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4CONSOLIDATED FINANCIAL STATEMENTS1.4 Consolidation principles and methods (IAS 27, 28, 31)Scope of consolidationThe consolidated fi nancial statements include the accounts ofCrédit Agricole CIB and of all companies over which Crédit AgricoleCIB exercises control, in accordance with IAS 27, IAS 28and IAS 31. Control is presumed to exist when Crédit AgricoleCIB owns, directly or indirectly, 20% or more of the voting power.• Defi nition of controlIn accordance with international standards, all entities falling underCrédit Agricole CIB’s exclusive control, joint control or signifi -cant infl uence are consolidated, providing that their contributionis deemed to be material and that they are not covered under theexclusions described below.Materiality is assessed in the light of three main criteria representinga percentage of the consolidated balance sheet, the consolidatedshareholder’s equity and the consolidated income statement.Exclusive control is presumed to exist if Crédit Agricole CIB ownsover half of the existing or potential voting rights in an entity,whether directly or indirectly through subsidiaries, except if, inexceptional circumstances, it can be clearly demonstrated thatsuch ownership does not give it control. Exclusive control alsoexists if Crédit Agricole CIB, as the owner of half or less than halfof the voting rights (including potential voting rights) in an entity,holds majority power within management bodies.Joint control is exercised in joint ventures in which each of the twoor more co-owners are bound by a contractual contribution thatprovides for joint control.Signifi cant infl uence is defi ned as the power to participate in thefi nancial and operating policy decisions of the investee but isnot control. Crédit Agricole CIB is presumed to have signifi cantinfl uence if it owns 20% or more of the voting rights in an entity,whether directly or indirectly through subsidiaries.• Consolidation of special-purposeentitiesThe consolidation of special-purpose entities (structures createdto manage a transaction or group of similar transactions andmore particularly funds under sole control) is specifi ed by SIC 12.A special-purpose entity (SPE) is consolidated if it is in substancecontrolled by the Crédit Agricole CIB Group, even in the absenceof a capital link. It concerns more particularly dedicated OPCVM.Whether or not a special-purpose entity is controlled in substanceis determined by considering the following criteria:• in substance, the activities of the SPE are being conducted onbehalf of a Crédit Agricole CIB Group according to its specific business needs so that the entity obtains benefi ts from theSPE’s operation,• in substance, Crédit Agricole CIB Group has the decision-makingpowers to obtain a majority of the benefi ts of the activitiesof the SPE or, by setting up an « autopilot » mechanism, theentity has delegated these decision-making powers,• in substance, Crédit Agricole CIB Group has rights to obtainthe majority of the benefi ts of the SPE and therefore may beexposed to risks incident to the activities of the SPE; or• in substance, Crédit Agricole CIB Group retains the majority ofthe residual or ownership risks related to the SPE or its assetsin order to obtain benefi ts from its activities.• Exclusions from the scope ofconsolidationIn accordance with IAS 28.1 and IAS 31.1, investments in associatesand venturers’ interests in jointly controlled entities held byventure capital entities are excluded from the scope of consolidation.Such investments shall be measured at fair value in accordancewith IAS 39, with changes in fair value recognised in profi tand loss in the period of the change.Consolidation methodsThe consolidation methods are respectively defi ned by IAS 27, 28and 31, based on the type of control exercised by Crédit AgricoleCIB over the entities that can be consolidated, regardless of theirbusiness or of whether or not they have legal entity status:• entities under exclusive control are fully consolidated, includingentities with different account structures, even if their businessis not an extension of that of Crédit Agricole CIB;• entities under joint control are proportionally consolidated, includingentities with different account structures, even if theirbusiness is not an extension of that of Crédit Agricole CIB;• entities over which Crédit Agricole CIB exercises signifi cantinfl uence are accounted for under the equity method.Full consolidation consists of eliminating the carrying amount ofthe investment held in the consolidating company’s fi nancial statementsand aggregating all assets and liabilities carried by theconsolidated companies, and determining and separately identifyingthe value of the minority interests in their net assets andearnings.Minority interests correspond to investments that don’t givecontrol as it is defi ned by IAS 27. They include instruments thatare portions of interests and that give the right of the net assetsin the event of a liquidation. They also are identifi ed separatelyfrom the parent’s ownership interests in net assets and the profi tand loss.Proportional consolidation consists of eliminating the carryingamount of the investment held in the Group’s fi nancial statementsand aggregating a portion of the assets, liabilities and results ofthe company concerned representing the parent’s ownershipinterest.The equity method consists of eliminating the amount of the investmentheld in the Group’s fi nancial statements and accountingfor its interest in the underlying equity and profi t and loss of theparent’s ownership concerned.The change in the book value of those securities now takes intoaccount the goodwill evolution.Consolidation adjustments andeliminationsThe Group makes all adjustments required to ensure the applicationof consistent accounting policies in the consolidated fi nancialstatements, unless they are deemed not to be material.160SHELF-REGISTRATION DOCUMENT CRÉDIT AGRICOLE CIB 2010
CONSOLIDATED FINANCIAL STATEMENTS 4Intragroup transactions affecting the consolidated balance sheetand income statement are eliminated in full.Profi ts and loss resulting from intragroup asset transactions areeliminated in full. Impairment measured at the time of an intragrouptransfer are recorded.Translation of foreign subsidiaries’financial statements (IAS 21)Financial statements of subsidiaries expressed in foreign currenciesare translated into Euros in two stages:• translation, if applicable, from the foreign currency transactionsinto the functional currency (currency used in the main economicenvironment in which the entity operates);• translation from the functional currency into Euros, i.e. the presentationcurrency of the Group consolidated fi nancial statements.Assets and liabilities are translated at the closing exchangerate. Income and expenses on the income statementare translated at the average exchange rate for the period.Translation differences resulting from the translation of assets,liabilities and the income statement are recognized as a separatecomponent of shareholders’ equity.Business combinations - Goodwill(IFRS 3)Business combinations are accounted for using the acquisitionmethod in accordance with IFRS 3.On the date of acquisition, the acquiree’s identifi able assets, liabilitiesand contingent liabilities that satisfy the conditions for recognitionset out in IFRS 3 are recognised at their fair value.Restructuring liabilities are only recognised as a liability if the acquireeis under an obligation to complete the restructuring at theacquisition date.For transactions carried out after 1 January 2010, contingentfuture payments the acquirer will make are conditional on futureevents are recognised at their acquisition-date fair values if theycan be measured reliably, even though their realisation is not probable.Subsequent fair value changes in the clauses that are classified as fi nancial debts are accounted for in profi t and loss.For transactions carried out until 31 December 2009, contingentfuture payments were included in the acquisition cost of the acquireeonly when their realisation became probable even after theappropriation period of 12 months.Since 1 January 2010, non-controlling interest that are presentownership interests and entitle their holders to a proportionateshare of the entity’s net assets in the event of liquidation, can bemeasured according to the choice of the acquirer, in two ways:• at the fair value at the acquisition date,• as the present ownership instruments’ non-controlling interest’sproportionate share in the recognised amounts of the acquiree’snet identifi able assetsThis option can be exercised acquisition by acquisition.The non-controlling interests that are not present ownership interestsshall be measured at their acquisition-date fair values.The initial fair value of assets, liabilities and contingent liabilitiesmay be adjusted within a maximum period of twelve months afterthe acquisition date.Certain transactions related to the acquiree are registered separatelyfrom the business combination. It concerns particularly:• effective settlement of a pre-existing relationship between theacquirer and acquiree;• arrangements for contingent payments to employees or sellingshareholders for future services;• transactions that aim to make the acquiree or its former shareholderspay back costs payable by the acquirer.Those separated transactions are generaly accounted for in profi tand loss at the acquisition date.The consideration transferred for the acquiree ( the purchase cost)is measured as the total of fair values transferred by the acquirerat the acquisiton date in exchange for control of the acquiree ( forexample: treasury, equity instruments…)For transactions until 31 December 2009, the purchase cost alsoincluded costs directly attributable to the business combination.For the transactions carried out from 1 January 2010, the acquisition-relatedcosts are now accounted for as expenses, separatelyfrom the combination. When the probabilities of transactionare high, costs are recorded in « Net gains/ (losses) on otherassets », otherwise it is recorded in « Operating expenses ».The excess of the aggregate of the price and the amount ofany non-controlling interest over the net of the acquisitio-dateamounts of the identifi able assets acquired and the liabilitiesassumes, is recognised in the balance sheet as goodwill if theacquiree is fully or proportionately consolidated. If the acquireeis accounted for using the equity method, the excess is includedunder the aggregate « investments in affi liates ». Any negativegoodwill is immediately recognised in profi t and loss.Goodwill is carried in the balance sheet at its initial amount in thecurrency of the acquiree and translated at the year-end exchangerate.For business combinaison achieved in stages, the previously heldequity interest in the acquiree is remeasured at its acquisition datefair value and recogniase the resulting gain or loss in profi t andloss. The goodwill is measured in one step from the fair value ofthe assets acquired and the liabilities assumed on the acquisitiondate.It is tested for impairment whenever there is objective indicationthat it may be impaired and at least once a year.The assumptions to measure the non-controlling interest at theacquisition date may infl uence the measurement of goowill andof any, its impairment.For the purpose of impairment testing, goodwill is allocated tothe Cash Generating Units (CGUs) that are expected to benefi tfrom the business combination. The Group defi nes a CGU as thesmallest identifi able group of assets and liabilities within its corebusinesses that can operate on the basis of a specifi c businessmodel. Impairment testing consists of comparing the carryingamount of each CGU, including any goodwill allocated to it, withits recoverable amount.Recoverable amount is defi ned as the higher of fair value lesscosts to sell and value in use, which is the present value of thefuture cash fl ows expected to be derived from continuing use ofthe CGU, as set out in medium-term business plans prepared bythe Group for management purposes.When the recoverable amount is lower than the carrying amount,an irreversible impairment loss is recognised through profi t andloss and deducted from the goodwill allocated to the CGU.When Crédit Agricole CIB increases its ownership percentage inan entity over which it already has exclusive control, the differencebetween the purchase cost and the portion of assets arisingfrom this increase is now recognised as a deduction from theSHELF-REGISTRATION DOCUMENT CRÉDIT AGRICOLE CIB 2010 161
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CONTENTSPRESENTATION OF CRÉDIT AGR
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PRESENTATION OF CRÉDIT AGRICOLE CI
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CORPORATE GOVERNANCE 2Pierre CAMBEF
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CORPORATE GOVERNANCE 2Jean PHILIPPE
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CORPORATE GOVERNANCE 2François VEV
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2010MANAGEMENT REPORTCRÉDIT AGRICO
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