BPCE - 2018 Registration document

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

The provisions of IAS 39 on the derecognition of financial assets and liabilities remain unchanged in IFRS 9. 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. 2.5.2 The method used to account for assets and liabilities relating to foreign currency transactions entered into by the Group depends upon whether the asset or liability in question is classified as a monetary or a non-monetary item. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency of the Group entity on whose balance sheet they are recognized, at the exchange rate prevailing at the balance sheet date. All resulting foreign exchange gains and losses are recognized in income, except in two cases: Foreign currency transactions

only the portion of the foreign exchange gains and losses calculated ● based on the amortized cost of financial assets at fair value through other comprehensive income is recognized in income, with any additional gains and losses being recognized in “Gains and losses recognized directly in other comprehensive income”; foreign exchange gains and losses arising on monetary items ● designated as cash flow hedges or as part of a net investment in a foreign operation are recognized in “Gains and losses recognized directly in other comprehensive income”. Non-monetary assets carried at historical cost are translated using the exchange rate prevailing at the transaction date. Non-monetary assets carried at fair value are translated using the exchange rate in effect at the date on which the fair value was determined. Foreign exchange gains and losses on non-monetary items are recognized in income if gains and losses relating to the items are recorded in income, and in “Gains and losses recognized directly in other comprehensive income” if gains and losses relating to the items are recorded in “Gains and losses recognized directly in other comprehensive income”. A structured entity frequently exhibits some or all of the following characteristics: well-defined activities; (a) a specific and well-defined aim, for example: implementing a (b) lease eligible for favorable tax treatment, carrying out research and development, providing an entity with a source of capital or funding, or providing investors with investment options by transferring associated risk and advantages to the structured entity’s assets; insufficient equity for the structured entity to finance its (c) activities without subordinated financial support; financing through the issue, to investors, of multiple instruments (d) inter-related by contract and which create concentrations of credit risk or other credit (“tranches”). The Group therefore considers, among others, collective investment vehicles within the meaning of the French Monetary and Financial Code and equivalent bodies governed by foreign law as structured entities. Full consolidation method The full consolidation of a subsidiary in the Group’s consolidated financial statements begins at the date on which the Group takes control and ends on the day on which the Group loses control of this entity. The portion of interest which is not directly or indirectly attributable to the Group corresponds to a non-controlling interest. Income and all components of other comprehensive income (gains and losses recognized directly in other comprehensive income) are divided between the Group and non-controlling interests. The comprehensive income of subsidiaries is divided between the Group and non-controlling interests, including when this division results in the allocation of a loss to non-controlling interests.

Note 3

Consolidation

3.1

SCOPE OF CONSOLIDATION – CONSOLIDATION AND VALUATION METHODS

5

The Group’s financial statements include the financial statements of all the entities over which it exercises control or significant influence, whose consolidation had a material impact on the aforementioned financial statements. The scope of entities consolidated by Groupe BPCE is described in Note 13 – Scope of consolidation. 3.1.1 The subsidiaries controlled by BPCE SA group are fully consolidated. Definition of control Control exists when the Group has the power to govern an entity’s relevant activities, when it is exposed to or is entitled to variable returns due to its links with the entity and has the ability to exercise its power over the entity to influence the amount of returns it obtains. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing the control exercised. These potential voting rights may result, for example, from share call options traded on the market, debt or equity instruments that are convertible into ordinary shares, or equity warrants attached to other financial instruments. However, potential voting rights are not taken into account to calculate the percentage of ownership. Exclusive control is presumed to exist when the Group holds directly or indirectly either the majority of the subsidiary’s voting rights, or at least half of an entity’s voting rights and a majority within the management bodies, or is in a position to exercise significant influence. Specific case of structured entities Entities described as structured entities are those organized in such a way that voting rights are not a key criterion when determining who has control. This is the case in particular when voting rights only apply to administrative duties and relevant activities are managed through contractual agreements. Entities controlled by the Group

433

Registration document 2018