2018 Registration document and annual fi nancial report - BNP PARIBAS 171
4CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
4
Notes to the fi nancial statements
Securities temporarily acquired under reverse repurchase agreements are not recognised in the Group s balance sheet. The corresponding receivable is recognised at amortised cost under the appropriate Financial assets at amortised cost category in the balance sheet, except in the case of reverse repurchase agreements contracted for trading purposes, for which the corresponding receivable is recognised in Financial assets at fair value through profi t or loss .
Securities lending transactions do not result in derecognition of the lent securities, and securities borrowing transactions do not result in recognition of the borrowed securities on the balance sheet. In cases where the borrowed securities are subsequently sold by the Group, the obligation to deliver the borrowed securities on maturity is recognised on the balance sheet under fi nancial liabilities at fair value through profi t or loss .
1.e.12 Offsetting financial assets and financial liabilities
A fi nancial asset and a fi nancial liability are offset and the net amount presented in the balance sheet if, and only if, the Group has a legally enforceable right to set off the recognised amounts, and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Repurchase agreements and derivatives that meet the two criteria set out in the accounting standard are offset in the balance sheet.
1.f ACCOUNTING STANDARDS SPECIFIC TO INSURANCE ACTIVITIES
The specifi c accounting policies relating to assets and liabilities generated by insurance contracts and fi nancial contracts with a discretionary participation feature written by fully consolidated insurance companies are retained for the purposes of the consolidated fi nancial statements. These policies comply with IFRS 4.
Financial assets and liabilities of insurance entities fall under IAS 39, as explained in note 1.a.1.
All other insurance company assets and liabilities are accounted for using the policies applied to the Group s assets and liabilities generally, and are included in the relevant balance sheet and profi t and loss account headings in the consolidated fi nancial statements.
1.f.1 Profit and loss account
Income and expenses recognised under insurance contracts issued by the Group are presented in the income statement under Net income from insurance activities .
This heading in the income statement includes premiums earned , net gain in investment contracts with no discretionary participation feature, net investment income (including income on investment property and impairment on shares and other equity instruments ), technical changes related to contracts; (including commissions), net charges for ceded reinsurance and policy benefi t expenses.
Other income and expenses relating to insurance activities (i.e. recorded by insurance entities) are presented in the other income statement headings according to their nature.
1.f.2 Financial investments of insurance activities
Investments of insurance activities mainly include:
■ investments by insurance entities in fi nancial instruments that are recognised in accordance with the principles of IAS 39, which include investments representing technical reserves of insurance activities and notably unit-linked contracts;
■ derivative instruments with a positive fair value. Group insurance entities underwrite derivative instruments for hedging purposes;
■ investment properties;
■ equity method investments;
■ and reinsurers share in liabilities arising from insurance and investment contracts.
Investments in financial instruments Financial investments held by the Group s insurance entities are classifi ed in one of the four categories provided for in IAS 39: fi nancial assets at fair value through profi t or loss, held-to-maturity fi nancial assets, loans and receivables and available-for-sale fi nancial assets.
Financial assets at fair value through profit or loss
The category of Financial assets at fair value through profi t or loss includes derivatives and fi nancial assets that the Group has elected to recognise and measure at fair value through profi t or loss at inception, in accordance with the option offered by IAS 39.
Financial assets may be designated at fair value through profi t or loss in the following cases (in accordance with IAS 39):
■ hybrid financial instruments containing one or more embedded derivatives which otherwise would have been separated and accounted for separately. An embedded derivative is such that its economic characteristics and risks are not closely related to those of the host contract;
■ where using the option enables the entity to eliminate or signifi cantly reduce a mismatch in the measurement and accounting treatment of assets and liabilities that would arise if they were to be classifi ed in separate accounting categories;
■ when the group of financial assets and/or financial liabilities is managed and measured on the basis of fair value, in accordance with a documented risk management and investment strategy.
Investments held in respect of insurance or investment contracts where the fi nancial risk is borne by policyholders (unit-linked contracts) are recognised at fair value through profi t or loss.
When the Group measures at fair value through profi t or loss investments made in respect of its insurance activities in entities over which it exercises signifi cant infl uence or joint control, these investments are presented under the line Financial assets at fair value through profi t or loss (see §1.b.2).
Financial instruments classifi ed in this category are initially recognised at their fair value, with transaction costs being directly recognised in the income statement.
