BPCE - 2020 Universal Registration Document

FINANCIAL REPORT

STATUTORY AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS

Our response

We reviewed the internal control procedures relating to the determination, valuation and recording of complex financial instruments classified at fair value in levels 2 and 3. We interviewed the Risk, Compliance and Permanent Control division and we acknowledge reporting and memos of Committees from this department (in conjunctionwith our Audit team at Natixis, contributor to this topic). We tested the controls that we deemed relevant to our audit, including those relating to: the approval and regular review by Management of the risks • of the valuation models; the independent verification of the valuation inputs; • the determination of value adjustments as well as corrections • added in the value; the approval and regular review of observabilitycriteria used in • the classification of eachoperation as observable/unobservable; Valuation of goodwill and intangible assets with infinite lives Risk identified and main judgements Groupe BPCE SA recognizes goodwill in its consolidated financial statements. External growth operations made by Groupe BPCE SA drive it to (i) appreciate the modalities of the exercise of control over the acquired entity in accordance with IFRS 10 ’Consolidated Financial Statements’ and (ii) allocate the purchase price in accordance with IFRS 3 ’Business Combinations’. Following this purchase price allocation, the ’surplus’ remaining unallocated, corresponding to the residual identifiable net asset, accounted for in ’goodwill’. These goodwills and the intangible assets acquired for which useful life is indefinite are subject to impairment tests at least each year, based on the appreciation of recoverable value of cash generating units (CGU) to which they are related, or as soon as an indication of an impairment loss appears. The determination of recoverable value relies on the discount of future cash flows of the CGU resulting from medium term plans established by entities and challenged by Groupe BPCE SA.

the classification of financial instruments according to the fair • value hierarchy. We performed these procedures with the assistance of our valuation experts, with whom we also made counter valuation work. Based on sampling, our experts analyzed the relevance of the assumptions; inputs and models used to determine the main adjustments to valuation as at December 31, 2020. We also analyzed the differences on existing collateral calls and gain or losses in case of sale of instruments allowing to contribute to the review of appropriateness of valuations. Finally, we examined the disclosures relating to the valuation of financial instruments published in the notes to the consolidated financial statements, including disclosures relating to the impacts of the health crisis on the fair value of financial instruments.

We deemed that the treatment of business combinations and, goodwill and limited-life intangible assets impairment tests to be a key audit matter by their very nature as they require the exercise of judgment regarding the structuring assumptions used especially for the determination of economic scenarios, financial trajectories or discount levels, especially in the unfavorable economic context of the health crisis. At December 31, 2020, the gross value of goodwill amounted to €4,041 million and accumulated impairment losses stood at €311 million. The terms of the impairmenttest implementedby BPCE as well as the key assumptions used to determine the recoverable value and sensitivities of the recoverable amounts are described in Note 3.4.2 to the consolidated financial statements.

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UNIVERSAL REGISTRATION DOCUMENT 2020 | GROUPE BPCE