2012 Registration document and annual financial report - BNP Paribas

6INFORMATIONON THE PARENT COMPANY FINANCIAL STATEMENTSNotes to the parent company financial statements6Post-employment benefit obligations under defined benefit plans aremeasured using actuarial techniques that take into account demographicand financial assumptions. The amount of the obligation recognised asa liability is measured on the basis of the actuarial assumptions appliedby the Group, using the projected unit credit method. This method takesinto account of various parameters such as demographic assumptions,the probability that employees will leave before retirement age, salaryinflation, a discount rate, and the general inflation rate. The value of anyplan assets is deducted from the amount of the obligation.The amount of the obligation under a plan, and the value of the planassets, may show significant fluctuations from one period to the nextdue to changes in actuarial assumptions, thereby giving rise to actuarialgains and losses. BNP Paribas SA applies the corridor method to accountfor actuarial gains and losses. Under this method, BNP Paribas SA isallowed to recognise, as from the following period and over the averageremaining service lives of employees, only that portion of actuarial gainsand losses that exceeds the greater of 10% of the present value of thegross defined-benefit obligation or 10% of the fair value of plan assetsat the end of the previous period.The effects of plan amendments on past service costs are recognised inprofit or loss over the full vesting period of the amended benefits.The annual expense recognised in the profit and loss account under“Salaries and employee benefit expenses“ with respect to defined benefitplans, is comprised of the current service cost (the rights vested in eachemployee during the period in return for services rendered), interest cost(the effect of discounting the obligation), the expected return on planassets, amortisation of actuarial gains and losses and past service costarising from plan amendments, and the effect of any plan curtailmentsor settlements.RECOGNITION OF REVENUE AND EXPENSESInterest and fees and commissions qualified as interest are recognisedon an accrual basis and include the commissions charged by the Bank aspart of an overall loan package (i.e., application fees, commitment fees,participation fees, etc.). The marginal transaction costs that the Bankmust pay when granting or acquiring loans are also spread out over theeffective life of the corresponding loan.Fees and commissions not qualified as interest that relate to the provisionof services are recognised when the service is performed or, for ongoingservices, on a prorated basis over the length of the service agreement.FOREIGN CURRENCY TRANSACTIONSForeign exchange positions are generally valued at the official year-endexchange rate. Exchange gains and losses on transactions in foreigncurrency carried out in the normal course of business are recognised inthe profit and loss account.Exchange differences arising from the conversion of assets held on a longtermbasis, including equity securities held for long-term investment, thecapital made available to branches, and other foreign equity investmentsdenominated in foreign currencies and financed in euros, are recognisedas translation adjustments for the balance sheet line items recordingthe assets.Exchange differences arising from the conversion of assets held on a longtermbasis, including equity securities held for long-term investment, thecapital made available to branches, and other foreign equity investments,denominated and financed in foreign currencies, are recognisedsymmetrically as translation differences for the corresponding financing.FOREIGN CURRENCY TRANSLATIONMonetary and non-monetary foreign currency-denominated assets andliabilities of foreign branches are translated into euros at the year-endexchange rate. Translation adjustments regarding the capital madeavailable to BNP Paribas SA branches outside of France are included in“Accrued income” and “Accrued expenses”.Note 2.HIGHLIGHTSDuring the year 2011, the three European countries, Greece, Ireland andPortugal saw a substantial deterioration in their public finances becauseof poor economic conditions and the financial crisis. This gradually causedinvestors to shun these countries’ sovereign debt, which prevented themfrom raising the resources needed to finance their public-sector deficits.In response, eurozone member-states devised a solidarity policy thatprompted them, alongside the International Monetary Fund, to set upa support system. This resulted in several support packages, first forGreece, then for Ireland and Portugal.In the second half of 2011 it was realised that Greece would struggleto meet the economic targets on which the 21 July plan was based,particularly in regards to the sustainability of its debt. This led to anotheragreement in principle regarding the basis of this plan on 26 October.The carrying value of Greek securities held was reduced by 75%, resulting3422012 Registration document and annual financial report - BNP PARIBAS