BPCE - 2018 Registration document

5 FINANCIAL REPORT

Statutory Auditors’ report on the financial statements

Valuation of associates, equity interests and long-term investments

Risk identified and main judgments

Notre réponse

As of December 31, 2018, associates, equity interests and long-term investments recognized in BPCE SA’s financial statements amounted to € 23,518 million. The risk is mainly borne by the largest holdings (Natixis, Crédit Foncier, BPCE International, Banque Palatine and Holassure). The measurement of these securities has a material impact on the Company’s income statement and is made by Financial Planning and Strategy on the basis of the entities’ business plans. As indicated in notes 2.3.3 and 3.4 to the financial statements, they are recognized at their acquisition cost and impaired on the basis of their value in use. Estimating the value in use of these securities requires a significant degree of judgment from management in terms of selecting the items to consider depending on the investments in question; these items may correspond to past items and forecast items (profitability outlook and the economic environment, discounted multiannual forecasts of expected dividend flows, etc.) determined on the basis of the strategic plan for the 2018-2020 period (TEC 2020). We deemed the correct measurement of equity interests to be a key audit matter, given the areas of judgment inherent to certain items, in particular the likelihood of achieving forecast results.

To assess the reasonableness of the estimated value in use of equity interests, with the guidance of our experts we verified that the estimated values determined by management were based on an appropriate measurement method applied to correctly documented quantified data. Depending on the securities in question, our audit work consisted in: examining the assumptions and inputs used by comparing them to ● external sources; examining the reasonableness of the medium-term plans used for ● each entity in question, which entailed: comparing these plans with the Group’s strategic plans validated - by the entities’ management bodies (Supervisory Board or Board of Directors), evaluating the consistency and reliability of the main - assumptions used to develop the plans, particularly with regard to past years’ financial projections and actual past performance, analyzing sensitivity to different valuation inputs (shareholders’ - equity, discount rates, etc.).

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Registration document 2018