BPCE - 2020 Universal Registration Document

FINANCIAL REPORT

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

application of different valuation rules to instruments managed under a single strategy. Embedded derivatives are no longer recognized separately to their host contract when these are financial assets, such that the entire hybrid instrument must now be recognized at fair value through profit or loss when it does not meet the SPPI criterion. For financial liabilities, the classification and measurement rules set out in IAS 39 are carried forward to IFRS 9 unchanged, with the exception of those applicable to financial liabilities that the entity chooses to record at fair value through profit or loss (fair value option), for which revaluation adjustments related to changes in own credit risk are recorded under gains and losses recognized directly in other comprehensive income, without being subsequently reclassified through profit or loss. The provisions of IAS 39 on the derecognitionof financial assets and liabilities remain unchanged in IFRS 9. The amendment to IFRS 9 of October 12, 2017 clarified the treatment under IFRS 9 of modifications of liabilities recognized at amortized cost if the modification does not result in derecognition: the profit or loss resulting from the difference between the original cash flows and the modified cash flows discounted at the original effective interest rate must be recognized in profit or loss. 2.5.2 The method used to account for assets and liabilities relating to foreign currency transactions entered into by the Group depends upon whether the asset or liability in question is classified as a monetary or a non-monetary item. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency of the Group entity on whose balance sheet they are recognized, at the exchange rate prevailing at the balance sheet date. All resulting foreign exchange gains and losses are recognized in income. However, there are two exceptions to this rule: only the portion of the foreign exchange gains and losses • calculated based on the amortized cost of financial assets at fair value through other comprehensive income is recognized in income, with any additional gains and losses being recognized in “Gains and losses recognized directly in other comprehensive income”; foreign exchange gains and losses arising on monetary items • designated as cash flow hedges or as part of a net investment in a foreign operation are recognized in “Gains and losses recognized directly in other comprehensive income”. Non-monetary assets carried at historic cost are translated using the exchange rate prevailing at the transaction date. Non-monetary assets carried at fair value are translated using the exchange rate in effect at the date on which the fair value was determined. Foreign exchange gains and losses on non-monetary items are recognized in profit or loss if gains and losses relating to the items are recorded in profit or loss, and in “Gains and losses recognized directly in other comprehensive income” if gains and losses relating to the items are recorded in “Gains and losses recognized directly in other comprehensive income”. TRANSACTIONS IN FOREIGN CURRENCIES

Financial assets that generate SPPI are debt instruments such as fixed-rate loans, floating-rate loans without an interest rate tenor mismatch or that are not linked to a security or to a market index, and fixed-rate or floating-rate debt securities. Non-SPPI financial assets include UCITS units and convertible bonds and mandatory convertible bonds with a fixed conversion ratio and structured loans to local authorities. To qualify as SPPI assets, the securities held in a securitization vehicle must meet specific conditions. The contractual terms of the tranchemust meet the SPPI criterion. The pool of underlying assets must meet the SPPI conditions. The risk inherent in the tranche must be lower than or equal to the exposure to the vehicle’s underlying assets. A non-recourse loan ( e.g. infrastructure financing-type project financing) is a loan secured only by physical collateral. If there is no possible recourse to the borrower, the structure of other possible recourses or protection mechanisms for the lender in the event of default must be examined in order to categorize these loans as SPPI assets: acquisition of the underlying asset, collateral provided (security deposits, margin call, etc. ), Debt instruments (loans, receivables or debt securities) may be measured at amortized cost, at fair value through other comprehensiveincome recyclable to profit or loss or at fair value through profit or loss. A debt instrument is valued at amortized cost if it meets the following two conditions: the asset is held under a hold to collect business model; and • the contractual terms of the financial asset define it as • generating SPPI within the meaning of the standard. A debt instrument is valued at fair value through other comprehensive income if it meets the following two conditions: the asset is held under a hold to collect and sell business • model; and the contractual terms of the financial asset define it as • generating SPPI within the meaning of the standard. Equity instrumentsare, by default, recorded at fair value through profit or loss unless they qualify for an irrevocable option for valuation at fair value through other comprehensive income not recyclable to profit or loss (provided they are not held for trading purposes and accordingly classified as financial assets at fair value through profit or loss), without subsequently being reclassified through profit or loss. If opting for the latter category, dividends continue to be recognized in income. All other financial assets are recorded at fair value through profit or loss. These financial assets include financial assets held for trading, financial assets at fair value through profit or loss and non-SPPI assets. Financial assets may only be designated at fair value through profit or loss in order to eliminate or significantly reduce an accounting mismatch. This option enables the elimination of accounting mismatches stemming from the enhancements provided. Accounting categories

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UNIVERSAL REGISTRATION DOCUMENT 2020 | GROUPE BPCE