72 There are three business models: • The Hold to Collect model, the objective of which is to receive contractual cash flows over the lifetime of the assets. This businessmodel does not necessarily involve holding all the assets until they mature, however the sale of such assets is strictly regulated; • the Hold to Collect and Sell model, the objective of which is to both collect the contractual cash flows and sell the financial asset. The selling of financial assets and the collectingof casharebothessential in thisbusinessmodel ; and • The Other/Sell model, the main objective of which is to sell the assets. This concerns, in particular, portfolios where the aim is to collect cash flows via sales, portfolios whose performance is assessed based on fair value and portfolios of financial assets held for trading. Whenmanagement’s strategy for managing financial assets does not correspond to either the collectmodel or the collect and sell model, these financial assets are classified in a portfolio whose management model is other/sell. The contractual terms (“Solely Payments of Principal & Interest” test or “SPPI” testing): SPPI testing combines a set of criteria, examined cumulatively, to establish whether contractual cash flows match the characteristics of simple financing (principal repayments and interest payments on the remaining amount of principal due). The test is met when the financing gives entitlement only to repayment of the principal and when the payment of interest received reflects the time value ofmoney, the credit risk associated with the instrument, the other costs and risks of a conventional loancontract anda reasonablemargin, regardless of whether the interest rate is fixed or variable. In a simple loan agreement, interest is the consideration for the cost of time, the price of credit and liquidity risk over the period, and other components related to the cost of carrying the asset (e.g. administrative costs). In some cases, when this form of qualitative analysis does not allow a conclusion to be drawn, quantitative analysis (or Benchmark testing) is carried out. This additional analysis consists of comparing the contractual cash flows of the asset under reviewwith the cash flows of a benchmark asset. If the difference between the cash flows of the financial asset and the benchmark asset is considered immaterial, the asset is deemed to be simple financing. Moreover, a specific analysis is conductedwhen the financial asset is issued by special purpose entities establishing a differentiated order of payment among the holders of the financial assets by contractually linkingmultiple instruments and creating concentrations of credit risk (“tranches”). Each tranche is assigned a rank of subordination that specifies the order of distribution of cash flows generated by the structured CFM Indosuez Wealth. In this case, the “SPPI” test requires an analysis of the characteristicsofcontractual cashflowsof theassetconcerned andunderlyingassetsaccordingtothe “look-through” approach andthecredit riskborneby thetranchessubscribed, compared to the credit risk of the underlying assets. The method of accounting for debt instruments resulting from determining the business model and performing the SPPI test can be presented in the formof the diagrambelow: Debt instruments Business models Collection Collect & Sell Other / Sell SPPI Test Met Amortised cost Fair value through other comprehensive income (items that may be reclassified) Fair value through profit or loss (SPPI Test N/A) Not met Fair value through profit or loss Fair value through profit or loss Debt instruments at amortised cost Debt instruments are valued at amortised cost if they are eligible for the collect model and if theymeet the “SPPI” test. They are recorded on the settlement date and their initial valuation also includes accrued coupons and transaction costs. Amortisation of any premiums/discounts and transaction costs on loans and receivables and fixed income securities is recognised in the income statement using the effective interest rate method. This category of financial instruments is subject to expected loss adjustments (ELA) under the conditions described in the specific paragraph "Impairment and provisioning for credit risk". Debt instruments at fair value through other comprehensive income recyclable to income Debt instruments are valued at fair value through other comprehensive income on items that may be reclassified if they are eligible for the collect and sell model and if they meet the “SPPI” test. They are recorded on the trade date and their initial valuation also includes accrued coupons and transaction costs. Amortisation of any premiums or discounts and transaction costs on fixed-income securities is recognised in the income statement using the effective interest rate method. 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). If the securities are sold, these changes are transferred to the Income Statement. This category of financial instruments is subject to expected loss adjustments (ELA) under the conditions described in the specific paragraph "Impairment and
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