2018 Registration document and annual fi nancial report - BNP PARIBAS 175

4CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018

4

Notes to the fi nancial statements

1.j EMPLOYEE BENEFITS Employee benefi ts are classifi ed in one of four categories:

■ short-term benefi ts, such as salary, annual leave, incentive plans, profi t-sharing and additional payments;

■ long-term benefi ts, including compensated absences, long-service awards, and other types of cash-based deferred compensation;

■ termination benefi ts;

■ post-employment benefi ts, including top-up banking industry pensions and retirement bonuses in France and pension plans in other countries, some of which are operated through pension funds.

Short-term benefits

The Group recognises an expense when it has used services rendered by employees in exchange for employee benefi ts.

Long-term benefits

These are benefi ts, other than short-term benefi ts, post-employment benefits and termination benefits. This relates, in particular, to compensation deferred for more than 12 months and not linked to the BNP Paribas share price, which is accrued in the fi nancial statements for the period in which it is earned.

The actuarial techniques used are similar to those used for defi ned- benefi t post-employment benefi ts, except that the revaluation items are recognised in the profi t and loss account and not in equity.

Termination benefits

Termination benefi ts are employee benefi ts payable in exchange for the termination of an employee s contract as a result of either a decision by the Group to terminate a contract of employment before the legal retirement age, or a decision by an employee to accept voluntary redundancy in exchange for these benefi ts. Termination benefi ts due more than 12 months after the balance sheet date are discounted.

Post-employment benefits

In accordance with IFRS, the BNP Paribas Group draws a distinction between defi ned-contribution plans and defi ned-benefi t plans.

Defi ned-contribution plans do not give rise to an obligation for the Group and do not require a provision. The amount of the employer s contributions payable during the period is recognised as an expense.

Only defi ned-benefi t schemes give rise to an obligation for the Group. This obligation must be measured and recognised as a liability by means of a provision.

The classifi cation of plans into these two categories is based on the economic substance of the plan, which is reviewed to determine whether the Group has a legal or constructive obligation to pay the agreed benefi ts to employees.

Post-employment benefi t obligations under defi ned-benefi t plans are measured using actuarial techniques that take demographic and fi nancial assumptions into account.

The net liability recognised with respect to post-employment benefi t plans is the difference between the present value of the defi ned-benefi t obligation and the fair value of any plan assets.

The present value of the defi ned-benefi t obligation is measured on the basis of the actuarial assumptions applied by the Group, using the projected unit credit method. This method takes into account various parameters, specifi c to each country or Group entity, such as demographic assumptions, the probability that employees will leave before retirement age, salary infl ation, a discount rate, and the general infl ation rate.

When the value of the plan assets exceeds the amount of the obligation, an asset is recognised if it represents a future economic benefi t for the Group in the form of a reduction in future contributions or a future partial refund of amounts paid into the plan.

The annual expense recognised in the profi t and loss account under Salaries and employee benefi ts , with respect to defi ned-benefi t plans includes the current service cost (the rights vested by each employee during the period in return for service rendered), the net interests linked to the effect of discounting the net defi ned-benefi t liability (asset), the past service cost arising from plan amendments or curtailments, and the effect of any plan settlements.

Remeasurements of the net defi ned-benefi t liability (asset) are recognised in shareholders equity and are never reclassifi ed to profi t or loss. They include actuarial gains and losses, the return on plan assets and any change in the effect of the asset ceiling (excluding amounts included in net interest on the defi ned-benefi t liability or asset).

1.k SHARE-BASED PAYMENTS Share-based payment transactions are payments based on shares issued by the Group, whether the transaction is settled in the form of equity or cash of which the amount is based on trends in the value of BNP Paribas shares.

IFRS 2 requires share-based payments granted after 7 November 2002 to be recognised as an expense. The amount recognised is the value of the share-based payment granted to the employee.

The Group grants employees stock subscription option plans and deferred share-based or share price-linked cash-settled compensation plans, and also offers them the possibility to purchase specially-issued BNP Paribas shares at a discount, on condition that they retain the shares for a specifi ed period.

Stock option and share award plans

The expense related to stock option and share award plans is recognised over the vesting period, if the benefi t is conditional upon the grantee s continued employment.