BPCE - 2020 Universal Registration Document

FINANCIAL REPORT

STATUTORY AUDITORS’ REPORT ON THE ANNUAL FINANCIAL STATEMENTS

EMPHASIS OF MATTER III. We draw attention to the following matter described in note 2.2 to the financial statements relating to the change in accounting method resulting from the application of regulation 2020-10 of the French Accounting Standards Authority (Autorité des normes comptables ) regarding the presentation of securities borrowings. Our opinion is not modified in respect of this matter. JUSTIFICATION OF ASSESSMENTS - KEY AUDIT MATTERS Due to the global crisis related to the Covid-19 pandemic, the financial statements of this period have been prepared and audited under specific conditions. Indeed, this crisis and the exceptional measures taken in the context of the state of sanitary emergency have had numerous consequences for companies, particularly on their operations and their financing, and have led to greater uncertainties on their future prospects. Those measures, such as travel restrictions and remote working, have also had an impact on the companies’ internal organization and the performance of the audits. In this complex and evolving context and in accordance with the requirements of Articles L. 823-9 and R. 823-7 of the French Commercial Code ( Code de commerce ) relating to the justification of our assessments, we inform you of the key audit matters relating to risks of material misstatement that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period, as well as how we addressed those risks. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on specific items of the financial statements. Valuation of associates, equity interests and long-term investments

Risk identified and main judgments

Our response

As of December 31, 2020, associates, equity interests and long-term investments recognized in BPCE SA’s financial statements amounted to €23,770 million, including €7,602 million in impairment losses. Net impairment of investments in subsidiaries and affiliates and other long-term investments in 2020 amounted to €1,346 million. As indicated in note 4.4 to the financial statements, they are recognized at their acquisition cost and impaired on the basis of their value in use. BPCE’s main banking subsidiaries are measured on the basis of discounted multi-year forecasts of expected dividend flows (Dividend Discount Model). The forecasts of expected dividend flows are based on the medium-term financial projections prepared by the entities concerned as part of Groupe BPCE’s annual budgeting process and established for the Group’s management purposes. We deemed the correct measurement of equity interests, shares in related companies and other long-termequity holdings to be a key audit matter, given the areas of judgment inherent to structuring assumptions used, in particular for determining economic scenarios, financial forecasts, valuation parameters, especially in the unfavorable economic context induced by the health crisis.

To assess the reasonableness of the estimated value in use of equity interests, shares in related companies and other long-term equity holdings with the guidance of our experts we verified that the estimated values determined by management were based on reasonable assumptions and an appropriate measurement method applied to correctly documented quantified data. Depending on the securities in question, our audit work consisted in: analyzing the relevance of the methods retained; • examining the assumptions and inputs used by comparing • them to external sources; performing an arithmetic check of the calculation of the values • of the main subsidiaries examining the reasonableness -especially in the financial and economic context of the health crisis- of the medium-term plans used for each entity in question, which entailed: comparing these plans with the Group’s strategic plans – validated by the entities’ management bodies (Supervisory Board or Board of Directors), evaluating the consistency and reliability of the main – assumptions used to develop the plans, particularly with regard to past years’ financial projections and actual past performance, analyzing sensitivity to different valuation inputs – (shareholders’ equity, discount rates, etc. ).

5

575

UNIVERSAL REGISTRATION DOCUMENT 2020 | GROUPE BPCE