an individual basis, our work consisted of: P testing the underlying assumptions and data used by Management to estimate impairments using credit file samples; P verifying the correct implementation of the decisions made during Risk Committee meetings. We also made sure that the downgrading rules for receivables were not changed compared to the previous year. Valuation of equity stakes Risks identified The Agence Française de Développement holds equity stakes as detailed in Notes 2.5, 5, 6, 8, 28 and 30 to the annual financial statements. These securities are recorded at their acquisition cost. These assets are impaired 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. Due to the limited availability of market data, the valuation of some of these financial instruments requires the exercise of judgement by management for the selection of the valuation method and parameters to be used. We considered the valuation of equity stakes to be a key point of the audit, given: P the significant impact from the choice of the valuation method on AFD’s results; P the sensitive nature of the parameters used for Management’s assumptions; P the significance of those amounts in the financial statements. Audit procedures implemented in response to risks identified In this context, our work consisted of: P reviewing all securities with an objective indicator of impairment to ensure the accuracy and completeness of the recorded impairments; P verifying the accounting / management reconciliation for the equity portfolio; P reconciling, on the basis of sampling, the valuation of securities with the external documentation that justified it. Verification of the management report and other documents addressed to the members of the Board of Directors We have also performed, in accordance with the professional standards applicable in France, the specific verification required by French law. Audit procedures implemented in response to risks identified To assess the reasonableness of the provisions created, we: P reviewed the process for evaluating the provisions and the internal control procedures governing them; P reviewed the governance of the provisioning processes;

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REGISTRATION DOCUMENT 2017

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