2012 Registration document and annual financial report - BNP Paribas

4CONSOLIDATEDFINANCIAL STATEMENTS - YEAR ENDED 31 DECEMBER 2012Notes to the financial statements4The cost of the mandatory five-year holding period is equivalent to thecost of a strategy involving the forward sale of shares subscribed atthe time of the capital increase reserved for employees and the cashpurchase of an equivalent number of BNP Paribas shares on the market,financed by a loan repaid at the end of a five-year period out of theproceeds from the forward sale transaction. The interest rate on theloan is the rate that would be applied to a five-year general purpose loantaken out by an individual with an average risk profile. The forward saleprice for the shares is determined on the basis of market parameters.1.j PROVISIONS RECORDED UNDERLIABILITIESProvisions recorded under liabilities (other than those relating to financialinstruments, employee benefits and insurance contracts) mainly relateto restructuring, claims and litigation, fines and penalties, and tax risks.A provision is recognised when it is probable that an outflow of resourcesembodying economic benefits will be required to settle an obligationarising from a past event, and a reliable estimate can be made of theamount of the obligation. The amount of such obligations is discounted,where the impact of discounting is material, in order to determine theamount of the provision.1.k CURRENT AND DEFERRED TAXESThe current income tax charge is determined on the basis of the tax lawsand tax rates in force in each country in which the Group operates duringthe period in which the income is generated.Deferred taxes are recognised when temporary differences arise betweenthe carrying amount of an asset or liability in the balance sheet and itstax base.Deferred tax liabilities are recognised for all taxable temporary differencesother than:■ taxable temporary differences on initial recognition of goodwill;■ taxable temporary differences on investments in enterprises underthe exclusive or joint control of the Group, where the Group is ableto control the timing of the reversal of the temporary difference andit is probable that the temporary difference will not reverse in theforeseeable future.Deferred tax assets are recognised for all deductible temporarydifferences and unused carryforwards of tax losses only to the extentthat it is probable that the entity in question will generate future taxableprofits against which these temporary differences and tax losses canbe offset.Deferred tax assets and liabilities are measured using the liability method,using the tax rate which is expected to apply to the period when the assetis realised or the liability is settled, based on tax rates and tax laws thathave been or will have been enacted by the balance sheet date of thatperiod. They are not discounted.Deferred tax assets and liabilities are offset when they arise within thesame tax group, they fall under the jurisdiction of a single tax authority,and there is a legal right to offset.Current and deferred taxes are recognised as tax income or expensesin the profit and loss account, excepted for deferred taxes relating tounrealised gains or losses on available-for-sale assets or to changes inthe fair value of instruments designated as cash flow hedges, which aretaken to shareholders’ equity.When tax credits on revenues from receivables and securities are usedto settle corporate income tax payable for the period, the tax credits arerecognised on the same line as the income to which they relate. Thecorresponding tax expense continues to be carried in the profit and lossaccount under “Corporate income tax”.1.l CASH FLOW STATEMENTThe cash and cash equivalents balance is composed of the net balanceof cash accounts and accounts with central banks, and the net balanceof interbank demand loans and deposits.Changes in cash and cash equivalents related to operating activitiesreflect cash flows generated by the Group’s operations, including cashflows related to investment property, held-to-maturity financial assetsand negotiable certificates of deposit.Changes in cash and cash equivalents related to investing activities reflectcash flows resulting from acquisitions and disposals of subsidiaries,associates or joint ventures included in the consolidated group, as wellas acquisitions and disposals of property, plant and equipment excludinginvestment property and property held under operating leases.Changes in cash and cash equivalents related to financing activitiesreflect the cash inflows and outflows resulting from transactions withshareholders, cash flows related to bonds and subordinated debt, anddebt securities (excluding negotiable certificates of deposit).1.m USE OF ESTIMATES IN THEPREPARATION OF THE F INANCIALS TATEMENTSPreparation of the financial statements requires managers of corebusinesses and corporate functions to make assumptions and estimatesthat are reflected in the measurement of income and expense in the profitand loss account and of assets and liabilities in the balance sheet, andin the disclosure of information in the notes to the financial statements.This requires the managers in question to exercise their judgement andto make use of information available at the date of the preparation ofthe financial statements when making their estimates. The actual futureresults from operations where managers have made use of estimatesmay in reality differ significantly from those estimates, mainly accordingto market conditions. This may have a material effect on the financialstatements.1242012 Registration document and annual financial report - BNP PARIBAS