UNIVERSAL REGISTRATION DOCUMENT 2023

7 FINANCIAL STATEMENTS Combined financial statements and notes

The Group recognises its financial assets when it becomes party to the contractual provisions of these assets. 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 transaction costs are not included in the acquisition cost of the financial assets. FAIR VALUE MEASUREMENT METHODS 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. 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 observable market data when available or, when not available, by resorting to assumptions that imply some 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 classified according to a three ‑ level hierarchy. These levels depend on whether a valuation model is used and the data sources used to populate the valuation models: optional designation at fair value through net income when it eliminates or materially reduces an accounting mismatch in the income statement. ❯ level 1 corresponds to a price listed in an active market to which the entity may have access on the valuation date; ❯ level 2 corresponds to the fair value determined on 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 corresponds to the fair value determined on the basis of a valuation model using data not observable on a market. ❯ Valuation techniques include the use of recent transactions under conditions of normal competition between informed and 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. DERECOGNITION Financial assets are derecognised when the contractual rights to the related cash flows expire or are transferred or considered as such to one or more beneficiaries and substantially all of the risks and rewards of the financial asset are transferred. Gains or losses on the sale of financial investments are determined using the FIFO method. REVERSE SECURITIES REPURCHASE AGREEMENTS Reverse securities repurchase agreements correspond to sales of financial assets to a counterparty with by a simultaneous commitment to repurchase these financial assets at an agreed date and price. These financial assets are not derecognised given that the Group retains almost all of the risks and rewards attached to them and are therefore maintained as assets in the balance sheet. The cash received on disposals is recorded under “Other liabilities” in the balance sheet.

3.2.2 Financial investments In particular, financial investments include shares and other variable ‑ income securities, bonds and other fixed ‑ income securities, mutual funds units, and loans and deposits. These assets are held either directly or through fully consolidated mutual funds. (a) Classification The classification of financial assets reflects the model applied to their subsequent valuation in the combined balance sheet and the recognition of unrealised and realised capital gains or losses relating to them. INITIAL RECOGNITION The classification of financial assets is determined on initial recognition and cannot be changed at a later date, except in the rare cases of a change in business model applying to these financial assets. Financial assets are classified into the following three valuation categories, based on the business model in which they are held and the characteristics of their contractual cash flows: a debt instrument is valued at amortised cost if the following two conditions are met: ❯ the instrument is managed according to a business model that aims to hold the assets in order to collect the cash flows provided for in the contract, ■ the instrument only offers contractual cash flows on specific dates, representing the principal and interest calculated on this principal; ■ a debt instrument is measured at fair value with changes in fair value recognised in other comprehensive income (“OCI”), and the gain or loss realised at the time of its sale is recycled to profit or loss when the following conditions are met: ❯ the instrument is managed according to a business model that aims to hold the assets in order to collect the cash flows provided for in the contract as well as flows from their sale, ■ the instrument only offers contractual cash flows on specific dates, representing the principal and interest calculated on this principal; ■ financial assets that do not fall into one of the two categories above are measured at fair value through net income. ❯ the optional designation at fair value through OCI of equities and other variable ‑ income securities that meet the definition of equity instruments in accordance with IAS 32 and that are not held for trading. This option is also called “Fair value through OCI not recyclable to profit or loss”. All changes in the fair value of the instruments in question are then recognised in OCI and are never recycled to profit or loss. Dividends received on these instruments are recognised in profit or loss. This option is applied by Groupama for most of its equity instruments, with the exception of those held to represent insurance contracts or financial contracts whose financial risk is borne by the policyholders, which are measured at fair value through net income; ❯ IFRS 9 also allows the following classification options to be selected irrevocably at initial recognition:

221

Document d’Enregistrement Universel 2023 GROUPAMA ASSURANCES MUTUELLES