GROUPAMA / 2020 UNIVERSAL REGISTRATION DOCUMENT

7 FINANCIAL STATEMENTS Consolidated financial statements and notes

The fair value of a financial instrument equates 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 relying on assumptionsthat imply a certain level of 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 classifiedaccordingto 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 entity may have access on the valuation date; level 2 correspondsto the fair value determinedon the basis of a ❯ valuation model using data directly observable on an active market or data that can be determined from prices observed; level 3 correspondsto the fair value determinedon the basis of a ❯ valuation model using data not observable on a market. Valuation techniques include the use of recent transactions under conditionsof normal competitionbetween informedand consenting parties, if available, reference to the current fair value of another instrument identical in substance, analysis of discounted cash flows, and option valuation models. Valuation rules (e) The valuation rules and any impairment must be understood as depending on classifying the financial instrument into one of the four categories given 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 at the closing fair 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) and corrected for any reserves for impairment. The differences between the redemption value and the acquisition price are distributed actuarially as expenses (a premium) or as income (a discount) over the residual life of the securities. When several redemption dates are provided, the residual life is determined on the basis of the final redemption date. Assets available-for-sale are valued at their fair value, and unrealised capital gains or losses are recordedin a separate item of Group's equity. Investments representingunit-linkedpolicies are valued at fair value through income, as an option.

financial assets designated as optional (held-for-trading or ■ even fair value option), providedthey complywith the following criteria: asset/liability matching to avoid any accounting mismatch, – hybrid instruments including one or more embedded – derivatives, group of financial assets and/or liabilities that are managed – and the income of which is valued at fair value; assets held to maturity include fixed-term investments that the ❯ Company expressly intends, and is able, to hold until maturity. The Group does not use this category, with the exception of certain perfectly backed portfolios that meet the criteria defined above; the loans and receivablescategoryincludesassetswith a defined ❯ payment or a payment that can be defined, which are not listed for trading on an active market; available-for-sale assets (stated at fair value via Group's equity) ❯ include by default all other fixed-term financial investments, equities, loans and receivablesthat are not included in the other categories. Reclassifications (b) A financial asset may, under exceptional circumstances, be reclassified outside the category of investments held for trading. A financial asset classified as available-for-salemay be reclassified outside the category of assets available-for-sale, into: the category of investmentsheld to maturity when the intent or ❯ capacity of the Company changes or when the entity no longer has a reliable assessment of fair value, the category of loans and receivables when the financial asset ❯ meets the definition of loans and receivableson the date of the reclassification and when the entity has the intent and the capacity to hold the financial asset for the foreseeable future or until its maturity. A financial asset classified in the category of investments held to maturity may be reclassifiedexceptionallyas available-for-saleif the entity’s intent or capacity has changed. Initial recognition (c) The Group recognisesits financial assets when it becomes party to the contractual provisions of these assets. Purchases and sales of financial investments are recorded on the transaction date. 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 transactionsare maintainedas assets on 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 under normal market conditions.

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Universal Registration Document 2020 - GROUPAMA ASSURANCES MUTUELLES