BPCE - 2020 Universal Registration Document

FINANCIAL REPORT

BPCE PARENT COMPANY ANNUAL FINANCIAL STATEMENTS

TREASURY BILLS, BONDS, EQUITIES AND OTHER FIXED/VARIABLE-INCOME SECURITIES

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Accounting principles The term “securities” covers interbank market securities, treasury bills and other negotiabledebt securities, bonds and other fixed-income instruments (i.e. whose returns do not change), equities and other variable-income instruments. For accountingpurposes,securitiestransactionsare governed by ANC Regulation No. 2014-07, which sets out the general accounting and measurement rules applicable to securities and the rules governing specific transactions such as temporary sales of securities. Securities are classified in the following categories: investments in associates and affiliates, other long-term investments,debt securitiesheld to maturity,equity securities available for sale in the medium term, securities available for sale, and trading securities. With respect to trading securities,securitiesavailable for sale, debt securitiesheld to maturity,and equity securitiesavailable for sale in the mediumterm, provisionsfor counterpartieswith knowndefault risks whose impact can be separatelyidentified are recognizedin the form of impairmentcharges. Changes in impairment are recorded under “Cost of risk”. In the event of a securities lending transaction, the securities loaned cease to appear on the balance sheet and a receivable representing the book value of the securities loaned is recognized as an asset. In the case of a securitiesborrowedtransaction,the borrowed securities are recorded in the trading securities categorywith a correspondingliability to the securitiesdebt to the lender for an amount equal to the market price of the securities borrowed on the date of borrowing. Securities borrowed are presented in the balance sheet as a deduction from the debt representing the value of the securities borrowed. Trading securities These are securities acquired or sold with the intention to resell or repurchasethemafter a short holdingperiod. In order to be eligible for this category, the securitiesmust be tradable on an active market at the date of their initial recognitionand their market prices must be accessible, representing actual transactions regularly occurring in the market under normal trading conditions. They may be either fixed-or variable-income instruments. Trading securitiesare recordedin the accountsat cost on their acquisition date, less transaction costs and including accrued interest, where applicable. In the event of short selling, the debt is recorded under liabilities in the amount of the selling price of the securities, less transaction costs. They are marked to market at the end of the fiscal year based on the market price on the most recent trading day. The overall balance of differences resulting from fluctuations in prices is taken to the income statement. For UCITS and investment funds, market value corresponds to net asset values reflecting available market information at the balance sheet date. Securities classified as trading securities may not be transferred to another accounting category (except in exceptionalmarket situationsrequiringa changeof strategyor in the absence of an active market for fixed-income securities), and the rules for their presentation and measurementcontinue to apply until they are sold, redeemed in full or written off.

Available-for-sale securities Securities that do not qualify for recognition in any other category are considered as available-for-sale securities. Available-for-sale securities are recorded in the accounts at cost on their acquisition date, less transaction costs. Where applicable,for fixed-incomesecurities,accrued interest is recognized as a balancing entry in the income statement under “Interest and similar income”. Any difference between the acquisition price and the redemption value (premium or discount) for fixed-income instruments is recorded in the income statement over the remaining term of the security using the actuarial method. Available-for-sale securities are measured at the lower of acquisition cost or market price. For UCITS and investment funds, market value correspondsto net asset values reflecting available market information at the balance sheet date. Unrealized capital losses are subject to an impairmentcharge that can be estimatedfor each group of similar securities,with no offsetting against capital gains recorded on other categories of securities. Gains generatedby hedging instruments,if any, as definedby Article 2514-1of ANC RegulationNo. 2014-07,are taken into account for the calculation of impairment. Unrealized capital gains are not recognized. Gains and losses on disposal of available-for-salesecurities,as well as impairmentcharges and reversals are recorded under “Net gains or losses on available-for-sale securities and equivalent”. Held-to-maturity securities These include fixed-incomesecuritieswith fixed maturity that were acquired or have been reclassified from “Trading securities” or “Available-for-sale securities” and which the company intends and is able to holdto maturity. The securities should not be subject to an existing restriction, legal or otherwise, liable to have an adverse effect on the company’s intention to hold the securities to maturity. Classification as held-to-maturity securities is not incompatible with their designation as items hedged against interest rate risk. Securities held to maturity are recorded in the accounts at cost as of their acquisitiondate, less transactioncosts. When previously classifiedas available for sale, they are recordedat cost and the previously recognized impairment charges are reversed over the residual life of the relevant securities. The difference between the acquisition cost and the redemption value of the securities, and the corresponding interest, are recognizedin accordancewith the same rules as those applicable to fixed-income securities available for sale.

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UNIVERSAL REGISTRATION DOCUMENT 2020 | GROUPE BPCE