NATIXIS - 2018 Registration document and annual financial report

5 FINANCIAL DATA

Consolidated financial statements and notes

Treasury shares and treasury share 6.18 derivatives All treasury shares held by Natixis are deducted from equity regardless of the purpose for which they are acquired/held. Any gains or losses recognized in the parent company financial statements in respect of the sale, measurement or impairment of treasury shares held for trading or available-for-sale are eliminated in the consolidated financial statements through equity. Treasury share derivatives are recognized differently depending on how they are unwound: as equity instruments, if they are unwound by trading a fixed a number of treasury shares for a fixed amount of cash or another financial asset, and if this trade is the only possible unwinding method. In such case, the instruments are not subsequently revalued; as derivatives, if they are unwound via a net cash settlement or a a net treasury shares settlement. In such case, the fair value changes in the instruments are recorded in the income statement. A contract obligating Natixis to buy its own shares creates a liability in the amount of the discounted acquisition price, regardless of how the derivative is classified, with a corresponding entry in equity. Fees and commissions received 6.19 The method of accounting for fees and commissions received depends on the end purpose of the services rendered and the method of accounting for the financial instruments to which the service relates. Fees and commissions that form an integral part of the effective yield on an instrument, for example loan set-up fees, are recognized and amortized as an adjustment to the effective interest rate over the estimated term of the applicable loan. These fees and commissions are recognized as interest income rather than fee and commission income. Fees for services are analyzed to separately identify their various components (or performance obligations) and assign to each component the share of income due to it. Each component is then recognized in income, according to the type of services rendered and the method of accounting for the financial instruments to which the service rendered is attached: fees and commissions for ongoing services, such as guarantee a fees or management fees, are deferred over the period during which the service is provided; fees and commissions for one-off services, such as business a provider fees, are recognized in income as soon as the service is provided. If uncertainty remains regarding the measurement of a fee amount (performance fee for asset management, variable financial engineering fee, etc.), only the amount for which the Group’s entitlement is already assured given the information available on the reporting date is recognized.

Tax expenses 6.20 The tax expense for the year comprises:

tax payable by French companies at the rate of 34.43% for the a fraction of the profit exceeding €500,000 (28% of €0 to €500,000) or at the rate in force locally for foreign companies and branches; deferred taxes arising from temporary differences between the a carrying amount of assets and liabilities and their tax basis, which are calculated using the balance sheet liability method. Deferred tax assets and liabilities are calculated at the level of each tax entity in accordance with local tax rules and based on tax rates that have been enacted or substantively enacted at the date the temporary difference will reverse. Deferred taxes are not discounted. Deferred tax assets are only recognized at the reporting date if the tax entity concerned is likely to recover tax savings over a fixed time period (10 years maximum). These savings will be realized by the deduction of temporary differences or tax loss carryforwards from estimated future taxable income within that time period. Deferred tax assets and liabilities are offset at the level of each tax entity. The tax entity may either be a single entity or, if applicable, a group of entities of which it is a part, that have elected for Group tax relief. The tax rate applied to deferred tax assets in France takes into account the tax cuts voted for under the 2017 and 2018 Finance Acts. These acts provide for a gradual reduction of corporate tax, which (excluding the impact of the 3.3% social security contribution) will fall to 31% in 2019 and 28% in 2020, 26.5% in 2021 and 25% in 2022 and thereafter. As the deferral of the corporate tax rate cut in France planned for the end of 2018 by the government for large groups was not included in the laws voted for or for which voting was under way at December 31, 2018, the deferred taxes recognized at December 31, 2018 continue to be determined based on a gradual reduction of the tax rate starting from 2019. The reduction of the federal corporate tax rate from 35% to 21% voted for in the United States in December 2017 is applicable from January 1, 2018. The implementation of federal income tax reductions also includes a measure limiting the deduction of tax loss carryforwards and the implementation of a minimum profit-based tax (Base Erosion and Anti-abuse Tax [BEAT] payment). Neither of these changes were deemed likely to have a significant impact on the income gained from the reduction in the federal tax rate. All temporary differences have been recognized regardless of their recovery or payment date. The net deferred income tax balance is shown in the balance sheet under “Deferred tax assets”. The value-added contribution, or “Cotisation sur la Valeur Ajoutée des Entreprises” (CVAE), is recorded in the accounts as “Operating expenses,” since Natixis considers that its calculation is not based on net income. The Employment Competitiveness Tax Credit (CICE) was considered to fall under IAS 19—Employee Benefits. As a result, this tax credit is presented as a deduction from the related payroll costs.

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Natixis Registration Document 2018