BPCE - 2019 Universal Registration Document

5

FINANCIAL REPORT

IFRS CONSOLIDATED FINANCIAL STATEMENTS OF BPCE SA GROUP AS AT DECEMBER 31, 2019

on a formally documented risk management or investment strategy, and information about the Group is also reported internally on a fair value basis. Hybrid financial instruments containing one or more embedded derivatives An embedded derivative is a component of a financial or non-financial hybrid (combined) instrument that qualifies as a derivative. It must be separated from the host contract and accounted for as a derivative if the hybrid instrument is not measured at fair value through profit or loss, and if the economic characteristics and risks associated with the derivative are not closely related to those of the host contract. The fair value option may be applied when the embedded derivative(s) substantially modify the cash flows of the host contract and when the separate recognition of the embedded derivative(s) is not specifically prohibited by IAS 39 ( e.g. an early redemption option at cost embedded in a debt instrument). The option allows the entire instrument to be measured at fair value, and therefore avoids the need to extract, recognize or separately measure the embedded derivative. This treatment applies in particular to certain financial instruments containing material embedded derivatives (convertible bonds, indexed bonds and structured securities).

Financial assets and liabilities designated at fair value through profit or loss The amendment to IAS 39 adopted by the European Union on November 15, 2005 allows entities to designate financial assets and liabilities at fair value through profit or loss on initial recognition. However, an entity’s decision to designate a financial asset or liability at fair value through profit or loss may not be reversed. Compliance with the criteria stipulated by the standard must be verified prior to any recognition of an instrument using the fair value option. In practice, this option may be applied only under the specific circumstances described below: Elimination of or significant reduction in an accounting mismatch Applying the option eliminates accounting mismatches stemming from the application of different valuation rules to instruments managed under a single strategy. This treatment applies in particular to unit-linked policy assets and liabilities. Harmonization of accounting treatment for management and performance measurement The option applies for a group of assets and/or liabilities managed and measured at fair value, provided that it is based

12/31/2019

12/31/2018

in millions of euros

UCITS

2,286 2,286

4,810 4,810

Financial assets held for trading

Trading derivatives

19

18

Bonds

2,026

1,501

Equities

507 277

195 171

UCITS

Investments backed by unit-linked policies Financial assets designated at fair value

18,152 20,962 23,267

15,320 17,187 22,014

TOTAL FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

CONDITIONS FOR DESIGNATING INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

12/31/2019

12/31/2018

Financial assets

Financial assets

Accounting mismatches

Fair value measurement

Embedded derivatives

designated at fair value

Accounting mismatches

Fair value measurement

Embedded derivatives

designated at fair value

in millions of euros

Bonds

645 507

1,381

2,026

762 195

739

1,501

Equities

507 277

195 171

UCITS

277

171

Investments backed by unit-linked policies

17,762 18,915

390

18,152 20,962

14,720 15,677

600

15,320 17,188

TOTAL

2,048

1,510

444

UNIVERSAL REGISTRATION DOCUMENT 2019 | GROUPE BPCE

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