BPCE - 2020 Universal Registration Document

FINANCIAL REPORT

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

INFORMATION ON LEASES

12.2 12.2.1

LEASES AS LESSOR

Accounting principles Leases are analyzed to determine whether in substance and economic reality they are operating leases or finance leases. Finance leases A finance lease is a lease that transfers to the lesseemost of the risks and rewards incidental to ownership of an asset. IFRS 16 gives five examples of situations that (individually or collectively) lead to a lease being classified as a finance lease: the lease transfers ownership of the asset to the lessee by • the end of the lease term; the lease provides the lessee with the option to purchase • the asset at a price that is expected to be sufficiently below the fair value at the date the option becomes exercisable for it to be reasonably certain, at the inception of the lease, that the option will be exercised; the lease term covers most of the economic life of the • asset even if there is no transfer of ownership; at the inception of the lease, the present value of lease • payments amounts to at least virtually all of the fair value of the leased asset; the leased assets are of such a specialized nature that only • the lessee can use them without major modifications. IFRS 16 also describes three indicators that may also individuallyor collectively lead to a lease being classified as a finance lease: if the lessee can cancel the lease, the lessor’s losses • associated with the cancellation are borne by the lessee; gains or losses from the change in the fair value of the • residual value accrue to the lessee; the lessee has the ability to extend the lease at a rent that • is substantially lower than the market rent. At the start of the contract, assets under finance leases are recorded in the lessor’s balance sheet in the form of a receivable equal to the net investment in the lease contract. The net investment corresponds to the amount of lease payments receivable from the lessee, discounted at the interest rate implicit in the lease plus any unguaranteed

residual value of the asset accruing to the lessor. More specifically, the lease payments used to calculate the net investment include fixed payments less any lease incentives payable and variable payments that depend on an index or rate. IFRS 16 requiresunguaranteedresidual values to be reviewed on a regular basis. A reduction in the estimatedunguaranteed residual value modifies the income allocation over the lease term. In this case, a new paymentscheduleis drawn up and a charge is recorded to adjust the amount of financial income already recorded. Any impairment recorded for counterpartyrisk on receivables in respect of finance leases is calculated in accordancewith IFRS 9 using the same method as for financial assets at amortizedcost (Note 5.5).This impairment is recordedon the income statement under “Cost of credit risk”. Finance lease income is considered to be interest and is recognized in the income statement under “Interest and similar income”. This income is recognizedusing the interest rate implicit in the lease, which reflects a constant periodic rate of return on the lessor’s net investment. The rate of return implicit in the lease is the discount rate that makes the following two items equal: the net investment; • and the initial value of the asset (the fair value at the • inception of the lease, plus any direct initial costs comprising expenses incurred specifically by the lessor to set up the lease). Operating leases A lease which is not considered to be a finance lease is classified as an operating lease. Assets provided under operating leases are shown in the balance sheet under property, plant and equipment or intangible assets in the case of equipment leases, and investment property in the case of property leases. Lease income from operating leases is recognized in the income statement on a straight-linebasis over the lease term, under “Income or expenses from other activities”.

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UNIVERSAL REGISTRATION DOCUMENT 2020 | GROUPE BPCE