2012 Registration document and annual financial report - BNP Paribas

4CONSOLIDATEDFINANCIAL STATEMENTS - YEAR ENDED 31 DECEMBER 2012Notes to the financial statements41.d ACCOUNTING STANDARDS SPECIFIC TOINSURANCE BUSINESSThe specific accounting policies relating to assets and liabilities generatedby insurance contracts and financial contracts with a discretionaryparticipation feature written by fully consolidated insurance companiesare retained for the purposes of the consolidated financial statements.These policies comply with IFRS 4.All other insurance company assets and liabilities are accounted for usingthe policies applied to the Group’s assets and liabilities generally, andare included in the relevant balance sheet and profit and loss accountheadings in the consolidated financial statements.1.d.1AssetsFinancial assets and non-current assets are accounted for using thepolicies described elsewhere in this note. The only exceptions are sharesin civil property companies (SCIs) held in unit-linked insurance contractportfolios, which are measured at fair value on the balance sheet datewith changes in fair value taken to profit or loss.Financial assets representing technical provisions related to unit-linkedbusiness are shown in “Financial assets at fair value through profit orloss”, and are stated at the realisable value of the underlying assets atthe balance sheet date.1.d.2LiabilitiesThe Group’s obligations to policyholders and beneficiaries are shownin “Technical reserves of insurance companies” and are comprisedof liabilities relating to insurance contracts carrying a significantinsurance risk (e.g., mortality or disability) and to financial contractswith a discretionary participation feature, which are covered by IFRS 4.A discretionary participation feature is one which gives life policyholdersthe right to receive a share of actual profits as a supplement to guaranteedbenefits.Liabilities relating to other financial contracts, which are covered byIAS 39, are shown in “Due to customers”.Unit-linked contract liabilities are measured in reference to the fair valueof the underlying assets at the balance sheet date.The technical reserves of life insurance subsidiaries consist primarilyof mathematical reserves, which generally correspond to the surrendervalue of the contract.The benefits offered relate mainly to the risk of death (term life insurance,annuities, loan repayment, guaranteed minimum on unit-linked contracts)and, for borrowers’ insurance, to disability, incapacity and unemploymentrisks. These types of risks are controlled by the use of appropriatemortality tables (certified tables in the case of annuity-holders), medicalscreening appropriate to the level of benefit offered, statistical monitoringof insured populations, and reinsurance programmes.Non-life technical reserves include unearned premium reserves(corresponding to the portion of written premiums relating to futureperiods) and outstanding claims reserves, inclusive of claims handlingcosts.The adequacy of technical reserves is tested at the balance sheet date bycomparing them with the average value of future cash flows as derivedfrom stochastic analyses. Any adjustments to technical reserves are takento the profit and loss account for the period. A capitalisation reserveis set up in individual statutory accounts on the sale of amortisablesecurities in order to defer part of the net realised gain and hencemaintain the yield to maturity on the portfolio of admissible assets. In theconsolidated financial statements, the bulk of this reserve is reclassifiedto “Policyholders’ surplus” on the liabilities side of the consolidatedbalance sheet; a deferred tax liability is recognised on the portion takento shareholders’ equity.This item also includes the policyholders’ surplus reserve resultingfrom the application of shadow accounting. This represents the interestof policyholders, mainly within French life insurance subsidiaries, inunrealised gains and losses on assets where the benefit paid underthe policy is linked to the return on those assets. This interest is anaverage derived from stochastic analyses of unrealised gains and lossesattributable to policyholders in various scenarios.In the event of an unrealised loss on shadow accounted assets, apolicyholders’ loss reserve is recognised on the assets side of theconsolidated balance sheet in an amount equal to the probable deductionfrom the policyholders’ future profit share. The recoverability of thepolicyholders’ loss reserve is assessed prospectively, taking into accountpolicyholders’ surplus reserves recognised elsewhere, capital gainson financial assets that are not shadow accounted due to accountingelections made (held-to-maturity financial assets and propertyinvestments measured at cost) and the company’s ability and intentionto hold the assets carrying the unrealised loss. The policyholders’ lossreserve is recognised symmetrically with the corresponding assetsand shown on the assets side of the balance sheet under the line item“Accrued income and other assets”.1.d.3Profit and loss accountIncome and expenses arising on insurance contracts written by the Groupare recognised in the profit and loss account under “Income from otheractivities” and “Expenses on other activities”.Other insurance company income and expenses are included in therelevant profit and loss account item. Consequently, movements in thepolicyholders’ surplus reserve are shown on the same line as gains andlosses on the assets that generated the movements.1.e PROPERTY, PLANT, EQUIPMENT ANDINTANGIBLE ASSETSProperty, plant and equipment and intangible assets shown in theconsolidated balance sheet are composed of assets used in operationsand investment property.Assets used in operations are those used in the provision of services orfor administrative purposes, and include non-property assets leased bythe Group as lessor under operating leases.1202012 Registration document and annual financial report - BNP PARIBAS