BPCE - 2020 Universal Registration Document

5

FINANCIAL REPORT

IFRS CONSOLIDATED FINANCIAL STATEMENTS OF GROUPE BPCE AS AT DECEMBER 31, 2020

12/31/2020

12/31/2019

Dividends recognized over the period Equity instruments held at the end of the period

Dividends recognized over the period Equity instruments held at the end of the period

Derecognition over the period

Derecognition over the period

Total profit or loss at the disposal date

Total profit or loss at the disposal date

Fair value at the disposal date

Fair value at the disposal date

Fair value

Fair value

in millions of euros

Investments in associates

2,794

133

18

(31)

2,631

153

232 175 407

124 (14) 110

Shares and other equity securities

586

6

458

17

TOTAL

3,380

139

18

(31)

3,089

170

Investments in associates include strategic holdings, “tool” entities ( e.g . IT) and certain long-term private equity securities. As these securities are not held for sale, their classification as equity instruments designated at fair value through other comprehensive income is appropriate.

The cumulative amount of changes in fair value reclassified to “Retained earnings” during the period relates primarily to the liquidation of non-consolidated securities in the amount of €31 million in 2020.

5.5

ASSETS AT AMORTIZED COST

Accounting principles Assets at amortized cost are SPPI financial assets managed under a hold to collect businessmodel. Most loans originated by the Group are classified in this category. Informationabout credit risk is provided in Note 7.1. Financial assets at amortized cost include loans and receivables due from banks and customers as well as securities at amortized cost such as treasury bills and bonds. Loans and receivables are initially recorded at fair value plus any costs and less any income directly related to the arrangement of the loan or to the issue. When loans are extended under conditions that are less favorable than market conditions,a discount correspondingto the differencebetween the nominal value of the loan and the sum of future cash flows discounted at the market interest rate is deducted from the nominal value of the loan. The market interest rate is the rate applied by the vast majority of local financial institutions at a given time for instrumentsand counterparties with similar characteristics. On subsequentbalancesheet dates, these financial assets are measured at amortized cost using the effective interest method. The effective interest rate is the rate that exactly discounts estimated future cash flows (payments or receipts) to the carryingamountof the loan at inception.This rate includesany discounts recorded in respect of loans granted at below-market rates, as well as any external transaction income or costs directly related to the implementationof the loans, which are treated as an adjustment to the effective yield on the loan. No internal cost is included in the calculation of amortized cost.

Loan renegotiations and restructuring When contracts are modified, IFRS 9 requires the identification of financial assets that are renegotiated, restructured or otherwisemodified (whetheror not as a result of financial hardship),but not subsequentlyderecognized.Any profit or loss arising from the modification of a contract is recognized in income. The gross carrying amount of the financial asset must be recalculated so it is equal to the present value of the renegotiated or amended contractual cash flows at the initial effective interest rate. The materiality of the modificationsis, however, analyzed on a case by case basis. "Restructured" amounts correspond to loans where an arrangementhas been reached that represents a concession to debtors in financial hardship or in danger of being so. "Restructured" amounts therefore require a combination of two elements: a concession and financial difficulties. To qualify as a "restructuring",an arrangementmust result in a more favorable situation for the debtor ( e.g. suspended paymentsof interest or principle,extensionof maturities, etc .) and take the form of additional clauses to an existing contract or the full or partial refinancing of an existing loan. Financial difficultyis measuredby a numberof criteria, such as payments more than 30 days past due or an at-risk classification. The arrangement of a restructuring does not necessarilymean the counterpartyin question is classed as in default by Basel standards. Whether they are classed as in default depends on the viability test carried out during the counterparty's restructuring.

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UNIVERSAL REGISTRATION DOCUMENT 2020 | GROUPE BPCE

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