2012 Registration document and annual financial report - BNP Paribas

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4CONSOLIDATEDFINANCIAL STATEMENTS - YEAR ENDED 31 DECEMBER 2012Notes to the financial statements4The same method is applied to the financial statements of enterpriseslocated in hyperinflationary economies, after adjusting for the effects ofinflation by applying a general price index.Differences arising from the translation of balance sheet items and profitand loss items are recorded in shareholders’ equity under “Exchangerates” for the portion attributable to shareholders, and in “Minorityinterests” for the portion attributable to outside investors. Under theoptional treatment permitted by IFRS 1, the Group has reset to zero alltranslation differences, by booking all cumulative translation differencesattributable to shareholders and to minority interests in the openingbalance sheet at 1 January 2004 to retained earnings.On liquidation or disposal of some or all of an interest held in a foreignenterprise located outside the euro zone, leading to a change in the natureof the investment (loss of control, significant influence or joint control),the cumulative translation adjustment recorded in equity at the date ofthe liquidation or sale is recognised in the profit and loss account.Should the percentage interest held change without any modification inthe nature of the investment, the translation adjustment is reallocatedbetween the portion attributable to shareholders and that attributableto minority interests, if the enterprise is fully consolidated. For associatesand joint ventures, the portion related to the interest sold is recognisedin the profit and loss account.1.b.4Business combinations andmeasurement of goodwillBusiness combinationsBusiness combinations are accounted for using the purchase method.Under this method, the acquiree’s identifiable assets and liabilitiesassumed are measured at fair value at the acquisition date except fornon-current assets classified as assets held for sale, which are accountedfor at fair value less costs to sell.The acquiree’s contingent liabilities are not recognised in the consolidatedbalance sheet unless they represent a present obligation on theacquisition date and their fair value can be measured reliably.The cost of a business combination is the fair value, at the date ofexchange, of assets given, liabilities incurred or assumed, and equityinstruments issued to obtain control of the acquiree. Costs directlyattributable to the business combination are treated as a separatetransaction and recognised through profit or loss.Any contingent consideration is included in the cost, as soon as controlis obtained, at its fair value on the date when control was acquired.Subsequent changes in the value of any contingent considerationrecognised as a financial liability are recognised through profit or loss.The Group may recognise any adjustments to the provisional accountingwithin 12 months of the acquisition date.Goodwill represents the difference between the cost of the combinationand the acquirer’s interest in the net fair value of the identifiable assetsand liabilities of the acquiree at the acquisition date. Positive goodwillis recognised in the acquirer’s balance sheet, while negative goodwill isrecognised immediately in profit or loss, on the acquisition date. Minorityinterests are measured at their share of the fair value of the acquiree’sidentifiable assets and liabilities. However, for each business combination,the Group can elect to measure minority interests at fair value, in whichcase a proportion of goodwill is allocated to them. To date, the Grouphas never used this latter option.Goodwill is recognised in the functional currency of the acquiree andtranslated at the closing exchange rate.On the acquisition date, any previously held equity interest in the acquireeis remeasured at its fair value through profit or loss. In the case of a stepacquisition, the goodwill is therefore determined by reference to theacquisition-date fair value.Since the revised IFRS 3 is applied prospectively, business combinationscompleted prior to 1 January 2010 were not restated for the effects ofchanges to IFRS 3.As permitted under IFRS 1, business combinations that took place before1 January 2004 and were recorded in accordance with the previouslyapplicable accounting standards (French GAAP), have not been restatedin accordance with the principles of IFRS 3.Measurement of goodwillThe BNP Paribas Group tests goodwill for impairment on a regular basis.Cash-generating unitsThe BNP Paribas Group has split all its activities into cash-generatingunits (1) representing major business lines. This split is consistent with theGroup’s organisational structure and management methods, and reflectsthe independence of each unit in terms of results and managementapproach. It is reviewed on a regular basis in order to take account ofevents likely to affect the composition of cash-generating units, such asacquisitions, disposals and major reorganisations.Testing cash-generating units for impairmentGoodwill allocated to cash-generating units is tested for impairmentannually and whenever there is an indication that a unit may be impaired,by comparing the carrying amount of the unit with its recoverable amount.If the recoverable amount is less than the carrying amount, an irreversibleimpairment loss is recognised, and the goodwill is written down by theexcess of the carrying amount of the unit over its recoverable amount.(1) As defined by IAS 36.1122012 Registration document and annual financial report - BNP PARIBAS
CONSOLIDATED FINANCIAL STATEMENTS - YEAR ENDED 31 DECEMBER 2012Notes to the financial statements4Recoverable amount of a cash-generating unitThe recoverable amount of a cash-generating unit is the higher of thefair value of the unit and its value in use.Fair value is the price that would be obtained from selling the unit at themarket conditions prevailing at the date of measurement, as determinedmainly by reference to actual prices of recent transactions involvingsimilar entities or on the basis of stock market multiples for comparablecompanies.Value in use is based on an estimate of the future cash flows to begenerated by the cash-generating unit, derived from the annual forecastsprepared by the unit’s management and approved by Group ExecutiveManagement, and from analyses of changes in the relative positioningof the unit’s activities on their market. These cash flows are discountedat a rate that reflects the return that investors would require from aninvestment in the business sector and region involved.1.c FINANCIAL ASSETS AND FINANCIALLIABILITIES1.c.1Loans and receivablesLoans and receivables include credit provided by the Group, the Group’sshare in syndicated loans, and purchased loans that are not quoted in anactive market, unless they are held for trading purposes. Loans that arequoted in an active market are classified as “Available-for-sale financialassets” and measured using the methods applicable to this category.Loans and receivables are initially measured at fair value or equivalent,which is usually the net amount disbursed at inception including directlyattributable origination costs and certain types of fees or commission(syndication commission, commitment fees and handling charges) thatare regarded as an adjustment to the effective interest rate on the loan.Loans and receivables are subsequently measured at amortised cost. Theincome from the loan, representing interest plus transaction costs andfees/commission included in the initial value of the loan, is calculatedusing the effective interest method and taken to profit or loss over thelife of the loan.Commission earned on financing commitments prior to the inception ofa loan is deferred and included in the value of the loan when the loanis made.Commission earned on financing commitments when the probability ofdrawdown is low, or when there is uncertainty as to the timing andamount of drawdowns, is recognised on a straight-line basis over thelife of the commitment.1.c.2Regulated savings and loan contractsHome savings accounts (Comptes Épargne-Logement – “CEL”) and homesavings plans (Plans d’Épargne Logement – “PEL”) are governmentregulatedretail products sold in France. They combine a savings phaseand a loan phase which are inseparable, with the loan phase contingentupon the savings phase.These products contain two types of obligations for BNP Paribas: anobligation to pay interest on the savings for an indefinite period, at arate set by the government at the inception of the contract (in the caseof PEL products) or at a rate reset every six months using an indexationformula set by law (in the case of CEL products); and an obligation to lendto the customer (at the customer’s option) an amount contingent uponthe rights acquired during the savings phase, at a rate set at the inceptionof the contract (in the case of PEL products) or at a rate contingent uponthe savings phase (in the case of CEL products).The Group’s future obligations with respect to each generation (in thecase of PEL products, a generation comprises all products with the sameinterest rate at inception; in the case of CEL products, all such productsconstitute a single generation) are measured by discounting potentialfuture earnings from at-risk outstandings for that generation.At-risk outstandings are estimated on the basis of a historical analysisof customer behaviour, and are equivalent to:■ for the loan phase: statistically probable loans outstanding and actualloans outstanding;■ for the savings phase: the difference between statistically probableoutstandings and minimum expected outstandings, with minimumexpected outstandings being deemed equivalent to unconditional termdeposits.Earnings for future periods from the savings phase are estimated as thedifference between the reinvestment rate and the fixed savings interestrate on at-risk savings outstanding for the period in question. Earningsfor future periods from the loan phase are estimated as the differencebetween the refinancing rate and the fixed loan interest rate on at-riskloans outstanding for the period in question.The reinvestment rate for savings and the refinancing rate for loansare derived from the swap yield curve and from the spreads expectedon financial instruments of similar type and maturity. Spreads aredetermined on the basis of actual spreads on fixed rate home loans inthe case of the loan phase and products offered to individual clients inthe case of the savings phase. In order to reflect the uncertainty of futureinterest rate trends, and the impact of such trends on customer behaviourmodels and on at-risk outstandings, the obligations are estimated usingthe Monte-Carlo method.Where the sum of the Group’s estimated future obligations with respectto the savings and loan phases of any generation of contracts indicates apotentially unfavourable situation for the Group, a provision is recognised(with no offset between generations) in the balance sheet in “Provisionsfor contingencies and charges”. Movements in this provision arerecognised as interest income in the profit and loss account.42012 Registration document and annual financial report - BNP PARIBAS 113
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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 ADEQUACYAnnual ri
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5RISKSAND CAPITAL ADEQUACYCapital m
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5RISKSAND CAPITAL ADEQUACYSovereign
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5RISKSAND CAPITAL ADEQUACYLiquidity
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5RISKSAND CAPITAL ADEQUACYAppendice
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5RISKSAND CAPITAL ADEQUACYAppendix
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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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2012 Registration document and annual financial report - BNP Paribas

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