2012 Registration document and annual financial report - BNP Paribas

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4CONSOLIDATEDFINANCIAL STATEMENTS - YEAR ENDED 31 DECEMBER 2012Notes to the financial statements4.6 Notes to the financial statements preparedin accordance with International FinancialReporting Standards as adopted bythe European UnionNote 1SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES APPLIED BYTHE BNP PARIBAS GROUP41.a APPLICABLE ACCOUNTING STANDARDSThe consolidated financial statements of the BNP Paribas Group havebeen prepared in accordance with international accounting standards(International Financial Reporting Standards – IFRS), as adopted for usein the European Union (1) . Accordingly, certain provisions of IAS 39 onhedge accounting have been excluded, and certain recent texts have notyet undergone the approval process.In the consolidated financial statements at 31 December 2012, theGroup has adopted the amendment to IFRS 7 “Financial Instruments:Disclosures – Transfers of Financial Assets” adopted by the EuropeanUnion on 23 November 2011 (see note 5.r). This amendment has noimpact on the recognition and measurement of transactions.The introduction of other standards, which are mandatory as of 1 January2012, has no effect on the 2012 financial statements.The Group did not choose to early-adopt the new standards, amendments,and interpretations adopted by the European Union whose applicationin 2012 was optional.As of 1 January 2013, in accordance with the amendment to IAS 19“Employee Benefits” adopted in June 2012 by the European Union, theretirement benefit liability will be recognised in the Group’s balance sheettaking into account actuarial gains or losses which would not have beenrecognised or amortised at this date. This liability will thus be increasedby EUR 412 million and by EUR 570 million respectively at 1 January2012 and 31 December 2012 in the restated 2012 accounts presented inthe 2013 financial statements; the 2012 pre-tax income will thereforebe increased accordingly by EUR 7 million.On 29 December 2012, the European Union adopted the amendment toIAS 32 “Financial Instruments: Presentation – Offsetting Financial Assetsand Financial Liabilities”, IFRS 10 “Consolidated Financial Statements”,IFRS 11 “Joint Arrangements”, and the amended IAS 28 “Investments inAssociates and Joint Ventures”, mandatory for financial periods starting onor after 1 January 2014, and IFRS 13 “Fair Value Measurement”, applicableprospectively for financial periods starting on or after 1 January 2013.The Group is in the process of analysing the potential impacts of thesenew standards on the consolidated financial statements.Information on the nature and extent of risks relating to financialinstruments as required by IFRS 7 “Financial Instruments: Disclosures” andto insurance contracts as required by IFRS 4 “Insurance Contracts”, alongwith information on regulatory capital required by IAS 1 “Presentationof Financial Statements” is presented in Chapter 5 of the Annual Report.This information, which is an integral part of the notes to the BNP ParibasGroup’s consolidated financial statements, is covered by the opinion ofthe Statutory Auditors concerning the consolidated financial statements,and is identified in the Annual Report by the word “Audited”.1.b CONSOLIDATION1.b.1Scope of consolidationThe consolidated financial statements of BNP Paribas include all entitiesunder the exclusive or joint control of the Group or over which the Groupexercises significant influence, with the exception of those entities whoseconsolidation is regarded as immaterial to the Group. The consolidationof an entity is regarded as immaterial if its contribution to theconsolidated financial statements is below the following three thresholds:EUR 15 million of consolidated Revenues, EUR 1 million of consolidatedgross operating income or net income before tax, EUR 500 million oftotal consolidated assets. Companies that hold shares in consolidatedcompanies are also consolidated.Subsidiaries are consolidated from the date on which the Group obtainseffective control. Entities under temporary control are included in theconsolidated financial statements until the date of disposal.(1) The full set of standards adopted for use in the European Union can be found on the website of the European Commission at: http://ec.europa.eu/internal_market/accounting/ias_en.htm#adopted-commission.1102012 Registration document and annual financial report - BNP PARIBAS
CONSOLIDATED FINANCIAL STATEMENTS - YEAR ENDED 31 DECEMBER 2012Notes to the financial statements4The Group also consolidates special purpose entities (SPEs) formedspecifically to manage a transaction or a group of transactions withsimilar characteristics, even where the Group has no equity interest in theentity, provided that the substance of the relationship indicates that theGroup exercises control as assessed by reference to the following criteria:■ the activities of the SPE are being conducted exclusively on behalf ofthe Group, such that the Group obtains benefits from those activities;■ the Group has the decision-making and management powers to obtainthe majority of the benefits of the ordinary activities of the SPE (forexample, by the power to dissolve the SPE, to amend its bylaws, or toexercise a formal veto over amendments to its bylaws);■ the Group has the ability to obtain the majority of the benefits of theSPE, and therefore may be exposed to risks incident to the activitiesof the SPE. These benefits may be in the form of rights to some or allof the SPE’s earnings (calculated on an annual basis), to a share ofits net assets, to benefit from one or more assets, or to receive themajority of the residual assets in the event of liquidation;■ the Group retains the majority of the risks taken by the SPE in orderto obtain benefits from its activities. This would apply, for example,if the Group remains exposed to the initial losses on a portfolio ofassets held by the SPE.1.b.2Consolidation methodsEnterprises under the exclusive control of the Group are fully consolidated.The Group has exclusive control over an enterprise where it is in aposition to govern the financial and operating policies of the enterpriseso as to obtain benefits from its activities. Exclusive control is presumedto exist when the BNP Paribas Group owns, directly or indirectly, morethan half of the voting rights of an enterprise. It also exists when theGroup has the power to govern the financial and operating policies ofthe enterprise under an agreement; to appoint or remove the majorityof the members of the Board of Directors or equivalent governing body;or to cast the majority of votes at meetings of the Board of Directors orequivalent governing body.Currently exercisable or convertible potential voting rights are taken intoaccount when determining the percentage of control held.Jointly-controlled companies are consolidated using the proportionalmethod. The Group exercises joint control when, under a contractualarrangement, strategic financial and operating decisions require theunanimous consent of the parties that share control.Enterprises over which the Group exercises significant influence(associates) are accounted for by the equity method. Significant influenceis the power to participate in the financial and operating policy decisionsof an enterprise without exercising control. Significant influence ispresumed to exist when the Group holds, directly or indirectly, 20% ormore of the voting power of an enterprise. Interests of less than 20% areexcluded from consolidation unless they represent a strategic investmentand the Group effectively exercises significant influence. This appliesto companies developed in partnership with other groups, where theBNP Paribas Group participates in strategic decisions of the enterprisethrough representation on the Board of Directors or equivalent governingbody, exercises influence over the enterprise’s operational managementby supplying management systems or senior managers and providestechnical assistance to support the enterprise’s development.Changes in the net assets of associates (companies accounted for underthe equity method) are recognised on the assets side of the balancesheet under “Investments in associates” and in the relevant componentof shareholders’ equity. Goodwill on associates is also included under“Investments in associates”.If the Group’s share of losses of an associate equals or exceeds thecarrying amount of its investment in the associate, the Group discontinuesincluding its share of further losses. The investment is reported at nilvalue. Additional losses of the associate are provided for only to theextent that the Group has a legal or constructive obligation to do so, orhas made payments on behalf of the associate.Minority interests are presented separately in the consolidated profitand loss account and balance sheet within consolidated equity. Thecalculation of minority interests takes into account the outstandingcumulative preferred shares classified as equity instruments issued bysubsidiaries, when such shares are held outside the Group.Transactions resulting in a loss of control completed prior to 1 January2010 gave rise to the recognition of a gain or loss equal to the differencebetween the sale price and the Group’s share in the underlying equity. Fortransactions completed after 1 January 2010, the revised IAS 27 requiredany equity interest retained by the Group to be remeasured at its fairvalue through profit or loss.Realised gains and losses on investments in consolidated undertakingsare recognised in the profit and loss account under “Net gain on noncurrentassets”.1.b.3Consolidation proceduresThe consolidated financial statements are prepared using uniformaccounting policies for reporting like transactions and other events insimilar circumstances.Elimination of intragroup balances andtransactionsIntragroup balances arising from transactions between consolidatedenterprises, and the transactions themselves (including income, expensesand dividends), are eliminated. Profits and losses arising from intragroupsales of assets are eliminated, except where there is an indication thatthe asset sold is impaired. Unrealised gains and losses included in thevalue of available-for-sale assets are maintained in the consolidatedfinancial statements.Translation of financial statements expressedin foreign currenciesThe consolidated financial statements of BNP Paribas are prepared ineuros.The financial statements of enterprises whose functional currency isnot the euro are translated using the closing rate method. Under thismethod, all assets and liabilities, both monetary and non-monetary, aretranslated using the spot exchange rate at the balance sheet date. Incomeand expense items are translated at the average rate for the period.42012 Registration document and annual financial report - BNP PARIBAS 111
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2012REGISTRATION DOCUMENTAND ANNUAL
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2012 Registration documentand annua
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1GROUP PRESENTATION1.1 Group presen
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GROUP PRESENTATIONPresentation of a
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1GROUPPRESENTATIONBNP Paribas and i
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1GROUPPRESENTATION1282012 Registrat
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2CORPORATEGOVERNANCEBoard of Direct
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5RISKSAND CAPITAL ADEQUACY5.6 Count
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5RISKSAND CAPITAL ADEQUACYAppendice
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6INFORMATIONON THE PARENT COMPANY F
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7ARESPONSIBLE BANK: INFORMATION ON
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8GENERALINFORMATIONDocuments on dis
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8GENERALINFORMATIONFounding documen
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8GENERALINFORMATIONStatutory Audito
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9STATUTORYAUDITORSStatutory Auditor
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10PERSON RESPONSIBLE FOR THE REGIST
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11TABLE OF CONCORDANCEHeadings as l
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HEAD OFFICE16, boulevard des Italie
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