BPCE - 2020 Universal Registration Document

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FINANCIAL REPORT

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

USE OF ESTIMATES AND JUDGMENTS 2.3 Preparation of the financial statements requires Management to make estimates and assumptions in certain areas with regard to uncertain future events. These estimates are based on the judgment of the individuals preparing these financial statements and the information available at the balance sheet date. Actual future results may differ from these estimates. With respect to the financial statements for the period ended December 31, 2020 in particular, accounting estimates requiring assumptions were mainly used for the following measurements: the fair value of financial instruments determined on the basis • of valuation models (Note 10); the amount of expected credit losses on financial instruments • as well as on loan and guarantee commitments (Note 7.1); the results of hedge effectiveness tests (note 5.3); • provisions recorded under liabilities in the balance sheet and • more specifically the provision for regulated home savings products (Note 5.13) and provisions for insurance policies (Note 9); calculations related to the cost of pensions and future • employee benefits (Note 8.2); uncertainties relating to the tax treatment of income taxes • (Note 11); deferred tax assets and liabilities (Note 11); • uncertainties related to the application of certain provisions • related to benchmarks (Note 5.20); goodwill impairment tests (Note 3.4.2). • Judgmentmust also be exercised to assess the businessmodel and the basic characteristics of a financial instrument. The procedures are described in the relevant paragraphs (Note 2.5.1).

The adoption of IFRS 16 led the BPCE SA group to extend its use of judgment to estimate the term of leases in order to recognize the right of use of lease assets and to record lease liabilities (Note 12.2.2). Uncertainties arising from the Covid-19 crisis are described in Note 1.5. BREXIT On June 23, 2016, the UK decided to leave the European Union (Brexit) following a referendum. After the triggering of Article 50 of the treaty on European Union on March 29, 2017, the United Kingdom and the 27 other member countries of the European Union gave themselves two years to prepare for the country’s effective withdrawal. The Brexit date was postponed three times and finally set at January 31, 2020. A transition period followed until December 2020, during which the future deal on goods and services was negotiated while existing European rules remained in force. On December 24, 2020, the United Kingdom and European Union reached an exit deal, which set out a framework for future trade once the transition period ended. However, the deal does not cover financial services. BPCE SA group therefore applied, as from January 1, 2021, the measures prepared for a no-deal Brexit, which had no material impact on its business. The two parties (UK and EU) gave themselves 3 months, until March 31, 2021, to negotiate specific rules for the financial sector. BPCE SA group is keeping a close eye on the outcome of these negotiations, in order to incorporate them, where necessary, in the assumptions and estimates used in preparing the consolidated financial statements. Lastly, the risk of European regulations not recognizing UK clearing houses is no longer a short-term risk. On September 21, 2020 ESMA announced an extension of the temporary equivalence period to June 30, 2022.

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UNIVERSAL REGISTRATION DOCUMENT 2020 | GROUPE BPCE

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