2018 REGISTRATION DOCUMENT AND ANNUAL FINANCIAL REPORT

2018 Registration document and annual fi nancial report - BNP PARIBAS 271

4CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018

Statutory Auditors report on the consolidated fi nancial statements

Assessment of the impacts of the ﬁ rst-time application of IFRS 9 Financial instruments (See Notes 1.a.1, 1.e.5, 1.e.6, 2b, 3.a, 3.c, 3.d, 3.h and 5.a to 5.h to the consolidated fi nancial statements)

Description of risk How our audit addressed this risk

The Group applied IFRS 9 (phases I and II), which replaces IAS 39 Financial Instruments: Recognition and Measurement , from 1 January 2018 to its fi nancial assets and liabilities, with the exception of those of the Insurance business line.

This standard signifi cantly changes the rules concerning the classifi cation, measurement and impairment of fi nancial assets.

In particular, the calculation of impairment losses according to the expected credit losses model requires management to exercise judgement, as described below. The fi rst-time application of IFRS 9 led BNP Paribas to recognise a negative impact of EUR 2.5 billion, net of tax, in equity, to publish an opening balance sheet at 1 January 2018 and to provide detailed disclosures on the transition from the balance sheet at 31 December 2017 prepared under IAS 39 to the opening balance sheet at 1 January 2018 prepared under IFRS 9 (excluding insurance assets and liabilities).

Determining this impact and detailed information required reliance on many assumptions and judgements as well as new operating processes. Given the complexity of the application of IFRS 9 and the signifi cance of the information published, we deemed the determination of the impact of the fi rst-time application of IFRS 9 and the related disclosures to be a key audit matter.

We assessed the procedures deployed by BNP Paribas to implement the new standard. We asked our experts to assess the analyses performed and the models used by BNP Paribas to apply the new IFRS 9 accounting principles.

With respect to the classifi cation and measurement of assets and liabilities, our work consisted in:

■ examining the analyses performed and the accounting principles defi ned by the Group and their implementation by the main business lines;

■ based on a sample of contracts, verifying the analysis prepared by BNP Paribas as regards the classifi cation of fi nancial assets;

■ assessing the models used for managing fi nancial assets.

With respect to expected credit losses, our audit work consisted in: ■ assessing the compliance of BNP Paribas accounting principles with IFRS 9 and the methods implemented by the business lines by examining the independent verifi cations performed internally where appropriate;

■ based on a sample of models, assessing the implementation of said models in IT systems and the fi nancial reporting;

■ performing an independent calculation of the expected losses based on a sample of contracts.

We also assessed the appropriateness of the disclosures provided in the notes to the consolidated fi nancial statements in relation to the impact of the fi rst-time application of IFRS 9.