CFM Indosuez Wealth Management Annual Report 2022 68 - Debt instruments that do not meet the SPPI test criteria. This is notably the case for mutual funds; - Financial instruments classified in portfolios for which CFM Indosuez Wealth chooses valuation at 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 (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 profit or loss, under Net Banking Income, against Outstandings. Interest on these instruments is recognised under “net gains or losses on financial instruments at fair value through profit or loss”. No impairment for credit risk is recorded on this category of financial assets. Debt instruments measured at fair value through profit or loss by nature whose business model is "Other/Sale" are recorded at the trade date. Debt instruments designated at fair value through profit or loss are recorded at the trade date. Debt instruments measured at fair value through profit or loss by nature, by failing the SPPI test, are recorded at the settlement date. Equity instruments Equity instruments are by default recognised at fair value through profit or loss, except in the case of the irrevocable option for classification and valuation at fair value through other comprehensive income on items that may not be reclassified, provided that these instruments are not held for trading purposes. Equity instruments 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 (directly recorded in profit or loss). Equity instruments held for trading are recorded on the trade date. Equity instruments measured at fair value through profit or loss and not held for trading are recorded at settlement date. They are subsequently measured at fair value and changes in fair value are recognised in profit or loss, under Net Banking Income, against Outstandings. This category of financial assets is not impaired. 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 on items that may not be reclassified is adopted at the transactional level (line by line) and applies from the date of initial recognition. These securities are recorded at the trade date. The initial fair value includes transaction costs. During subsequent valuations, changes in fair value are recognised in other comprehensive income on items that may not be reclassified. In the event of disposal, these changes are not reclassified to profit or loss, and the gain or loss on disposal is recognised in other comprehensive income. Only dividends are recognised in income if: - CFM Indosuez Wealth's right to collect payment is established; - It is likely that the economic benefits associated with the dividends will flow to CFM Indosuez Wealth; - the amount of dividends can be reliably measured. This category of financial assets is not impaired. Derecognition of financial assets A financial asset (or group of financial assets) is derecognised in whole or in part: - when the contractual rights to the cash flows related to the asset expire; - or when they are transferred or considered as such because they have one or more beneficial owners and when substantially all the risks and benefits of the financial asset are transferred. In this case, any rights or obligations created or retained at the time of transfer are recognised separately as assets and liabilities. If the contractual rights to the cash flows are transferred but only some of the risks and rewards as well as control are retained, CFM Indosuez Wealth continues to recognise the financial asset to the extent of the entity’s continued involvement in this asset. Financial assets renegotiated for commercial reasons without any financial difficulties of the counterpart and with the aim of developing or keeping a commercial relationship are derecognised at the date of the renegotiation. The new loans granted to customers are recorded at their fair value on the date of renegotiation. Subsequent accounting treatment will depend on the business model and the SPPI test. Financial liabilities Classification and valuation of financial liabilities On the balance sheet, financial liabilities are classified into two accounting categories: - financial liabilities at fair value through profit or loss, either by default or as an option; - financial liabilities at amortised cost. Financial liabilities at fair value through profit or loss, by default Financial instruments issued primarily with a view to being bought back in the short term, instruments forming part of an identified portfolio of financial instruments that are managed together and which show indications of a recent short-term profit-taking profile, and derivatives (with the exception of certain hedging derivatives) are measured at fair value by nature. Changes in the fair value of this portfolio are booked to the Income Statement. Financial liabilities valued at amortised cost All other liabilities matching the definition of a
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