BPCE - 2020 Universal Registration Document

FINANCIAL REPORT

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

Equity method Income, assets and liabilities of investments in associates and joint ventures are accounted for in the Group’s consolidated financial statements using the equity method. An investment in an associate or a joint venture is initially recognized at its acquisition cost and subsequently adjusted for the Group share in the income and other comprehensiveincome of the associate or joint venture. The equity method is applied from the date on which the entity becomes an associate or a joint venture. On the acquisition of an associate or a joint venture, the difference between the cost of investment and the Group’s share in the net fair value of the entity’s identifiable assets and liabilities is recognized in goodwill. When the net fair value of the entity’s identifiable assets and liabilities is higher than the cost of investment, the difference is recognized in income. The share of net income of entities accounted for under the equity method is included in the Group’s consolidated income. When a Group entity carries out a transactionwith a Group joint venture or associate, the profit or loss resulting from this transaction is recognized in interests held by third parties in the associate or joint venture. The net investment in an associate or joint venture is subject to impairment testing if there is objective evidence of impairment arising from one or more events occurring after the initial recognition of the net investment and if the events have an impact on estimated cash flows, provided this impact can be reliably calculated. In such cases, the total carrying amount of the investment (including goodwill) is subject to impairment testing in accordance with the provisions of IAS 36 “Impairment of Assets”. Exception to the equity method When the investment is held by a venture capital organization, an investment fund, an investment company with variable share capital or a similar entity such as an insurance asset investment fund, the investor may choose not to recognize the investment using the equity method. In this case, revised IAS 28 “Investments in Associates and Joint Ventures” authorizes the investor to recognize the investment at its fair value (with changes in fair value recognized in income) in accordance with IFRS 9. These investments are therefore recognized as “Financial assets at fair value through profit or loss”. The Natixis group’s private equity subsidiaries have chosen to measure their investments in this way, considering that this valuation method provides more relevant information.

Accounting treatment of joint activities An investment in a joint enterprise is accounted for by integrating all interests held in the joint activity, i.e. the entitled share in each asset and liability and item of income. These interests are allocated by nature to the various lines of the consolidatedbalance sheet, consolidated income statement and the statement of net income and gains and losses recognized directly in other comprehensive income. 3.2 The consolidated financial statements are prepared using uniform accounting policies for reporting similar transactions in comparable circumstances. Where material, consolidation adjustments are made to ensure the consistency of the measurement methods applied by consolidated entities. 3.2.1 The consolidated financial statements are expressed in euros. Balance sheet items of foreign subsidiariesand brancheswhose functional currency is not the euro are translated using the exchange rate in force at the balance sheet date. Income and expense items are translated at the average exchange rate for the period, which is the approximate value of the transaction price if there are no significant fluctuations. Translation adjustments arise from a difference in: net income for the period translated at the average rate and at • the closing rate; equity (excluding net income for the period) translated at the • historic exchange rate and at the year-end rate. The portion attributable to equity holders of the parent is recorded in equity under “Foreign exchange rate adjustments” and the portion attributable to minority shareholders under “Non-controlling interests”. TRANSACTIONS The impact of intercompany transactions on the consolidated balance sheet and consolidated income statement is eliminated. Dividends, as well as gains and losses on intercompany asset disposals, are also eliminated. Where appropriate, capital losses from asset disposals resulting in impairment are maintained. 3.2.3 In accordance with revised IFRS 3, “Business Combinations” and IAS 27, “Consolidated and Separate Financial Statements”: combinations betweenmutual insurers are included within the • scope of IFRS 3; costs directly linked to business combinations are recognized • in net income for the period; contingent considerations payable are included in the • acquisition cost at their fair value at the date of acquisitionof a controlling interest in an entity, even if they are only potential. Depending on the settlement method, transferred considerations are recognized against: capital and later price revisions will not be booked, – or debts and later adjustments are recognized against – income (financial debts) or according to the appropriate standards (other debts outside the scope of IFRS 9); CONSOLIDATION RULES FOREIGN CURRENCY TRANSLATION ELIMINATION OF INTRA-GROUP 3.2.2 BUSINESS COMBINATIONS

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3.1.3 Definition

INVESTMENTS IN JOINT ACTIVITIES

A joint activity is a partnership where parties that have joint control over an entity have direct rights over the entity’s assets, and obligations for its liabilities.

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UNIVERSAL REGISTRATION DOCUMENT 2020 | GROUPE BPCE