BPCE - 2018 Registration document

5 FINANCIAL REPORT

BPCE parent company annual financial statements

Reclassifications from the “available-for-sale securities” category to the “debt securities held to maturity” category are effective as from the reclassification date in either of the following conditions: under exceptional market circumstances necessitating a change of ● strategy; where fixed-income securities are no longer tradable on an active ● market. It should be noted that in its March 23, 2009 press release, the Conseil national de la comptabilité (CNC – French National Accounting Board) specified that “the possibility of portfolio transfers, in particular from available-for-sale securities portfolios to held-to-maturity securities portfolios as specified under Article 19 of CRBF Regulation No. 90-01 before it was updated by CRC Regulation No. 2008-17, remains in force and is not repealed by ANC Regulation No. 2014-07. As CRC Regulation No. 2008-17, replaced by ANC Regulation No. 2014-07, provided for additional possibilities of transfers between portfolios, these new transfer possibilities are added, as of the regulation’s effective date of July 1, 2008, to those previously defined”. As a consequence, reclassification of the available-for-sale securities portfolio as a held-to-maturity portfolio remains possible through a simple change of intention if, on the day of the transfer, all of the criteria for a held-to-maturity portfolio are met. 2.3.4 Accounting rules for intangible assets and property, plant and equipment are defined by ANC Regulation No. 2014-03. Intangible assets An intangible asset is an identifiable non-monetary asset without physical substance. Intangible assets are recorded at cost (purchase price including costs). These assets are amortized over their estimated useful lives. In particular, software is amortized over a maximum period of five years. Any additional amortization that may be applied to software using the accelerated method permitted for tax purposes is recorded, where applicable, under accelerated amortization. Goodwill is not amortized but is subject, as appropriate, to impairment tests. Leasehold rights are amortized on a straight-line basis over the residual term of the lease and, if necessary, are tested for impairment relative to market value. Property, plant and equipment Property, plant and equipment consists of tangible assets that (a) are held for use in the production or supply of goods and services, for rental to others or for administrative purposes; and (b) are expected to be used during more than one fiscal year. Insofar as buildings are assets consisting of a number of components that have different uses at the outset, each component is recognized separately at cost and a depreciation schedule specific to each component is used. The depreciable amount is the gross value less the residual value where the latter is material, lasting and can be measured reliably. Other property, plant and equipment is recorded at cost, production cost or revalued cost. The cost of assets denominated in foreign currencies is translated into euro at the exchange rate prevailing on Intangible assets and property, plant and equipment

the transaction date. These assets are depreciated or amortized in order to reflect the pattern in which the asset’s future economic benefits are expected to be consumed by the entity, which generally corresponds to the asset’s useful life.

Where applicable, assets may be subject to impairment. Investment property corresponds to non-operating assets.

Debt securities 2.3.5 Debt securities are presented based on the nature of the underlying: retail certificates of deposit, interbank and negotiable debt securities, bonds and other debt securities, apart from subordinated debt, which is recorded separately in a specific line item under liabilities. Accrued interest on these instruments is disclosed separately as a related payable, as a balancing entry to the income statement entry. Issue premiums are recognized in their entire amount during the period or are spread out on a straight-line basis over the life of the debt. Issue and redemption premiums are spread out on a straight-line basis over the life of the debt via a deferred expenses account. For structured debt, applying the principle of prudence, only the certain portion of remuneration or principal is recognized. Unrealized gains are not recorded. Unrealized losses are subject to a provision. 2.3.6 Subordinated debt comprises proceeds from issues of subordinated debt securities, both term and perpetual subordinated debt, together with mutual guarantee deposits. In the event of liquidation of the debtor, the repayment of subordinated debt is only possible after all other creditors have been satisfied. Accrued interest payable on subordinated debt is disclosed separately as a related payable, as a balancing entry to the income statement entry. 2.3.7 This item includes provisions set up to cover contingencies and losses that are clearly identifiable but of uncertain timing or amount, that are either directly related or unrelated to banking transactions as defined under Article L. 311-1 of the French Monetary and Financial Code or from related transactions defined under Article L. 311-2 of the same Code. Unless covered by a specific text, such provisions may only be recognized if the company has an obligation to a third party at the end of the fiscal year and no equivalent consideration is expected in return, in accordance with ANC Regulation No. 2014-03. In particular, this item includes a provision for potential employee liabilities and a provision for counterparty risk. Employee benefits Employee benefits are recognized in accordance with ANC recommendation No. 2013-R-02. They are classified into four categories: SHORT-TERM EMPLOYEE BENEFITS Short-term employee benefits mainly include wages, paid annual leave, incentive schemes, profit-sharing, and bonuses payable within 12 months of the end of the period in which the employee renders the service. They are recognized as an expense for the period, including amounts remaining due at the balance sheet date. Subordinated debt Provisions

558

Registration document 2018