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

Parent company fInancial statementsNOTE 1ACCOUNTING POLICIES OF BNP PARIBAS SAThe financial statements of BNP Paribas SA have been preparedin accordance with the generally accepted accounting principlesapplicable to the French banking industry.Year-on-Year ComparisonsThe effect on opening shareholders’ equity at 1 January 2002of applying Comité de la Réglementation Comptable standardCRC 2000-06 concerning liabilities is not material. Applicationof the new standard does not affect comparisons of the threefinancial years presented in these financial statements.Up until 30 September 2002, investments in non-consolidatedundertakings, other participating interests and equitysecurities held for long-term investment were stated atthe lower of cost and fair value, corresponding mainly tothe average market price for the last 24 months or themarket value determined as close as possible to the year-end,in the case of investments that have suffered a permanentimpairment in value.Since that date, fair value is determined based on availableinformation using a multi-criteria valuation approach,including the discounted future cash flows, sum-of-the digitsand net asset value methods as well as analysis of ratioscommonly used to assess future yields and exit opportunitiesfor each line of securities (see note below on securities).Standard CRC 2002-10 relating to the depreciation,amortisation and impairment of assets – amended by standardCRC 2003-07 dated 12 December 2003 – contains measuresconcerning the date and consequences of the standard’s firsttimeapplication, which is compulsory from 1 January 2005.BNP Paribas SA has not opted for early application and is notaffected by the applicable transitional measures relating toprovisions for major repairs. Moreover, as BNP Paribas SA hasnot identified significant expenditure concerning multi-yearprogrammes for maintenance or overhaul, these standards hadno impact on opening shareholders’ equity at 1 January 2003.Standard CRC 2002-03 dealing with credit risks, theclassification methods to be applied to doubtful andrestructured loans, and loan restructurings at below marketrates of interest, has been adopted as from 1 January 2003,based on Opinion 2003-G issued by the Comité d’Urgencedu Conseil National de la Comptabilité (French NationalAccounting Board Urgent Issues Taskforce) on 18 December2003 and the press release dated 21 November 2003issued by the Conseil National de la Comptabilité (CNC).For BNP Paribas SA, application of this standard torestructured loans classified as sound carried in the balancesheet at 31 December 2003 led to the recognition of aEUR 51 million discount, recorded under provisions,corresponding to the difference between the new interestrate on restructured loans classified as sound and the marketrate prevailing on the restructuring date. The discountedinterest differential will be taken into account in determiningthe lending margin on the loans concerned. Applicationof the new standard led to the reclassification underirrecoverable loans of EUR 540 million worth of loanspreviously considered as giving rise to a country risk.The loans in question consist of restructured loans thatare once again in default. The corresponding provisions,in the amount of EUR 273 million, which were previouslyincluded in provisions for country risks, were reclassifiedin 2003 under provisions for specific risks (note 6).This standard also introduced two sub-categories of loans:sound loans restructured not at market terms, whichare included under sound loans, and irrecoverable loanswhich are included under doubtful loans.The Comité d’Urgence’s opinion dated 21 January 2004provides guidelines on the accounting treatment ofthe consequences of certain provisions of the PensionsReform Act (Act no. 2003-775 dated 21 August 2003).Under the new rules, employees can elect to retire beforethe age of 65, but cannot be required to do so by theiremployer. The statutory retirement bonus payable whenthey retire is subject to payroll taxes. Previously, retirementbonuses paid to employees who retired at their employer’srequest were exempt from payroll taxes. The actuarialassumptions used to calculate the related benefit obligationhave been revised to take account of these changes, leadingto an additional cost of EUR 199 million in 2003 (see note 29)in order to provide for the obligation in full, in accordancewith Group policies.Interbank and Money-market Items, Customer Items (Assets)Amounts due from credit institutions include all subordinatedand unsubordinated loans made in connection with bankingtransactions with credit institutions, with the exception of273BNP PARIBAS - ANNUAL REPORT 2004