CFM INDOSUEZ Wealth Management - 2019 annual report

Business model Debt instruments Hold to Collect Hold to Collect and Sell Other / Sell SPPI test Passed Amortised cost Fair value through other comprehensive income recyclable to income Fair value through profit or loss Not passed Fair value through profit or loss Fair value through profit or loss Fair value through profit or loss (SPPI test) 61 Debt instruments at amortised cost Debt instruments are measured at amortised cost if they are eligible for the Hold to Collect business model and if they fulfil the SPPI criteria. They are recorded on the settlement date and their initial valuation also includes accrued coupons and transaction costs. This category of financial assets is subject to impairment under the conditions described in the paragraph on Provisioning for credit risk. Debt instruments at fair value through other comprehensive income recyclable to income Debt instruments are measured at fair value through other comprehensive income recyclable to income if they are eligible for the Hold to Collect and Sell business model and if they fulfil the SPPI criteria. They are recorded on the trade date and their initial valuation also includes accrued coupons and transaction costs. The amortisation of any premiums / discounts and transaction costs on fixed income securities is recognised in profit or loss. These financial assets are subsequently measured at fair value and changes in fair value are recorded in other comprehensive income recyclable to income, offset against balances outstanding (excluding accrued interest). In the event of sale, these changes are transferred to income. This category of financial instruments is subject to impairment under the conditions described in the paragraph on Provisioning for credit risk (with no impact on the fair value recorded in the balance sheet). Debt instruments at fair value through profit or loss Debt instruments are measured at fair value through profit or loss in the following cases: - The instruments are classified in portfolios consisting of financial assets held for trading or whose main purpose is their sale; Financial assets held for trading are assets acquired or generated by the business primarily for the purpose of selling them in the short term or as part of a portfolio of instruments jointly managed for the purpose of obtaining a profit related to short-term price fluctuations or an arbitraging margin. Although contractual cash flows are collected during the time that CFM Indosuez Wealth Group holds the assets, the collection of these contractual cash flows is not essential but incidental. - The instruments do not meet the SPPI test criteria. This is particularly the case for UCITS; - The instruments are classified in portfolios that CFM Indosuez Wealth chooses to recognise fair value in order to reduce a difference in accounting treatment in the income statement. In this case, these instruments are designated at fair value through profit or loss. Financial assets measured at fair value through profit or loss are initially recognised at fair value, excluding transaction costs (which are directly recorded in profit or loss) and including accrued interest. They are subsequently measured at fair value and changes in fair value are recognised in income, under net banking income, offset against balances outstanding. No impairment is recorded on these financial assets. Debt instruments measured at fair value through profit or loss by default are recorded on the settlement date. Debt instruments designated at fair value through profit or loss are recorded on the trade date. Equity instruments Equity instruments are, by default, recorded at fair value through profit or loss unless they qualify for an irrevocable option for valuation at fair value through other comprehensive income not recyclable to income and provided they are not held for trading purposes. Equity instruments at fair value through profit or loss inancial assets measured at fair value through profit or loss are initially recognised at fair value, excluding transaction costs (which are directly recorded in profit or loss). They are recorded on the settlement date. They are subsequently measured at fair value and changes in fair value are recognised in income, under net banking income, offset against balances outstanding. No impairment is recorded on these financial assets. Equity instruments at fair value through other comprehensive income not recyclable to income (irrevocable option) The irrevocable option to recognise equity instruments at fair value through other comprehensive income not recyclable to income is applied per transaction (line by line) and is effective from the date of initial recognition. These securities are recorded on the trade date. The initial fair value includes transaction costs. In subsequent valuations, changes in fair value are recorded in other comprehensive income not recyclable to income. In the event of sale, these changes are not recycled to income; the profit or loss is recognised in other comprehensive income. Only dividends are recognised in income. Reclassification of financial assets In the event of a major change in the business model for the management of financial assets (new business, acquisition of entities, sale or discontinuation of a significant activity), a reclassification of these financial assets is required. The reclassification applies to all the financial assets in the portfolio from the date of reclassification. In other cases, the business model remains unchanged for existing financial assets. If a new business model is identified, it applies prospectively to new financial assets grouped in a new management portfolio. Annual Financial Statements 2019