2018 Registration document and annual fi nancial report - BNP PARIBAS474

6 INFORMATION ON THE PARENT COMPANY FINANCIAL STATEMENTS 31 DECEMBER 2018

6

Notes to the parent company fi nancial statements

Post-employment benefits

The post-employment benefi ts provided to BNP Paribas SA employees in France include both defi ned-contribution plans and defi ned-benefi t plans.

Defined-contribution plans, such as Caisse Nationale d Assurance Vieillesse and supplemental national and trade union plans that pay pensions to former BNP Paribas SA employees in France, do not give rise to an obligation for BNP Paribas SA and consequently do not require a provision. The amount of employer s contributions payable during the period is recognised as an expense.

Only defi ned-benefi t plans, such as the retirement packages paid for by BNP Paribas SA s retirement fund, give rise to an obligation for BNP Paribas SA. 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 BNP Paribas SA 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 into account demographic and fi nancial assumptions. The amount of the obligation recognised as a liability 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, tailored to the country in question, 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. The value of any plan assets is deducted from the amount of the obligation. When the value of the plan assets exceeds the amount of the obligation, an asset is only recognised if it represents a future economic benefi t in the form of a reduction in future contributions or a future partial refund of amounts paid into the plan.

The amount of the obligation under a plan, and the value of the plan assets, may show signifi cant fl uctuations from one period to the next due to changes in actuarial assumptions, thereby giving rise to actuarial gains and losses. Actuarial gains and losses and the effect of limits on assets are recognised entirely in profi t or loss. Expected gains from investments are calculated at the discount rate of the corresponding commitments.

RECOGNITION OF REVENUE AND EXPENSES Interest and fees and commissions qualifi ed as interest are recognised on an accrual basis. These include the commissions charged by the Bank as part of an overall loan package (i.e., application fees, commitment fees, participation fees, etc.). The marginal transaction costs that the Bank must pay when granting or acquiring loans are also spread out over the effective life of the corresponding loan.

Fees and commissions not qualifi ed as interest that relate to the provision of services are recognised when the service is performed or, for ongoing services, on a prorata basis over the length of the service agreement.

FOREIGN CURRENCY TRANSACTIONS Foreign exchange positions are generally valued at the offi cial year-end exchange rate. Exchange gains and losses on transactions in foreign currency carried out in the normal course of business are recognised in the profi t and loss account.

Exchange differences arising from the conversion of assets held on a long- term basis, including equity securities held for long-term investment, the capital made available to branches, and other foreign equity investments denominated in foreign currencies and fi nanced in euros, are recognised as translation adjustments for the balance sheet line items recording the assets.

Exchange differences arising from the conversion of assets held on a long- term basis, including equity securities held for long-term investment, the capital made available to branches, and other foreign equity investments, denominated and financed in foreign currencies, are recognised symmetrically as translation differences for the corresponding fi nancing.

TRANSLATION OF FINANCIAL STATEMENTS EXPRESSED IN FOREIGN CURRENCIES Monetary and non-monetary foreign currency-denominated assets and liabilities of foreign branches are translated into euros at the year-end exchange rate. Translation adjustments regarding the capital made available to BNP Paribas SA branches outside of France are included in Accrued income and Accrued expenses .

Note 2 NOTES TO THE 2018 PROFIT AND LOSS ACCOUNT

2.a NET INTEREST INCOME BNP Paribas SA includes in Interest income and Interest expense all income and expenses from fi nancial instruments measured at amortised cost according to the effective interest rate method (interest, commission and expenses) and from fi nancial instruments measured at fair value

that do not meet the defi nition of a derivative instrument. The change in fair value on fi nancial instruments at fair value through profi t or loss (excluding accrued interest) is recognised under Gains (losses) on trading account securities .

Interest income and expense on derivatives accounted for as fair value hedges are included with the revenues generated by the hedged item.