La banque d'un monde qui change 2004 - BNP Paribas

on retirement bonuses should be accounted for as a planamendment. Consequently, the provision recorded in prior yearshas been written off against equity at 1 January 2004 and thepast service cost is being recognised in profit or loss over theestimated remaining working lives of the employees concerned.A provision has been recorded in the opening IFRS balancesheet, with a corresponding adjustment to equity, to coverthe Group’s obligations towards retired employees who receivesupplementary healthcare benefits under the BNP Paribasmutual insurance plan. In 2004, the Group’s obligations wereextinguished through a lump-sum payment of an amount thatwill cover all future healthcare costs of retired employees,considering forecast trends in healthcare costs and increasesin contributions payable by plan participants.• Share-based payments (IFRS 2):The cost of stock options granted to certain employees isrecognised in the profit and loss account over the option vestingperiod, with a corresponding increase in equity. This accountingtreatment has no effect on equity. Share-based deferredcompensation expenses are charged to the profit and loss accountover their vesting periods and the shares purchased for allocationto the beneficiaries are deducted from equity.• Property and equipment (IAS 16 and 36) and investmentproperty (IAS 16 and 40):The Group has elected to measure operating assets accordingto the cost model and the effects of the revaluationsperformed in 1991, 1992 and 1995 have therefore beencancelled, leading to a corresponding adjustment of equity.Investment properties held to earn rentals and for capitalappreciation are also measured according to the costmodel, except for those properties held by Group insurancecompanies in unit-linked portfolios which are measured usingthe fair value model in accordance with IAS 40.In the IFRS financial statements, properties measuredaccording to the cost model are depreciated by thecomponents method, which consists of depreciating individualcomponents of assets separately over their respective usefullives. The resulting adjustments to accumulated depreciationat 1 January 2004 have been recognised in equity. The changeof method also affects annual depreciation expense.Software (IAS 36 and 38)Software has been analysed by category, with eachcategory amortised over a different useful life. The resultingadjustments to accumulated amortisation at 1 January 2004have been recognised in equity. The change of method alsoaffects annual amortisation expense.Goodwill (IAS 36 and IFRS 3)For the purpose of applying IAS 36 and IFRS 3, the Group’sbusinesses have been analysed by cash-generating unit.Goodwill allocated to each cash-generating unit is notamortised, but is tested for impairment using the methodsprescribed in these standards.• Leases (IAS 17):According to IAS 17, contracts sold by the vehicle leasingsubsidiaries represent operating leases and the correspondingassets have therefore been reclassified under property andequipment. The vehicles are depreciated on a straight-linebasis rather than using the interest method. Depreciationschedules have been adjusted to take into account changes inresidual values, and initial direct costs incurred in negotiatingand arranging the operating leases are added to the carryingamount of the leased vehicles. The effects of these changesof method have been recognised in equity in the opening IFRSbalance sheet at 1 January 2004. The changes of method alsoaffect annual depreciation expense.• Scope of consolidation (IAS 27, 28, 31 and SIC 12):Under IAS 28, investments in associates must be accountedfor by the equity method even if they are being held for sale.Consequently, investments held in the private equity portfoliothat fulfil the relevant criteria have been included in the IFRSscope of consolidation, mainly by the equity method.In addition, certain special purpose entities, set up mainlyin connection with securitisation programmes, have beenconsolidated in accordance with interpretation SIC 12.Lastly, the accounts of associates already accounted forby the equity method in the French GAAP accounts havebeen restated in accordance with IAS/IFRS. The effect ofthe resulting changes of method has been recognised in equityin the opening IFRS balance sheet at 1 January 2004.Standards applicable as of 1 January 2005The Group applies European Commission regulation (EC)no. 2086/2004 dated 19 November 2004 endorsing IAS39 minus the provisions on the fair value option and certainprovisions relating to portfolio hedging.• Allowances for impairment losses on loans (IAS 39):Adoption of IAS 39 does not lead to any change in the criteriaapplied by the Group to identify impaired loans. However, therelated provisions must take into account expected futurecash flows from the loans, discounted at the loans’ originaleffective interest rate. The resulting increase in provisions176BNP PARIBAS - ANNUAL REPORT 2004