2012 Registration document and annual financial report - BNP Paribas

4CONSOLIDATEDFINANCIAL STATEMENTS - YEAR ENDED 31 DECEMBER 2012Notes to the financial statements41.c.3SecuritiesCategories of securitiesSecurities held by the Group are classified into one of four categories.Financial assets at fair value through profit or lossFinancial assets at fair value through profit or loss are composed of:■ financial assets held for trading purposes;■ financial assets that the Group has designated, on initial recognition,at fair value through profit or loss using the fair value option availableunder IAS 39. The conditions for applying the fair value option are setout in section 1.c.10.Securities in this category are measured at fair value at the balancesheet date. Transaction costs are directly posted in the profit and lossaccount. Changes in fair value (excluding accrued interest on fixed-incomesecurities) are presented in the profit and loss account under “Net gain/loss on financial instruments at fair value through profit or loss”, alongwith dividends from variable-income securities and realised gains andlosses on disposal.Income earned on fixed-income securities classified into this category isshown under “Interest income” in the profit and loss account.Fair value incorporates an assessment of the counterparty risk on thesesecurities.Loans and receivablesSecurities with fixed or determinable payments that are not traded onan active market, apart from securities for which the owner may notrecover almost all of its initial investment due to reasons other thancredit deterioration, are classified as “Loans and receivables” if they donot meet the criteria to be classified as “Financial assets at fair valuethrough profit or loss.” These securities are measured and recognised asdescribed in section 1.c.1.Held-to-maturity financial assetsHeld-to-maturity financial assets are investments with fixed ordeterminable payments and fixed maturity that the Group has theintention and ability to hold until maturity. Hedges contracted to coverassets in this category against interest rate risk do not qualify for hedgeaccounting as defined in IAS 39.Assets in this category are accounted for at amortised cost using theeffective interest method, which builds in amortisation of premium anddiscount (corresponding to the difference between the purchase price andredemption value of the asset) and acquisition costs (where material).Income earned from this category of assets is included in “Interestincome” in the profit and loss account.Available-for-sale financial assetsAvailable-for-sale financial assets are fixed-income and variable-incomesecurities other than those classified as “F air value through profit or loss”or “H eld-to-maturity” or “L oans and receivables”.Assets included in the available-for-sale category are initially recordedat fair value, plus transaction costs where material. At the balancesheet date, they are remeasured at fair value, with changes in fair value(excluding accrued interest) shown on a separate line in shareholders’equity. Upon disposal, these unrealised gains and losses are transferredfrom shareholders’ equity to the profit and loss account, where they areshown on the line “Net gain/loss on available-for-sale financial assets”.The same applies in the event of impairment.Income recognised using the effective interest method for fixed-incomeavailable-for-sale securities is recorded under “Interest income” in theprofit and loss account. Dividend income from variable-income securitiesis recognised under “Net gain/loss on available-for-sale financial assets”when the Group’s right to receive payment is established.Repurchase agreements and securities lending/borrowingSecurities temporarily sold under repurchase agreements continue tobe recorded in the Group’s balance sheet in the category of securitiesto which they belong. The corresponding liability is recognised in theappropriate debt category on the balance sheet except in the case ofrepurchase agreements contracted for trading purposes where thecorresponding liability is classified under “Financial liabilities at fairvalue through profit or loss”.Securities temporarily acquired under reverse repurchase agreementsare not recognised in the Group’s balance sheet. The correspondingreceivable is recognised under “Loans and receivables” except in thecase of reverse repurchase agreements contracted for trading purposes,where the corresponding receivable is recognised under “Financial assetsat fair value through profit or loss”.Securities lending transactions do not result in derecognition of thelent securities, and securities borrowing transactions do not result inrecognition of the borrowed securities on the balance sheet. In caseswhere the borrowed securities are subsequently sold by the Group, theobligation to deliver the borrowed securities on maturity is recognisedon the balance sheet under “Financial liabilities at fair value throughprofit or loss”.Date of recognition for securities transactionsSecurities classified as at fair value through profit or loss, held-tomaturityor available-for-sale financial assets are recognised at thetrade date.Regardless of their classification (at fair value through profit or loss, loansand receivables or debt), temporary sales of securities as well as salesof borrowed securities are initially recognised at the settlement date.Securities transactions are carried on the balance sheet until the Group’srights to receive the related cash flows expire, or until the Group hassubstantially transferred all the risks and rewards related to ownershipof the securities.1142012 Registration document and annual financial report - BNP PARIBAS