Groupama // 2021 Universal Registration Document

7 FINANCIAL STATEMENTS Combined financial statements and notes

Accounting principles and valuation methods used 3

3.1

Intangible assets

Goodwill resulting from the acquisition of a foreign entity outside the 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 amortised but undergoes 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 is higher. Fair value, less sales costs, is computed as follows, in accordance the market value minus selling costs if there is an active market; ❯ otherwise, the best possible information, with reference to ❯ comparable transactions. Value in use corresponds to the current expected value of future cash flows to be generated by the cash generation unit. Goodwill, recorded at the initial business combination, the value of which is not material or requires disproportionate valuation work in relation to its value, is immediately expensed in the year. An impairment of goodwill recognised during a previous fiscal year may not be subsequently written back. If the acquirer’s interest in the net fair value of the identifiable assets, liabilities and reserves exceeds the acquisition cost of the Company’s shares, the identification and valuation of the assets, liabilities and reserves and the valuation of the cost of the combination is reassessed. If, after this revaluation, the share acquired remains greater than the acquisition cost, this surplus is immediately recognised in income. When taking over an entity, a sale option may be granted to holders of non-controlling equity stakes. The option to sell means the Group is obliged to buy securities held by the minority shareholders at a specified strike price on a future date (or period of time) if the holder exercises that right. This obligation is reflected in the financial statements as a liability valued at the strike price of this discounted right. with the recommendations of IAS 36 (§25 to 27): the sales price shown in a final sales agreement; ❯

Goodwill 3.1.1 Goodwill on first-time consolidation corresponds to the difference between the acquisition cost of securities of consolidated companies and the Group’s share in restated Group's equity as at the acquisition date. When not assigned to identifiable items on the balance sheet, goodwill is recorded on the balance sheet in a special asset item as an intangible asset. Residual goodwill results from the price paid above the Group’s share in the fair value of the identifiable assets and liabilities of the acquired company as at the acquisition date, revalued for 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 possible estimate of the price add-ons (earn-outs, payment deferrals, etc.). The residual balance therefore corresponds to 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 combination of intangible items 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. Adjustments to future earnouts are recognised as an adjustment to the cost of acquisition for business combinations completed prior to 1 January 2010 and in the income statement for business combinations completed on or after 1 January 2010. For business combinations completed on or after 1 January 2010, the costs directly attributable to the acquisition are recorded in expenses when 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 identifiable net assets of the acquired company. The subsequent acquisition of non-controlling interests does not result in the creation 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 Group's equity. Goodwill is allocated to the cash-generating units (CGU) of the acquiring company and/or the acquired company which are expected to take advantage of the business combination. 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 created by combining entities of the same level.

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Universal Registration Document 2021 - GROUPAMA ASSURANCES MUTUELLES

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