PSA - 2019 Universal Registration Document

CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2019 Notes to the Consolidated Financial Statements at 31 December 2019

This new accounting standard bases the valuation of insurance contractson a prospectiveassessmentof insurers’ commitments. Such an approachimpliesan increaseduse of complexmodels,fed by numeroushypotheses,and could requiresignificantchangesto existing models, tools and processes. Groupe PSA is currently assessing the impact on BanquePSAFinance. In 2018, the main new IFRS standardsapplicableto the Groupwas as follows (seeNote 2.4): IFRS 15– Revenue fromContracts with Customers ; n IFRS 9 – Financial Instruments . n In addition, IAS 29 Hyperinflation had been applied to the operations in Argentina (seeNote 2.5). FIRST APPLICATION IMPACT 2.2. OF IFRS 16 –ACCOUNTING PRINCIPLES GroupePSAapplied IFRS 16– Leases at 1 January2019(mandatory applicationdate). This standard replaces IAS 17 and the IFRIC 4, SIC 15andSIC 27interpretations. For the lessees, recognition is now based on a single model, resultingfrom the eliminationof the distinctionbetweenoperating leases andfinance leases. IFRS 16stipulatesthe recognitionof any leaseson the balancesheet of the lessees, with the recognitionof an asset (representingthe right-of-useof the leasedasset for the term of the lease) and of a debt (for the obligationto pay rent). For the lessors, the current distinctionbetween operating leases and finance leases remains, witha modeof recognition that is essentiallyunchanged. The assumptionsused by Groupe PSA from among the transition and permanent recognitionoptions provided by IFRS 16 are the following: Transition measures: n use of the modifiedretrospectiveapproach.No restatementof n the comparative periods. the identical classificationof asset and liability balances for n financeleasesidentifiedunderIAS 17in right-of-useassetsand leaseliabilitiesas authorized by thestandard; the lease liabilityis assessedat the presentvalue of the rental n paymentsremainingdue. The Groupmakesuse of knowledge acquiredafterthe fact,for example,to determinethe termof a leasethat contains renewal or terminationoptions; the right-of-useas at the transitiondate is equalto the liability n of the lease,adjustedfor the amountof the rentpaymentspaid in advanceor to be paid.The initialdirectcostsare includedin the valuation of the right-of-useon thetransition date; exemption of leases whose remaining term is less than n 12 monthsat 1 January2019, and the low-valueleases held by the Group; the discountrate appliedon the transitiondatecorrespondsto n the incrementalborrowingrate determinedon the remaining termof the leasesfor the entireGroup.The impactreportedin the 30 June 2019 interim financial statements has been adjustedas a consequenceof Faurecia’schangeto incremental borrowingrates on the durationrather than the terms of the leases at 2019 year-endresulting in a €39 millionincrease in Lease liabilities. the Groupopted to recorddeferredtaxes for the net amount n of temporarydifferencesresultingfrom the 1st applicationof IFRS 16.

Permanent recognition: n exemption of new short-term leases (term of less than n 12 monthsincludingeconomicincentiverenewalperiods)and low-value leases; The lease term correspondsto the non-cancellableperiod of n each lease, to whichshouldbe addedany renewaloptionthat the Groupis reasonablycertainto carryout, and any optionof terminationthat the Group is reasonablycertain to not carry out. Specifically,in the case of commercialleases in France (3-6-9 years),the Group used a maximumterm of 9 years, in accordancewith the opinionof the ANC (Autoritédes Normes Comptables) . However,IFRSInterpretationCommitteedecided on 26 Novemberthat as long as eitherthe lessoror the lessee has an economicincentivenot to terminatethe leasesuchthat it would incur a penalty on termination that is more than insignificant,the contract is enforceablebeyond the date on which the contractcan be terminated.The Group is currently assessingthe impactof this decisionon the lease liabilityand leaseassets asof January 1st 2019. The discountrate correspondsto the incrementalborrowing n rate determinedon the lease term of the leases for the entire Group; this rate is defined accordingto the duration of the contract in order to take into account the payment profiles. The incrementalborrowingrate is a default rate, to be used onlyif the interestrate implicitin the contractcannot be easily determined. On the dateof theirentryinto force,whichcorrespondsto the date on whichthe leasedassetis madeavailableto the lessee,the leases, as defined by IFRS – 16 Leases are recognised: as fixed assets (right-of-use)for the amountof the debt of the n rent payments (determined above), increased by advance paymentsmadeto the lessor,initialdirectcostsincurred,less any lease incentivesreceived,as well as an estimationof the costsof decommissioning or of refurbishingthe leasedassetaccordingto the termsof the lease, if applicable; and as financialliabilitiesfor the amount of rent paymentsover the n term of the lease as determinedabove, discountedat the rate determinedabove. These fixed assets are amortizedon a straight-linebasis, either for the termof the lease,or for theirusefullife, if it is less thanthe term of the lease or if the lease transfersownershipof the asset to the lessee,or if there is a purchaseoptionthat is reasonablycertainto be exercised. In the consolidatedstatementsof cashflows,the paymentsof lease liabilities are reported in the cash flows from financing activities, pursuant to IFRS 16 leases. IMPACT OF THE FIRST-TIME 2.3. APPLICATION OF IFRS 16 – IMPACT ON THE 2019 CONSOLIDATED FINANCIAL STATEMENTS Consolidatedstatements ofincome A. The impact of the first-time application of IFRS 16 on the consolidatedstatement of income of the year2019 concerns: the operatingincome with a positive net impact of €16 million, n stemmedfrom the positiveeffect of the non-recognitionof the lease expense for €348 million combined with the negative impactof €332 million for the amortization expense of therelated rights ofuse. the net financial income (expense) for a negative impact of n €62 million.

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PSA - GROUPE PSA - 2019 UNIVERSAL REGISTRATION DOCUMENT