GROUPAMA / 2018 Registration document

7 FINANCIAL STATEMENTS

CONSOLIDATED FINANCIAL STATEMENTS AND NOTES

A financial asset classified in the category of investments held to maturity may be reclassified exceptionally as available-for-sale if the entity’sintent or capacity haschanged. Initial recognition (c) The Group recognisesits financial assets when it becomesparty to the contractualreservesof these assets. Purchases and sales of financial investments are recorded on the transactiondate. Financial assets are initially recorded at fair value plus; for assets not valued at fair value through income, the transaction costs directly chargeable to the acquisition. However, when immaterial the transactioncosts are not included in the acquisitioncost of the financial assets. Repurchase transactions are maintained as assets in the balance sheet. Fair value measurement methods (d) The fair value of financial assets is the amount for which an asset could be exchanged between well-informed, consenting parties, acting undernormal market conditions. The fair value of a financial instrument corresponds to its listed stock price on an active market. When the market for this financial instrument is not active, its fair value is measured by valuation techniques using observablemarket data when available or, when not available, by resorting to assumptions that imply some judgment. Pursuant to the amendment to IFRS 7 issued by the IASB in March 2009 and IFRS 13, financial instruments (assets and liabilities) valued at fair value are classified according to a three-level hierarchy. These levels depend on whether a valuation model is used and the data sources used to populate the valuation models: level 1 correspondsto a price listed in an active market to which ❯ the entitymay haveaccess on the valuationdate; level 2 correspondsto the fair value determined on the basis of ❯ a valuation model using data directly observable on an active market or data that canbe determined from pricesobserved; level 3 correspondsto the fair value determined on the basis of ❯ a valuation modelusing data not observableon a market. Valuation techniques include the use of recent transactions under conditions of normal competition between informed and consentingparties, if available, referenceto the current fair value of another instrument identical in substance, analysis of discounted cash flows, andoption valuation models. Valuation rules (e) The valuation rules and any impairment must be interpreted in the light of the classification of the financial instrument in one of the four categoriesgiven above.

Assets held for trading and those for which the option to include them in this category has been applied are recorded in the income statement atthe closingfair value. Financial assets held to maturity, unlisted equities for which the fair value cannot be valued reliably, and loans and receivables are recorded at amortised cost or historic cost. The amortised cost is the amount at which the asset was valued at the time of initial recognition, minus repayments of principal, plus or minus the cumulative amortisation of the differences between the initial amount and the amount at maturity (based on the effective interest rate) andcorrected forany reservesfor impairment. The differences between the redemption value and the acquisition price are distributed actuarially as expenses (agio) or as income (discount) over the residual life of the securities. When several redemption dates are provided, the residual life is determined on the basisof the final redemption date. Available-for-sale assets are valued at their fair value, and unrealisedcapital gains or losses are recorded in a separate line of shareholders’ equity. Investments representing unit-linked policies are valued at fair value throughincome, as an option. Reserves for impairment (f) At each closing date, the Group looks for the existenceof objective presumptions ofimpairmentin its investments. DEBT INSTRUMENTSCLASSIFIEDASAVAILABLE-FOR-SALE ASSETS For debt instruments classified as available-for-saleassets, a loss of value is recognised through income in the event of a proven counterparty risk. Impairments recognised on debt instruments are written back through income in the event of reduction or disappearanceof the counterparty risk. For equity instruments classified as available-for-sale assets, the Group has taken into account the clarifications made by the IFRS InterpretationsCommittee (IFRIC) in its July 2009 update on the notion of significant or prolonged decrease in paragraph 61of IAS 39. As at 31 December 2018, there is objective evidence of impairmentin the following cases: the financial investmentwas already covered by a reserve at the ❯ previous publishedclose; or a 50% discount is observedas at the closingdate; or ❯ the financialinvestmenthas been in a continuousunrealised loss ❯ position with respect to its book value over the last 36 months prior to the closingdate. For securitiesconsideredstrategicsecurities,held by the Group for the long term, characterisedby the Group’s representationon their governance bodies or significant, lasting contractual relations or a significantstake in the capital (in absolute or relative value), without significant influence being exercised, this reference period is 48 months. EQUITYINSTRUMENTSCLASSIFIEDASAVAILABLE-FOR-SALE ASSET

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REGISTRATION DOCUMENT 2018 - GROUPAMA ASSURANCES MUTUELLES