GROUPAMA / 2019 Universal Registration Document

7 FINANCIAL STATEMENTS Consolidated financial statements and notes

Subsequent expenditure (c) Subsequent expendituremust be added to the book value of the property: if it is probable that these expenses will allow the asset to ● generateeconomic benefits; during each five-year period, the real estate is subject to an ● annualappraisal certified by the expert. Reserves for impairment (d) On each closing date of its financial statements, the Group determineswhether 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 calculatedas 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 realisable value. When the value of the propertyincreasesat a later time, the reserve for impairment iswrittenback through 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 the asset. 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 ● variableknownas the “underlying asset”; it requires a zero or low initial net investment compared with ● other instrumentsthat react in the same way to market changes; it is settled at a futuredate. ● All derivatives are recorded on 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 netforeign 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 Derivatives 3.3

in fair value are deferred into equity until the cash flows hedges are recognisedin 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 the changesin the hedging derivative. The ineffective portion of hedges is recognised in the income statement. Embedded derivatives 3.3.3 Embedded derivatives are components of compound financial instrumentsthat meet the definition of a derivative product. They are separate from the host contract and recognised as derivatives whenthe followingthree conditions aremet: the economicfeatures 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 ● embeddedderivativemeets the definition of a derivative; the hybrid instrument is not valued at fair value with recognition ● of the changes in the fair value throughthe income statement. When one of these conditions is not met, thereis no separation. and joint ventures Investmentsin associatesand joint venturesare consolidatedusing the equity method. At the time of acquisition, the investment is recorded at the acquisition cost and its net book value is subsequentlyraised or reducedto take into accountparticularlythe income or losses as well as the change in fair value of financial assets in proportion to the investor’sstake. Non-current held-for-sale assets and discontinued businesses 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 availablefor immediatesale in its current state, and its sale must be 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-currentassets cease to be depreciatedonce they are reclassified as held-for-sale assets. 3.5 Investments in associates 3.4

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Universal Registration Document 2019 - GROUPAMA ASSURANCES MUTUELLES