GROUPAMA / 2019 Universal Registration Document

7 FINANCIAL STATEMENTS Consolidated financial statements and notes

notes receivable and notes payable are offset but, if the ● receivable is discounted,the credit facility granted to the Group is substitutedfor the notepayable; transactions affecting commitments receivedand given; ● inward reinsurance, outward reinsurance and retrocessions; ● co-insurance and co-reinsurance operations and pooled ● management; brokerand intermediation transactions; ● contractual sharingof premiumincomeof group policies; ●

reserves for the write-down of equity interests funded by the ● Company holding the securities and, if applicable, reserves for contingencies and charges recognised because of losses sufferedby exclusivelycontrolled companies; transactions on forward financial instruments; ● capital gains and losses from internal transfer of insurance ● investments; intra-groupdividends. ●

Accounting principles and valuation methods used 3

3.1

Intangible assets

The subsequent acquisition of non-controlling interests does not result in thecreation of additional goodwill. Operations for the acquisition and disposal of non-controlling interests in a controlled company that have no impact on the control exercised over that company are recorded in the Group' s equity. Goodwill is allocated to the cash-generating units (CGU) of the acquiring company and/or the acquired company which are expectedto take advantageof the businesscombination.A CGU is defined as the smallest group of assets that produces cash flows independently of other assets or groups of assets. With management units, management tools, geographic regions or major business lines, a CGU is createdby combiningentities of the same level. Goodwillresultingfrom the acquisitionof a foreignentity outsidethe eurozone is recorded in the local currency of the acquired entity and translated to euros at the closing rate. Subsequent foreign exchange fluctuations are posted to foreign exchange translation reserves. For entities acquired during the fiscal year, the Group has twelve months from the acquisition date to assign a final value to the acquired assets and liabilities. In a business combination achieved in stages, the previously acquired stake in control is revalued at fair value and the resulting adjustment recorded through income. Residual goodwill is not amortisedbut is subject to an impairment test at least once a year on the same date. The Group reviews the goodwill’s book value in case of an unfavourable event occurring between two annual tests. Impairment is recorded when the recoverable amount of the cash generating unit to which the goodwill is allocated is less than its net book value. Recoverable value is defined as fair value less cost of sales, or value in use, whichever ishigher.

Goodwill 3.1.1 Goodwill on first-time consolidation corresponds to the difference between the acquisition cost of securities of consolidated companiesand the Group’s share in restated shareholders’equity as at the acquisitiondate. When not assigned to identifiable items on the balance sheet, goodwill is recordedon the balance sheet in a specialasset item as an intangibleasset. Residual goodwill results from the price paid above the Group’s share in the fair value of the identifiableassets and liabilities of the acquiredcompanyas at the acquisitiondate, revaluedfor the share of any intangible assets identified in the acquisition accounting according to revised IFRS 3 (fair value of assets and liabilities acquired).The price paid includes the best possibleestimateof the price add-ons(earn-outs,paymentdeferrals, etc.). The residual balance therefore correspondsto the valuation of the share of income expected on future production. This expected performance, which is reflected in the value of future production, results from the combinationof intangibleitems that are not directly measurable. Such assets are assessed based on multiples or forecast future income that served as the valuation base for the price paid on acquisition and are used to establish the value of goodwill stated above. For combinations prior to 1 January 2010, adjustments of future earn-outs are accounted for as an adjustment of the acquisition cost and in income for combinations carried out on or after 1 January 2010. For business combinationscompletedon or after 1 January 2010, the costs directly attributable to the acquisition are recorded in expenseswhen they are incurred. For each acquisition, a decision is made whether to value non-controlling interests at fair value or for their share of the identifiablenet assets of the acquired company.

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Universal Registration Document 2019 - GROUPAMA ASSURANCES MUTUELLES