2018 Registration document and annual fi nancial report - BNP PARIBAS186

4 CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018

4

Notes to the fi nancial statements

The adoption of IFRS 9 provisions related to the classifi cation and measurement of fi nancial instruments led to the following impacts as of 1 January 2018:

Securities previously classifi ed as available-for-sale fi nancial assets recognised at fair value through equity:

(a) Treasury bills, Government bonds and other debt securities previously recognised as at fair value through equity for which the business model consists of collecting contractual cash fl ows have been classifi ed at amortised cost for EUR 57 billion; their cumulated changes in value, which were included in equity as at 31 December 2017 were cancelled (EUR 170 million before tax, or EUR 111 million in equity attributable to shareholders). The analysis of the managing model of securities held by Group ALM Treasury led to a split of this portfolio into approximately equivalent in size collect and collect and sell business models.

(b) By way of exception, EUR 1.5 billion for which the contractual cash fl ows do not consist solely of payments relating to principal and interest on the principal are measured at fair value through profi t and loss. Within shareholders equity, this classifi cation triggered the transfer of EUR 46 million (Group share) from Changes in assets and liabilities recognised directly in equity to Retained earnings .

(c) Investments in equity instruments such as shares were classifi ed as fi nancial instruments at fair value through profi t or loss for EUR 4.6 billion. This classifi cation triggered the transfer of EUR 938 million net unrealised gain (Group share) from Changes in assets and liabilities recognised directly in equity to Retained earnings .

(d) The option of recognising equity securities at fair value through equity was retained for EUR 2.3 billion. This classifi cation triggered the transfer of EUR 561 million net unrealised gain (Group share) from Changes in assets and liabilities recognised directly in equity that may be reclassifi ed to profi t or loss to Changes in assets and liabilities recognised directly in equity that will not be reclassifi ed to profi t or loss .

Loans and receivables and assets held to maturity recognised at amortised cost:

(e) reclassifi cation of debt securities previously included in Loans and advances into Financial assets at fair value through equity for EUR 1.5 billion, based on their collect and sell business model. A EUR 84 million difference (before tax) between the fair value of these securities and their previous net carrying amount was recognised in assets, and a EUR 59 million after tax (Group share) revaluation was recognised in changes in assets and liabilities recognised directly in equity that may be reclassifi ed to profi t or loss .

(f) reclassifi cation of loans and debt securities previously included in Loans and advances into Financial instruments at fair value through profi t or loss for respectively EUR 1 billion and EUR 1.2 billion. It is notably the case for instruments for which the cash fl ow criterion is not met: instruments indexed on a benchmark rate presenting a modifi ed time value, and securitization junior notes held. Non-signifi cant fair value adjustments have been booked in retained earnings following this reclassifi cation.

With respect to fi nancial liabilities, the main change introduced by IFRS 9 relates to the recognition of changes in fair value attributable to changes in the credit risk of the liabilities designated as at fair value through profi t or loss (fair value option), which are recognised on a separate line in shareholders equity and no longer through profi t or loss. Thus, EUR 323 million cumulated changes in value (Group share) were reclassifi ed as of 1 January 2018 from retained earnings into changes in assets and liabilities recognised directly in equity that will not be reclassifi ed to profi t or loss (g).

The main other adjustment is related to the application of the IFRS 9 provisions on classifi cation and measurement of fi nancial instruments by equity-method entities (h).