BPCE_REGISTRATION_DOCUMENT_2017

5 FINANCIAL REPORT

IFRS Consolidated Financial Statements of Groupe BPCE as at December 31, 2017

3.2.3

Investments in joint activities

interest in an entity, even if they are only potential. Dependingon the settlement method, transferred considerations are recognized against: capital and laterprice revisionswill not be booked, - or debts and later adjustments are recognized against income - (financialdebts) or accordingto the appropriatestandards(other debts outside thescope of IAS39); on an entity’s acquisition date, non-controlling interests may be ● valued: either at fair value (method resulting in the allocationof a share - of the goodwill to non-controlling interests), or at the share in the fair value of the identifiable assets and - liabilities of the entity acquired (method similar to that applicable to transactions prior to December 31, 2009). The choice between these two methods must be made for each business combination. Whatever method chosen when the acquisitionis made, increases in the percentage of interest in an entity already controlled are systematicallyrecognized incapital: when an entity is acquired, any share previouslyheld by the Group ● must be revalued at fair value through profit or loss. Consequently, in the event of a step acquisition, the goodwill is determined by referring tothe fair valueat the acquisitiondate; when the Group loses control of a consolidatedcompany,any share ● previouslyheld by the Groupmust be revaluedat fair value through profit or loss. All business combinations that occurred prior to the revisions of IFRS 3 and IAS 27 are accounted for by applying the purchase method, except business combinationsinvolving two or more mutual insurers or entities under joint control, as these transactions were explicitlyexcludedfrom thescope of application. shareholders of fully-consolidated subsidiaries The Group has entered into commitmentswith minority shareholders of certain fully consolidated Group subsidiaries to buy out their shares. These buyback commitmentsare optional commitments(sales of put options). The exercise price for these options may be an amount fixed contractually, or may be established according to a calculation formula pre-defined upon the acquisition of the subsidiary’s securities taking into account its future activity, or may be set as the fair value of the subsidiary’s securities on the day on which theoptions are exercised. For accounting purposes, these commitments are treated asfollows: pursuant to the provisions of IAS 32, the Group recognizes a ● financial liability with respect to the put options sold to minority shareholders in fully-consolidatedentities. This liability is initially recognizedat the discountedvalue of the put option exercise price under “Other liabilities”; the obligationto record a liability even though the put options are ● not exercised means, for purposes of consistency, that the same accounting treatment as that for transactions related to non-controlling interests must be applied. As a result, the corresponding entry for this liability is deducted from “Non-controllinginterests” underlyingthe options and the balance is deducted from “Retained earnings, attributableto equity holders of the parent”; Buyback commitments with the minority 3.3.4

Definition A joint activity is a partnershipwhere parties that have joint control over an entity have direct rights over the assets, and obligations for liabilities, of this entity. Accounting treatment of joint activities An investmentin a joint enterpriseis accountedfor by integratingall interestsheld in the joint activity, i.e. the entitled share in each asset and liability and item of comprehensiveincome. 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. 3.3 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 consolidatedentities. 3.3.1 The consolidated financial statements are expressed in euros. Balance sheet items of foreign subsidiaries and branches whose functionalcurrencyis not the euro are translatedusing the exchange rate in force at the balancesheet date. Income and expenseitems are translated at the average exchange rate for the period, which is the approximatevalue of the transactionprice if there are no significant fluctuations. Foreign exchange rate adjustments arise from a differencein: net income for the period translatedat 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-endrate. The portion attributableto equity holders of the parent is recordedin equity under “Foreign exchange rate adjustments” and the portion attributable to minority shareholders under “Non-controlling interests”. 3.3.2 The impact of intercompanytransactionson the consolidatedbalance sheet and consolidatedincome statementis eliminated.Dividends,as well as gains and losses on intercompany asset disposals, are also eliminated. Where appropriate, capital losses from asset disposals resulting inimpairment are maintained. 3.3.3 In accordance with revised IFRS 3, “Business Combinations” and IAS 27, “Consolidated and Separate Financial Statements”: combinations between mutual insurers are included within the ● scope of IFRS3; costs directly linked to businesscombinationsare recognizedin net ● income forthe period; contingent considerations payable are included in the acquisition ● cost at their fair value at the date of acquisition of a controlling CONSOLIDATION RULES Foreign currency translation Elimination of intragroup transactions Business combinations

256

Registration document 2017