1998-Paribas Annual Report - BNP Paribas

Upon their purchase, securities held for sale are
accounted for at their acquisition price, excluding costs
and any accrued interest. The difference between the
redemption value and the purchase price is accrued to
income over the remaining life of the security, by
applying an actuarial method for zero coupon bonds
and transferable debt securities, and on a straight-line
basis for all other securities.
At year end, for each homogeneous group of securities
of the same nature, unrealized losses resulting from the
difference between book value and market value are
provided for in the accounts. Unrealized gains are not
recorded. For unlisted bonds and shares, estimated trading
value is used as market price.
Investment securities are initially accounted for at
their acquisition price, excluding costs and any accrued
interest. At year end, they are carried at cost adjusted for
amortization or accretion of the difference between the
redemption value and the acquisition price over the
remaining life of the securities. No provision is made at
year end for any shortfall of the market value of these
bonds over their book value. Provisions may be made to
cover the risk of default by the issuer of the securities.
G) SECURITIES RECEIVED (DELIVERED) UNDER
RESALE (REPURCHASE) AGREEMENT
Securities received under resale agreements are recorded
as an asset representative of the claim due from the seller.
Similarly, securities delivered under repurchase agreements
are recorded as a liability representative of the
debt due to the purchaser.
The income or expense relating to securities received or
delivered is accrued prorata temporis in the income statement.
Securities delivered under repurchase agreements are
accounted for applying the accounting principles relevant
to their portfolio classification.
H) LONG-TERM SHAREHOLDINGS
These include all equity securities held for the long-term
as well as loans related to these investments.
These securities are accounted for at purchase price
except for those held by French companies that were
revalued in 1978 as authorized by law. When significant
and exceptional costs are incurred, these are included in
the purchase price. At year end, in order to determine
PARIBAS CONSOLIDATED STATEMENTS
potential decrease in value, equity securities are valued
taking into account either the companies’ net equity
corrected for unrealized gains and losses and potential
future earnings or the market value. They are shown in
the balance sheet at the lower of cost or this valuation.
I) TECHNICAL PROVISIONS OF INSURANCE
COMPANIES
Technical provisions in life insurance are mathematic
provisions (difference between the present value of the
commitments given respectively by the insurer and the
policyholder). In non-life insurance, provisions on premiums
(portions of premiums related to future years)
and for claims, including administrative expenses, are
made.
J) LOAN LOSS PROVISIONS
Specific provisions are made for loan losses considered
likely as a result of total or partial non-payment of
doubtful debts, or because contingent commitments are
called. They are calculated on the basis of identified
risks at the closing date. Provisions are also set up to
cover risks in countries which are rescheduling their
foreign debt or which have defaulted or are facing an
acute financial crisis.
These risks include credit exposure (excluding Trade
finance), securities and commitments given, net of Coface
guarantees and cash collateral. Provisions established for
doubtful debt are deducted from assets. Provisions on
contingent liabilities and for country risks are included
in liabilities, as well as other provisions that correspond
mainly to risks resulting from the adverse economic
conditions of certain sectors, which are not necessarily
allocated to individual credits.
K) PROVISIONS ASSIMILATED TO RESERVES
General provisions which do not cover any potential
business risk and which may be set up for regulatory or
tax purposes are included, net of the tax effect, in shareholders’
equity. The changes during the year are then
considered as appropriations of earnings, and not charged
or credited to the year’s income.
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