AFD - 2019 Universal registration document

CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH IFRS

Notes to the consolidated financial statements

Gains or losses on fi nancial instruments Gains or losses on fi nancial instruments at fair value through pro fi t and loss Income from financial instruments recognised at fair value through profit and loss is recognised under this heading and mainly includes: P dividends, other revenues and gains and losses realised; P changes in fair value; P the impact of hedge accounting. Gains and losses on fi nancial instruments at fair value through equity Income from financial instruments recognised at fair value through shareholders’ equity is recognised under this heading and includes: P dividends and other revenues; P gains and losses realised on financial assets at fair value through transferable shareholders’ equity. 6.2.3.2.4 Commitments to buy back minority interests In 2008 and again in 2014, during the Proparco capital increase, the Group made commitments to buy back the interests of Proparco’s minority shareholders. The strike price is defined contractually depending on the restated net asset value on the option exercise date. In the 2019 financial statements, these commitments led to a debt of €90.6M to the minority shareholders of Proparco, with a corresponding entry of an increase in “minority interests” in the amount of €3.0M and a decrease in “Consolidated reserves – Group Share” of €93.7M. The new window has been open since September Ǿ 2019 and closes in September Ǿ 2024. 6.2.3.2.5 Fixed assets Fixed assets appearing on AFD’s balance sheet include property, plant and equipment and intangible assets. Fixed assets are recorded at their acquisition cost plus directly-related expenses. If a fixed asset consists of a number of items that may be regularly replaced and have different useful lives, each item is booked separately according to its own depreciation table. This item-by-item approach has been used for the headquarters building.

Given the low volume of loans within the AFD Group, and the low default portfolio nature of certain portfolios, the AFD Group does not have a collection of internal historic defaults that are sufficiently representative of the economic reality of the operating regions of the Group’s entities. Forthesereasons,theAFDGrouphasselectedanapproachbased on rating transitions and default probabilities communicated by the rating agencies. It may be necessary to adjust the external transition matrices that serve as the basis for measuring the probability of default in order to correct some irregularities that might affect the consistency of default probabilities. Loss given default (LGD) Loss given default is modelled for assets in all three stages. The AFD Group has taken into account the collateral valuation in the LGD modelling. In view of AFD’s business model and its debt recovery capacity, the AFD Group uses internal recovery data models based on the coverage ratios of doubtful debts and factoring in the likelihood of recovery. Exposure at default (EAD) Exposure at default reflects the amount of debt outstanding at the time of default and thus takes future cash flows and forward looking factors into account. As such, EAD takes into account: P the contractual amortisation of the principal; P elements of drawdowns of lines recognised off-balance sheet; P any early repayments. Restructuring of fi nancial assets Restructuring for the borrower’s financial difficulties results in a change to the terms of the initial agreement to allow the borrower to contend with the financial difficulties it is having. If the restructuring does not result in derecognition of the assets and the changes in terms are such that the present value of these new expected future flows at the original effective interest rate of the asset is lower than its book value, a discount must be recognised under “Cost of credit risk” to bring the book value back to the new present value.

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UNIVERSAL REGISTRATION DOCUMENT 2019