Groupama // 2021 Universal Registration Document

7 FINANCIAL STATEMENTS Combined financial statements and notes

The impairment recorded on a Group's equity instrument will only be reversed to income when the asset in question is sold. INVESTMENTS VALUED AT AMORTISED COST For investments valued at amortised cost, the amount of the reserve is equal to the difference between the net book value of the assets and the discounted value of the future cash flows expected, determined on the basis of the original effective interest rate of the instrument. The amount of the loss is included in the net income or loss for the fiscal year. The reserve may be written back through income. Derecognition (g) Financial assets are derecognised when contractual risks expire or the Group transfers the financial asset. Gains or losses on the sale of financial investments are determined using the FIFO method, with the exception of securities carried by mutual funds. The method used for mutual funds is the weighted average cost method. Gains and losses from divestment are recorded on the income statement on the date of realisation and represent the difference between the sale price and the net book value of the asset. Investment property 3.2.2 The Group has chosen to recognise investment property using the cost method. It is valued using the component approach. Initial recognition (a) Lands and properties appear on the balance sheet at their acquisition cost. The value of the property includes significant transaction costs directly attributable to the transaction, except in the specific case of investment property representing unit-linked commitments that may be posted, by discretion, to income at fair value. When a real estate asset includes a portion held to produce rental income and another part used for production or administrative purposes, the asset is treated as investment property only if the latter is immaterial. At the time of initial recognition, property is subdivided by components and recorded separately. The impairment periods applied by the Group for each component depend on the nature of the property under consideration and are as follows: building shell (impairment period between 30 and 120 years); ❯ wind and watertight facilities (impairment period between 30 and ❯ 35 years); heavy equipment (impairment period between 20 and 25 years); ❯ secondary equipment, fixtures and fittings (impairment period ❯ between 10 and 15 years); maintenance (impairment period: 5 years). ❯

Acquisition cost of the property is the outcome either of outright acquisition, or acquisition of a company that owns the property. In the latter case, the cost of the property is equal to its fair value on the date of acquisition of the owner company. Each component is identified by its duration and depreciation rate. The residual value of the shell component cannot be valued with sufficient reliability, particularly given the uncertainties about the holding horizon; thus this component is amortised on the basis of the acquisition cost. Rent income is recorded using the straight-line method over the term of the lease agreement. The market value of real estate investments is determined on the basis of an appraisal conducted at most every five years and reviewed annually by an independent expert. Real estate investments representing unit-linked liabilities where the financial risk is borne by the policyholder are carried at fair value with changes in fair value recognised in the income statement. Subsequent expenditure (c) Subsequent expenditure must be added to the book value of the property: if it is probable that these expenses will allow the asset to ❯ generate economic benefits; and these expenses can be reliably valued. ❯ Reserves for impairment (d) On each period end date of its financial statements, the Group determines whether there is evidence of potential loss of value on property recorded at depreciated 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 recognises a loss of value in the income statement for the difference between the two values, and the net book value is discounted to reflect only the realisable value. When the value of the property increases at a later time, the reserve for impairment is written back through income. Derecognition (e) Gains or losses from the disposal of property investments are recorded 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.

3.3

Derivatives

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 known as the “underlying asset”; it requires a zero or low initial net investment compared with ❯ other instruments that react in the same way to market changes;

Valuation (b)

The cost of the property is the amount at which the property was recorded at the time of initial recognition, minus cumulative amortisation and corrected for any reserves for impairment.

161 Universal Registration Document 2021 - GROUPAMA ASSURANCES MUTUELLES