AFD - 2019 Universal registration document

CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH IFRS

Notes to the consolidated financial statements

Based on the criteria observed, the three management models for the classification and measurement of financial assets are: P the collection only model for contractual cash flows of financial assets; P the model based on the collection of contractual cash flows and the sale of financial assets; and P any other models, such as the sales only model. The method of accounting for financial assets resulting from the analysis of contractual clauses coupled with the qualification of the business model is presented in the diagram below:

P The management model The management model defines how the instruments used to generate cash flows are managed. The management model is identified at portfolio level, and not instrument by instrument, primarily by analysing and observing: P the performance reports submitted to the Group’s Senior Management; P the compensation policy for portfolio managers; P completed and anticipated asset sales (size, frequency, etc.).

Financial Assets (IAS 32)

Cash flow characteristics

Management model

Asset classes

Amortised cost

Collection of contractual flows

"SPPI (Solely Payment of Principal and Interest)"

Fair value through equity to EH LQFOXGHG LQ SURͤW RU ORVV in the future

Collection of contractual flows and sales

Debt securities

Fair value through P&L

Other

Non basic debt instruments and derivatives

Fair value through P&L

All management models

Non SPPI

Fair value or Option Fair Value through equity not to be UHF\FOHG LQ SURͤW RU ORVV

All management models

Equity securities

Non SPPI

6

flows to book value. The effect of subsequent reversal of the impairment is booked under net banking income. P Securities at amortised cost This category includes debt securities whose contractual characteristics are SPPI and whose business model is classified as “hold to collect”. They are recognised initially at market value plus transaction costs and then at amortised cost using the effective interest method, which includes the amortisation of premiums and discounts. Interest accrued on coupons that are not yet due are included at their balance sheet value under IFRS. These financial assets are subject to impairment under the conditions described in the paragraph below “Impairment of financial assets at amortised cost and at fair value through equity”.

a) Debt instruments at amortised cost Debt securities are measured at amortised cost if both of the following criteria are met: the contractual cash flows are solely payments of principal and interest on the principal amount outstanding and the business model is classified as “hold to collect”. This category of financial assets includes: P Loans and receivables Loans and receivables are initially recognised at market value plus transaction costs. In general, this is the amount originally paid (including related receivables). Loans and receivables are measured after their initial recognition at amortised cost based on the effective interest rate and may be subject to individual impairment whenever a default event has occurred after the grant of the loan with an impact on future projected asset cash flows and, is therefore, likely to generate measurable loss. These impairments are determined by comparing discounted cash

123

UNIVERSAL REGISTRATION DOCUMENT 2019