BPCE_REGISTRATION_DOCUMENT_2017

5 FINANCIAL REPORT

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

IAS 39 does not permit the sale or transfer of these securities before maturity except in certain specific circumstances.In the event that the securities are sold before maturity, all held-to-maturity assets must be reclassifiedat group level and the held-to-maturitycategory cannot be used during the current year or the following two years.

Available-for-sale financial assets are initially recognized at fair value, plus any transaction costs. On the balance sheet date, they are carried at their fair value and changesin fair value are recordedunder “Gains and losses recognized directly in other comprehensiveincome” (except for foreign currency money market assets, for which changes in the fair value of the foreigncurrencycomponentaffect net income).The principlesused to determine fair valueare described inNote 4.1.6. If they are sold,these changes infair valueare taken to income. Interest income accrued or received on fixed-income securities is recorded under “Interest or similar income”. Interest income accrued or receivedon variable-incomesecuritiesis recordedunder “Net gains or losses onavailable-for-sale financial assets”. Date of recognition Securities are recorded in the balance sheet on the settlement/delivery date. Temporary transfers of securities are also recorded on the settlement/delivery date. For repurchase or reverse repurchase transactions, a loan commitment given or received is recorded between the transactiondate and the settlement/deliverydate when such transactions are recorded as “Loans and receivables” or “Liabilities”.When such transactionsare recorded under “Assets and liabilities at fair value through profit or loss”, the commitment is recorded as an interest rate derivative. Rules applicable to partial disposals The first-in, first-out (FIFO) method is applied to any partial disposals of securities, expect inspecialcases. 4.1.3 Financial instruments issued by the Group qualify as debt or equity instrumentsdependingon whetheror not the issuer has a contractual obligation to deliver cash or another financial asset to the holder of the instrument,or to exchange the instrumentunder conditionsthat are potentially unfavorable to the Group. This obligation must arise from specific contractualterms and conditions,not merely economic constraints. In addition, when an instrument qualifies as equity: its remuneration is treated as a dividend, and therefore impacts ● equity, along with the tax relating to this remuneration; it cannotbe an underlying eligible for hedge accounting; ● if the issue is in a foreign currency, the instrument is fixed at its ● historic value resulting from its conversion to euros at its initial date of transfer to equity. Finally, when these instruments are issued by a subsidiary, they are includedin “Non-controllinginterests”.When their remunerationis of a cumulative nature, it is charged to “Income attributable to equity holders of the parent” and increases the income of “Non-controlling interests”. However, when their remunerationis not of a cumulative nature, it is drawn from retained earnings attributable to equity holdersof the parent. Financial liabilities at fair value through profit or loss These are financial liabilities held for trading or classified in this category on a voluntary basis at initial recognition using the fair value option availableunder IAS 39. The qualifyingcriteria used when applying this option are describedin Note 4.1.4 “Financialassets and liabilitiesat fair value throughprofit or loss”. Debt and equity instruments

Exceptions to the rule apply in the followingcases: a materialdeterioration inthe issuer’s credit quality; ●

a change in tax regulationscanceling or significantlyreducing the ● tax exemptionon interest earned oninvestmentsheld-to-maturity; a major business combinationor significant withdrawalof activity ● (sale of a sector, for example) requiring the sale or transfer of held-to-maturity investments in order to maintain the entity’s existing situation in terms of interest rate risk or its credit risk policy; a change in legal or regulatory provisions significantly modifying ● either the definition of an eligible investment or the maximum amount of certain types of investment, requiring that the entity dispose of aheld-to-maturityasset; a significant increase in capital requirementsforcing the entity to ● restructure by selling held-to-maturity assets; a significant increase in the risk weighting of held-to-maturity ● assets interms of prudential capital regulations. In the exceptional cases described above, the income from the disposal is recorded under “Net gains or losses on available-for-sale financial assets”. The hedging of these securities against interest rate risk is not permitted. However, hedges against exchange rate risk or the inflation component of certain held-to-maturityfinancial assets are allowed. Held-to-maturity financial assets are recognized at fair value at inception, plus any transaction costs directly attributable to their acquisition.They are subsequentlymeasured at amortized cost using the effective interest method, includingany premiums,discountsand acquisition fees,where material. Loans and receivables The “Loans and receivables” portfolio comprises non-derivative financial assets with fixed or determinablepayments and which are not quoted in an active market. In addition, these assets must not be exposed to a risk of material losses unrelated to a deterioration in their credit quality. Some securities not quoted in an active market may be classified in this portfolio. These are initially recognized at fair value, plus any transaction costs and less any transaction income. Securities classified in this category comply with the rules for recognition, measurement and impairment applicable to loans and receivables. When a financial asset recorded under loans and receivables is sold before its maturity, the income from the disposal is recorded under “Net gainsor losses onavailable-for-sale financial assets”. Available-for-sale financial assets Available-for-salefinancial assets are all securities not classified in the previousthree categories.

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Registration document 2017