2018 Registration document and annual fi nancial report - BNP PARIBAS 163

4CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018

4

Notes to the fi nancial statements

1.d.2 Commissions and income from other activities

Commissions received with regards to banking and similar services provided (except for those that are integral part of the effective interest rate), revenues from property development and revenues from services provided in connection with lease contracts fall within the scope of IFRS 15 Revenue from Contracts with Customers .

This standard defi nes a single model for recognising revenue based on fi ve-step principles. These fi ve steps enable to identify the distinct performance obligations included in the contracts and allocate the transaction price among them. The income related to those performance obligations is recognised as revenue when the latter are satisfi ed, namely when the control of the promised goods or services has been transferred.

The price of a service may contain a variable component. Variable amounts may be recognised in the income statement only if it is highly probable that the amounts recorded will not result in a signifi cant downward adjustment.

Commission The Group records commission income and expenses in profi t or loss:

■ either over time as the service is rendered when the client receives continuous service. These include, for example, certain commissions on transactions with customers when services are rendered on a continuous basis, commissions on fi nancing commitments that are not included in the interest margin, because the probability that they give rise to the drawing up of a loan is low, commissions on fi nancial guarantees , clearing commissions on fi nancial instruments, commissions related to trust and similar activities, securities custody fees...

Commissions received under fi nancial guarantee commitments are deemed to represent the initial fair value of the commitment. The resulting liability is subsequently amortised over the term of the commitment, in Commission income;

■ or at a point in time when the service is rendered, in other cases. These include, for example, distribution fees received, loan syndication fees remunerating the arrangement service, advisory fees...

Income from other activities Income from property development as well as income from services provided in connection with lease contracts is recorded under income from other activities in the income statement.

As regards property development income, the Group records it in profi t or loss:

■ over time, when the performance obligation creates or enhances an asset on which the customer obtains control as it is created or enhanced (e.g. work in progress controlled by the client on the land in which the asset is located...), or where the service performed does not create an asset that the entity could otherwise use and gives it enforceable right to payment for performance completed to date. This is the case for contracts such as VEFA (sale in the future state of completion) in France;

■ at completion in other cases.

Regarding income from services provided in connection with lease contracts, the Group records them in profi t or loss as the service is rendered, i.e. in proportion to the costs incurred for maintenance contracts.

1.e FINANCIAL ASSETS AND LIABILITIES Financial assets, except those relating to insurance activities (see note 1.f) are classifi ed at amortised cost, at fair value through shareholders equity or at fair value through profi t or loss depending on the business model and the contractual features of the instruments at initial recognition.

Financial liabilities are classifi ed at amortised cost or at fair value through profi t or loss at initial recognition.

Financial assets and liabilities are recognised in the balance sheet when the Group becomes a party to the contractual provisions of the instrument. Purchases and sales of financial assets made within a period established by the regulations or by a convention in the relevant marketplace are recognised in the balance sheet at the settlement date.

Accounting principles applicable to fi nancial assets and liabilities for the fi nancial statements as at 31 December 2017 are presented in the 2017 Registration document.

1.e.1 Financial assets at amortised cost

Financial assets are classifi ed at amortised cost if the following two criteria are met: the business model objective is to hold the instrument in order to collect the contractual cash fl ows and the cash fl ows consist solely of payments relating to principal and interest on the principal.

Business model criterion Financial assets are managed within a business model whose objective is to hold fi nancial assets in order to collect cash fl ows through the collection of contractual payments over the life of the instrument.

The realisation of disposals close to the maturity of the instrument and for an amount close to the remaining contractual cash-fl ows, or due to an increase in the counterparty s credit risk is consistent with a business model whose objective is to collect the contractual cash fl ows ( collect ). Sales imposed by regulatory requirements or to manage the concentration of credit risk (without an increase in the asset s credit risk) are also consistent with this business model when they are infrequent or insignifi cant in value.

Cash flow criterion The cash fl ow criterion is satisfi ed if the contractual terms of the debt instrument give rise, on specifi ed dates, to cash fl ows that are solely repayments of principal and interest on the principal amount outstanding.

The criterion is not met in the event of a contractual characteristic that exposes the holder to risks or to the volatility of contractual cash fl ows that are inconsistent with those of a non-structured or basic lending arrangement. It is also not satisfi ed in the event of leverage that increases the variability of the contractual cash fl ows.