BPCE - 2019 Universal Registration Document

FINANCIAL REPORT

STATUTORY AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS

Business combinations, and impairment tests of goodwill and intangible assets with finite lives

Risk identified and main judgments

Our response

External growth operations made by Groupe BPCE (including operations launched in 2019 mentioned in significant events in the financial statements) drive it to (i) appreciate the modalities of the exercise of control over the acquired entity in accordance with IFRS 10 “Consolidated Financial Statements” and (ii) allocate the purchase price in accordance with IFRS 3 “Business Combinations”. Following this purchase price allocation, the “surplus” remaining unallocated, corresponding to the residual identifiable net asset, accounted for in “goodwill”. These goodwills and the intangible assets acquired for which useful life is indefinite are subject to impairment tests at least each year, based on the appreciation of recoverable value of cash generating units (CGU) to which they are related, or as soon as an indication of an impairment loss appears. The determination of recoverable value relies on the discount of future cash flows of the CGU resulting from medium term plans established by entities and challenged by Groupe BPCE. We deemed that the treatment of business combinations and, goodwill and limited-life intangible assets impairment tests to be a key audit matter by their very nature as they require the exercise of judgment regarding the structuring assumptions used especially for the determination of economic scenarios, financial trajectories or discount levels. At December 31, 2019, the gross value of goodwill amounted to €5,290 million and accumulated impairment losses stood at €625 million. The terms of the impairment test implemented by BPCE as well as the key assumptions used to determine the recoverable value and sensitivities of the recoverable amounts are described in Note 3.5.2 to the consolidated financial statements.

With the help of our experts, we evaluated the procedure implemented by the Group to identify signs of potential impairment loss and carried out a critical review of the method used for implementing impairment tests. In particular, our work includes: comparison of assumptions and inputs with external sources; • review of the reasonableness of the medium-term plans • retained for each concerned entity involving: the confrontation with the strategic plan of the Group – approved by the governing bodies (supervisory or administrative) of the entities, the assessment of the consistency and reliability of the main – assumptions used to prepare the plans, particularly regarding the financial trajectories developed during past financial years and actually carried out, the analysis of the sensitivity to different valuation inputs – (equity, discount rate…); verification of the consistency of the disclosures published on • the results of these impairment tests; review of the assumptions underlying the purchase price • allocation of external growth operations of the period and review of related accounted schemes. Regarding the purchase price allocation of external growth operations made in 2019, we reviewed the related underlying assumptions

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UNIVERSAL REGISTRATION DOCUMENT 2019 | GROUPE BPCE