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 designated at fair value through profit or loss CFM Indosuez Wealth does not offer this instrument. Financial liabilities valued at amortised cost All other liabilities matching the definition of a financial liability (excluding derivatives) are valued at amortised cost. These liabilities are initially measured at fair value (including transaction income and costs) and subsequently recognised at amortised cost using the effective interest rate method. Reclassification of financial liabilities The initial classification of financial liabilities is irrevocable. No subsequent reclassification is allowed. Distinction between debt and equity The distinction between debt instruments and equity instruments is based on analysis of the substance of the contractual terms. A financial liability is a debt instrument if it includes a contractual obligation: - to provide another entity with cash, another financial asset or a variable number of equity instruments; or - to exchange financial assets and liabilities with another entity on potentially unfavourable terms. An equity instrument is a non-redeemable financial instrument which offers a discretionary return representing a residual interest in a business after deduction of all its financial liabilities (net assets) and which is not qualified as a debt instrument. Derecognition and modification of financial liabilities A financial liability is derecognised in whole or in part: - upon expiration; or - when quantitative or qualitative analyses conclude that it has been substantially modified in the event of restructuring. A substantial change to an existing financial liability must be recorded as an extinction of an initial financial liability and the recognition of a new financial liability (novation). Any differential between the carrying amount of the extinct liability and the new liability will be recognised immediately in the Income Statement. If the financial liability is not derecognised, the original EIR is maintained. A discount/premium is recognised immediately in the Income Statement on the date of modification and is then spread, using the original EIR, over the instrument's remaining lifetime. Negative interest on financial assets and liabilities In accordance with the IFRS IC decision of January 2015, negative interest income (expense) on financial assets that do not meet the definition of income under IFRS 15 is recognised as interest expense in the income statement, not as a reduction of interest income. The same applies to negative interest expense (income) on financial liabilities. Annual Report 2024 71
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