GROUPAMA / 2018 Registration document

7 FINANCIAL STATEMENTS

CONSOLIDATED FINANCIAL STATEMENTS AND NOTES

Embedded derivatives 3.3.3 Embedded derivatives are components of compound financial instruments that meetthe definition ofa derivativeproduct. They are separate from the host contract and recognised as derivatives whenthe following three conditionsare met: the economic features and the risks of the embeddedderivative ❯ are not closely linked to the economic features and risks of the host contract; a separate instrument containing the same conditions as the ❯ embedded derivative meets the definition ofa derivative; the hybrid instrument is not valued at fair value with recognition ❯ of the changes in thefair value throughthe incomestatement. When one ofthese conditions is not met,there is no separation. and joint ventures Investments in associates and joint ventures are consolidated using the equity method. At the time of acquisition,the investment is recorded at the acquisition cost and its net book value is subsequently raised or reduced to take into account particularly the income or losses as well as the change in fair value of financial assets in proportion to theinvestor’s stake. and discontinued activities A non-currentasset (or a group intended to be sold) is considered to be held for sale if its book value will be mainly recoveredthrough a sale transaction rather than through continued use. In order for this to be the case, the asset (or the group intended to be sold) must be available for immediate sale in its current state, and its sale mustbe highlyprobable (within thenext 12 months). Non-current assets (or a group intended to be sold) classified as held for sale are valued at the lower value between the net book value and the fair value minus transfer costs. In case of an unrealised capital loss, impairment is recorded in profit or loss. In addition, non-current assets cease to be depreciated once they are reclassifiedas held-for-sale assets. A discontinued activity is considered to include any component from which the entity is separated or that is classified as held for sale and is in one of the followingsituations: it constitutes a line of business or a major, separate ❯ geographicalarea; or it is part of a single, coordinatedplan for divestment of a line of ❯ business ora major, separategeographicalarea; or it is a subsidiary acquiredexclusivelyin order to besold. ❯ Investments in related companies 3.4 Non-current assets held for sale 3.5

Reserves for impairment (d) On each closing date of its financial statements, the Group determines whether there is evidence of potential loss of value on property recorded at amortised cost. If this is the case, the realisable value of the property is calculated as being the higher of two values: the sale price net of sale costs and the value in use. If the realisable value is less than the net book value, the Group recognisesa loss of value in income for the differencebetween the two values, and the net book value is discountedto reflect only the realisablevalue. When the value of the property increases at a later time, the reserve for impairment is written backthrough income. Derecognition (e) Gains or losses from the disposal of property investments are booked in the income statement on the date of realisation and represent the difference between the net sale price and the net book value of theasset. General information 3.3.1 A derivative is a financial instrument with the following three features: its value fluctuates on the basis of the change in a specific ❯ variable knownas the “underlying asset”; it requires a zero or low initial net investment compared with ❯ other instruments that react in the same wayto marketchanges; it is settledat a future date. ❯ All derivatives are recorded in the balance sheet at their fair value on the original date and during their subsequent revaluation. Changes in fair value are posted to income except for derivatives designatedas cash flow hedgesand net foreign investments. Hedging derivatives 3.3.2 The use of hedge accounting is subject to obligations regarding documentation and periodic demonstration of the efficacy of the hedge. Hedging derivatives are recorded at fair value with changes in the income statement,except for cash flow hedges and hedges of net foreign investmentsconsideredas effective, for which the changes in fair value are deferred into equity until the cash flows hedges are recognised in the income statementor when the foreign subsidiary is sold. For a fair value hedge of an available-for-saleasset, the changes in fair value of the hedged item are recognised in income or loss so that they exactly offset thechanges in the hedgingderivative. The ineffective portion of hedges is recognised in the income statement. Derivatives 3.3

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REGISTRATION DOCUMENT 2018 - GROUPAMA ASSURANCES MUTUELLES