2020 Universal registration document and annual financial report - BNP PARIBAS 499

6information on the Parent ComPany finanCial statements at 31 deCemBer 2020

6

Notes to the parent company financial statements

If a significant portion of the Debt securities held to maturity is sold or reclassified into a different category, the sold or reclassified securities cannot be returned to the Debt securities held to maturity category at any time during the current financial period or the following two financial years. All the securities classified as Debt securities held to maturity would then be reclassified as Securities available for sale in the medium term .

If exceptional market circumstances necessitate a change in investment strategy, and Trading account securities and Securities available for sale are reclassified as Debt securities held to maturity , the sale of any Debt securities held to maturity prior to the maturity date would not invoke the reclassification clauses in the above paragraph if the sale occurred because the securities had once again become tradable on an active market.

Equity securities held for long-term investment, investments in subsidiaries and affiliates

Equity interests include investments in subsidiaries and affiliates in which BNP Paribas SA exercises significant influence over management and investments considered strategic to BNP Paribas SA s business development. This influence is deemed to exist when BNP Paribas SA holds an ownership interest of at least 10%.

Equity securities held for long-term investment are shares and related instruments that BNP Paribas SA intends to hold on a long-term basis in order to earn a satisfactory long-term rate of return without taking an active part in the management of the issuing company, but with the intention of promoting the development of lasting business relationships by creating special ties with the issuer.

Other investments in affiliates consist of shares and other variable- income investments in companies over which BNP Paribas SA has exclusive control (i.e. companies likely to be fully consolidated into the Group).

These types of securities are recorded individually at the lower of cost and fair value.

Fair value for each security is determined on the basis of available information, including discounted future cash flows, net revalued assets and/or multiples commonly used to assess future yields. For securities listed on an active market, the fair value is considered to be the average market price over the previous one-month period.

For simplicity, listed securities acquired for less than EUR 10 million may be valued on the basis of the average closing stock market price in the month prior to closing.

Disposals, gains and losses and provision movements are recorded in the profit and loss account under Net gain (loss) on disposals of fixed assets .

Dividends are recognised as soon as payment has been approved by the Annual General Meeting or when they are received if the shareholders decision is unknown. They are recorded under Income on equities and other variable instruments .

Treasury shares

Treasury shares held by BNP Paribas SA are classified and valued as follows:

■ Treasury shares held, purchased under a market-making agreement or acquired in connection with index arbitrage transactions are recorded under Trading account securities at market price;

■ Treasury shares held for allocation to employees are recorded under Securities available for sale . Shares granted to employees of BNP Paribas SA subsidiaries are charged to the subsidiaries according to the provisions of local law;

■ Treasury shares held to be granted to employees are not impaired, but a provision is recognised for these shares based on the services provided by the employees who will receive the shares;

■ Treasury shares that are intended to be cancelled or that are not being held for either of the above reasons are included in long-term investments. Treasury shares intended to be cancelled are stated at cost. All others are stated at the lower of cost and fair value.

FIXED ASSETS Buildings and equipment are stated at acquisition cost or at the adjusted value determined in accordance with France s finance laws of 1977 and 1978. Revaluation differences on non-depreciable assets, recorded at the time of these statutory revaluations, are included in share capital.

Fixed assets are initially recognised at purchase price plus directly attributable costs, together with borrowing costs where a long period of construction or adaptation is required before the asset can be brought into service.

Software developed by BNP Paribas SA that fulfils the criteria for capitalisation is capitalised at direct development cost, which includes external costs and staff costs directly attributable to the project.

Subsequent to initial recognition, fixed assets are measured at cost less accumulated depreciation or amortisation and any impairment losses.

Fixed assets are depreciated or amortised using the straight-line method over the useful life of the asset. Depreciation and amortisation expense are recognised in the profit and loss account under Depreciation, amortisation, and provisions on property, plant and equipment and intangible assets .

The portion of recognised depreciation or amortisation that exceeds the economic amount, mainly calculated on a straight-line basis, is recorded in the balance sheet as a liability under Regulatory provisions: accelerated depreciation and amortisation . BNP Paribas SA does not calculate the deferred tax effects of accelerated depreciation and amortisation.

Where an asset consists of a number of components which may require replacement at regular intervals, or which have different uses or generate economic benefits at different rates, each component is recognised separately and depreciated using a method appropriate to that component. BNP Paribas SA has adopted the component-based approach for property used in operations.