2018 Registration document and annual fi nancial report - BNP PARIBAS472
6 INFORMATION ON THE PARENT COMPANY FINANCIAL STATEMENTS 31 DECEMBER 2018
6
Notes to the parent company fi nancial statements
■ Goodwill in the business is now presumed to have an unlimited period of use. It is therefore non-amortisable, without any required justifi cation. However, this is a refutable presumption, meaning that if there is a limited period for use, the goodwill must be amortised over its actual or fi xed period of use (ten years) if it is not possible to reliably assess this period. In addition, if goodwill is not amortised, it must now be tested for impairment annually regardless of whether there is any indication of impairment.
■ The merger premium is allocated to the various assets contributed as a result of mergers and similar transactions up to the limit of identifi ed unrealised gains. The amount is allocated in the dedicated sub-accounts of the assets concerned, according to the amortisation, depreciation and provisioning rules for these assets.
■ After allocation to the different underlying assets (see above), the net balance of the residual merger premium is carried to goodwill.
Gains and losses on disposals of property, plant and equipment, and intangible assets used in operations are recognised in the profi t and loss account under Net gain (loss) on disposals of fi xed assets .
DUE TO CREDIT INSTITUTIONS AND DUE TO CUSTOMERS Amounts due to credit institutions and customers are classifi ed by their initial term or their type: demand accounts and time deposits for credit institutions, and regulated savings accounts and other deposits for customers. These sections include securities and other assets sold under repurchase agreements depending on the type of counterparty. Accrued interest is recorded on a separate line.
DEBT SECURITIES Debt securities are broken down between certifi cates of deposit, interbank market securities, negotiable debt securities, bonds and other debt instruments. This section does not include subordinated notes which are recorded under subordinated debt.
Accrued interest on debt securities is recorded on a separate line of the balance sheet and is debited to the profi t and loss account.
Bond issue and redemption premiums are amortised using the yield- to-maturity method over the life of the bonds. Bond issuance costs are amortised using the straight-line method over the life of the bonds.
PROVISIONS FOR INTERNATIONAL COMMITMENTS Provisions for international commitments are based on the evaluation of non-transfer risk related to the future solvency of each of the countries at risk and on the systemic credit risk incurred by debtors in the event of a constant and durable deterioration in the overall situation and economies of these countries. Additions and reversals of these provisions are refl ected in the profi t and loss account under Cost of risk .
PROVISIONS FOR NON-BANKING TRANSACTIONS BNP Paribas SA records provisions for clearly identifi ed contingencies and charges whose timing or amount is uncertain. In accordance with current regulations, these provisions for non-banking transactions may be recorded only if the Bank has an obligation to a third party at year- end, there is a high probability of an outfl ow of resources to the third party, and no equivalent economic benefi ts are expected in return from the third party.
COST OF RISK The Cost of risk line item includes expenses arising from the identifi cation of counterparty and credit risks, litigation, and fraud inherent to banking transactions conducted with third parties. Net movements in provisions that do not fall under the category of such risks are classifi ed in the profi t and loss account according to their type.
FORWARD FINANCIAL INSTRUMENTS Forward fi nancial instruments are purchased on various markets for use as specifi c or general hedges of assets and liabilities, or for transaction purposes.
The Bank s commitments related to these instruments are recognised off-balance sheet at nominal value. The accounting treatment of these instruments depends on the corresponding investment strategy.
Derivatives held for hedging purposes
Income and expenses related to forward fi nancial instruments held for hedging purposes and designated to one instrument or a group of homogeneous instruments are recognised in income symmetrically with the income and expenses on the underlying instrument, and under the same accounting heading.
Income and expenses related to forward fi nancial instruments used to hedge overall interest rate risk are recognised in income on a prorata basis .
Derivatives held for trading purposes
Derivatives held for trading purposes can be traded on organised markets or over-the-counter.
Derivatives held within a trading book are valued at market value on the balance sheet date. The corresponding gains and losses (realised and unrealised) are recognised in income. They are recognised in income under Gains (losses) on trading account securities .
The market value is determined from either:
■ the listed price, if one is available;
■ a valuation method using recognised fi nancial models and theories with parameters calculated from transaction prices observed on active markets, or from statistical or other quantitative methods.
