BPCE - 2019 Universal Registration Document

5

FINANCIAL REPORT

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

11.2

DEFERRED TAX ASSETS AND LIABILITIES

Accounting principles Deferred tax assets and liabilities are recognized when temporary differences arise between the carrying amount of assets and liabilities on the balance sheet and their tax base, irrespective of when the tax is expected to be recovered or settled. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability settled based on tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax liabilities and assets are offset at the level of each tax entity. The tax entity may either be a single entity or a tax consolidation group. Deferred tax assets are recognized only to the extent that it is probable that the entity will be able to recover them in the foreseeable future.

Deferred tax assets and liabilities are recognized as tax income or expense in the income statement, except for those related to: revaluation differences on post-employment benefits; • unrealized gains and losses on financial assets at fair value • through other comprehensive income; and changes in the fair value of derivatives used as cash flow • hedges; for which the corresponding deferred tax assets and liabilities are recognized as unrealized gains and losses directly in other comprehensive income. Deferred tax assets and liabilities are not discounted to their present value.

Deferred tax assets and liabilities on temporary differences arise from the recognition of the items listed in the statement below (positive figures indicate deferred tax assets, while negative figures in brackets represent deferred tax liabilities):

12/31/2019

12/31/2018

in millions of euros

Unrealized capital gains on UCITS

23

20

Fiscal EIGs

(85)

(87) 121

Provisions for employee-related liabilities Provisions for regulated home savings products Non-deductible impairment for credit risk

40

1

1

60 75

36

Other non-deductible provisions

364 (39)

Changes in fair value of financial instruments recorded in equity

(12)

(337) (235) 1,704 (837)

(740) (324) 2,244

Other sources of temporary differences (1) Deferred tax related to timing differences

Deferred tax arising on the capitalization of tax loss carryforwards

Unrecognized deferred tax assets and liabilities NET DEFERRED TAX ASSETS AND LIABILITIES

(1,283)

632

637

Recognized As assets in the balance sheet As liabilities in the balance sheet

1,971

1,578

(1,339) (941) A deferred tax liability of €347 million was recognized at December 31, 2019 (€336 million at December 31, 2018) on certain goodwill items recorded in the United States giving (1) rise to tax amortization over 15 years.

Deferred tax assets on tax losses amounted to €831 million at December 31, 2019, including €641 million in tax losses recognized on the Natixis France tax consolidation group. The tax loss base recognized on this tax consolidation group is €2,455 million, out of total tax-loss carryforwards of €4,350 million. Natixis conducted tests measuring the impact of a +/-10% variation in NBI growth forecasts included in its tax business plans. These tests confirmed that Natixis is able to deduct future tax gains from tax losses subject to deferred tax assets. The balance of deferred tax assets on tax losses recognized at December 31, 2019 stood at €190 million, including €47 million in the United States.

In accordance with the 2019 Finance Act in France, Groupe BPCE remeasured its net deferred tax assets and liabilities; Deferred tax assets and liabilities of French companies are calculated by applying the tax rate that will be in force when the temporary difference is reversed. Tax rates will be gradually lowered through to 2022 (including the social security contribution on profits), from 32.02% in 2020 to 28.41% in 2021 to 25.83% in 2022 and thereafter for taxable profit taxed at the normal rate. At December 31, 2019, deductible temporary differences, tax losses and unused tax credits for which no deferred tax asset has been recorded in the balance sheet amounted to €837 million.

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UNIVERSAL REGISTRATION DOCUMENT 2019 | GROUPE BPCE

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