2012 Registration document and annual financial report - BNP Paribas

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6INFORMATIONON THE PARENT COMPANY FINANCIAL STATEMENTSNotes to the parent company financial statements6AMOUNTS DUE TO CREDIT INSTITUTIONSAND CUSTOMERSAmounts due to credit institutions are classified into demand accounts,time deposits and borrowings. Customer deposits are classified intoregulated savings accounts and other customer deposits. These sectionsinclude securities and other assets sold under repurchase agreements.Accrued interest is recorded on a separate line.DEBT SECURITIESDebt securities are broken down between retail certificates of deposit,interbank market securities, negotiable certificates of deposit, bonds andother debt instruments. This section does not include subordinated noteswhich are recorded under “Subordinated debt“.Accrued interest on debt securities is recorded on a separate line of thebalance sheet and is debited to the profit and loss account.Bond issue and redemption premiums are amortised using the yieldto-maturitymethod over the life of the bonds. Bond issuance costs areamortised using the straight-line method over the life of the bonds.PROVISIONS FOR INTERNATIONALCOMMITMENTSProvisions for international commitments are based on the evaluation ofnon-transfer risk related to the future solvency of each of the countriesat risk and on the systemic credit risk incurred by debtors in the eventof a constant and durable deterioration in the overall situation andeconomies of these countries. Additions and reversals of these provisionsare reflected in the profit and loss account under “Cost of risk“.PROVISIONS FOR ITEMS NOT RELATED TOBANKING TRANSACTIONSBNP Paribas SA records provisions for clearly identified contingenciesand charges of uncertain timing or amount. In accordance with currentregulations, these provisions for items not related to banking transactionsmay be recorded only if the Bank has an obligation to a third party atyear-end, there is a high probability of an outflow of resources to thethird party, and no equivalent economic benefits are expected in returnfrom the third party.COST OF RISKThe “Cost of risk“ line item includes expenses arising from the identificationof counterparty and credit risks, litigation, and fraud inherent to bankingtransactions conducted with third parties. Net movements in provisionsthat do not fall under the category of such risks are classified in the profitand loss account according to their type.FORWARD FINANCIAL INSTRUMENTSForward financial instruments are purchased on various markets for useas specific or general hedges of assets and liabilities, or for transactionpurposes.The Bank’s commitments related to these instruments are recognisedoff-balance sheet at nominal value. The accounting treatment of theseinstruments depends on the corresponding investment strategy.Derivatives held for hedging purposesIncome and expenses related to forward derivatives held for hedgingpurposes and designated to one instrument or a group of homogeneousinstruments are recognised in income symmetrically with the income andexpenses on the underlying instrument, and under the same heading.Income and expenses related to forward financial instruments used tohedge overall interest rate risk are recognised in income on a pro ratabasis.Derivatives held for trading purposesDerivatives held for trading purposes can be traded on organised marketsor over-the-counter.Derivatives held within a trading book are valued at market value on thebalance sheet date. The corresponding gains and losses (realised andunrealised) are recognised in income under “Gains (losses) on tradingaccount securities“.The market value is determined from either:■ the listed price, if one is available;■ or a valuation method using recognised financial models and theorieswith parameters calculated from transaction prices observed on activemarkets, or from statistical or other quantitative methods.In both cases, BNP Paribas SA makes conservative value adjustments toaccount for modelling, counterparty, and liquidity risks.Some complex derivatives, which are typically custom-made fromcombined instruments and highly illiquid, are valued using models wherecertain parameters are not observable on an active market.Until 31 December 2004, the Bank recognised gains from trading thesecomplex derivatives immediately in income.However, on 1 January 2005, the Bank began recognising these gainsin income over the period during which the valuation parameters areexpected to be unobservable. If, during this period, the parametersdo become observable or a justifiable valuation can be obtained bycomparison with recent, similar transactions on an active market, theremaining unrecognised gains are recognised directly in income.3402012 Registration document and annual financial report - BNP PARIBAS
INFORMATION ON THE PARENT COMPANY FINANCIAL STATEMENTSNotes to the parent company financial statements6Other derivatives transactionsDepending on the nature of the instruments, gains and losses onover-the-counter contracts representing isolated open positions arerecognised in income when the contracts are settled or on a pro ratabasis. A provision for unrealised losses is recognised for each group ofhomogeneous contracts.CORPORATE INCOME TAXA charge for corporate income tax is taken in the period in which therelated taxable income and expenses are booked, regardless of the periodin which the tax is actually paid. BNP Paribas SA recognises deferredtax for all temporary differences between the book value of assets andliabilities and their tax basis according to the liability method. Recognitionof deferred tax assets depends on the probability of recovery.EMPLOYEE PROFIT-SHARINGAs required by French law, BNP Paribas SA recognises employee profitsharingin the year in which the employee entitlement arises and reportsthe amount under “Salaries and employee benefit expenses“ in the profitand loss account.EMPLOYEE BENEFITSBNP Paribas SA employees receive each of the following four types ofbenefits:■ termination benefits, payable primarily in the case of early terminationof an employment contract;■ short-term benefits such as salary, annual leave, incentive plans, profitsharingand additional payments;■ long-term benefits, including compensated absences, long-serviceawards, and other types of cash-based deferred compensation;■ post-employment benefits, including top-up banking industry pensionsin France and pension plans in other countries, some of which areoperated through pension funds.Termination benefitsTermination benefits are employee benefits payable as a result of adecision by BNP Paribas SA to terminate a contract of employmentbefore the legal retirement age or by an employee to accept voluntaryredundancy in exchange for a benefit. Termination benefits due morethan 12 months after the closing date are discounted.Short-term benefitsBNP Paribas SA recognises an expense when it has used services renderedby employees in exchange for employee benefits.Long-term benefitsLong-term benefits are benefits (other than post-employment benefitsand termination benefits) which do not fall wholly due within 12 monthsafter the end of the period in which the employee renders the associatedservices. The actuarial techniques used are similar to those used fordefined benefit post-employment benefits, except that actuarial gainsand losses are recognised immediately, as are the effects of any planamendments.This relates in particular to cash compensation deferred for more than 12months, which is accrued in the financial statements for the period duringwhich the employee provides the corresponding services. If the paymentof this deferred variable compensation is subject to the employee’scontinued presence at the vesting date, the services are presumed tohave been rendered during the vesting period and the correspondingcompensation expense is recognised on a pro rata basis over that period.The expense is recognised under salaries and employee benefit expenses,with a corresponding liability in the balance sheet. It is revised to takeaccount of any non-fulfilment of the continued presence or performanceconditions and changes in the BNP Paribas share price.If there is no continued presence condition, the expense is not deferredbut recognised immediately with a corresponding liability in the balancesheet, which is then revised on each reporting date until settlement, toaccount for any performance conditions and changes in the BNP Paribasshare price.Post-employment benefitsThe post-employment benefits provided to BNP Paribas SA employees inFrance include both defined-contribution plans and defined-benefit plans.Defined contribution plans, such as Caisse Nationale d’AssuranceVieillesse and supplemental national and trade union plans that paypensions to former BNP Paribas SA employees in France, do not giverise to an obligation for BNP Paribas SA and consequently do not requirea provision. The amount of employer’s contributions payable during theperiod is recognised as an expense.Only defined benefit plans, such as the retirement packages paid forby BNP Paribas SA’s retirement fund, give rise to an obligation forBNP Paribas SA. This obligation must be measured and recognised as aliability by means of a provision.The classification of plans into these two categories is based on theeconomic substance of the plan, which is reviewed to determine whetherBNP Paribas SA has a legal or constructive obligation to pay the agreedbenefits to employees.62012 Registration document and annual financial report - BNP PARIBAS 341
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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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2CORPORATEGOVERNANCEExecutive Commi
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32012REVIEW OF OPERATIONSOutlook3.6
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32012REVIEW OF OPERATIONSLiquidity
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4CONSOLIDATEDFINANCIAL STATEMENTS -
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5RISKSAND CAPITAL ADEQUACY5.6 Count
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5RISKSAND CAPITAL ADEQUACYAnnual ri
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8GENERALINFORMATIONDocuments on dis
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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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