SFIL Annual financial report 2018

Annual financial statements in accordance with French GAAP I 4 119 Annual Financial Report 2018 SFIL Management report Report on corporate governance Consolidated financial statements in accordance with IFRS Annual financial statements in accordance with French GAAP Shareholders’ Meeting of May 29, 2019 General information former employees. Actuarial and investment risks fall on SFIL; as a result, this obligation is measured and recognized as a liability under the item Provisions. Post-employment benefit obligations under defined benefit plans are measured using an actuarial valuation technique that includes demographic and financial assumptions and the Projected Unit Credit Method, under which each period of service gives rise to an additional unit of benefit entitle- ment and each unit is measured separately to build up the final obligation. The defined benefit net liability recognized in the balance sheet is valued by independent actuaries and represents the present value of defined benefit obligations reduced by the fair value of plan assets (if any). Re-measurements of defined benefit net liability (or asset) and the fair value of its covering assets is subject to adjustments due to changes in actuarial assumptions, which results in revaluating the liability (or asset) recog- nized under defined contribution plans. Actuarial gains and losses resulting from these adjustments are recognized according the “corridor” method. Under this method, SFIL is allowed to recognize, over the average remaining ser- vice lives of employees, only the portion of actuarial gains and losses that exceeds the corridor. The corridor is the greatest of the following two amounts: 10% of the present value of the gross defined benefit plans or 10% of the fair value of plan assets at previous reporting period closing date. Under defined benefit plans, the expense recognized as staff expenses represents in particular the acquired rights during the reporting period by each employee and comprises the current service cost and past service cost arising from plan amendments, curtailments or settlements. 1.2.12. Tangible and intangible assets Fixed assets consist exclusively of operating tangible and intangible assets. These assets are held for production or administrative purposes. Fixed assets are recognized as assets if: • i t is probable that the associated future economic benefits will flow to the entity, and • t heir cost can be measured reliably. Fixed assets are recognized at acquisition cost plus any directly attributable expenses. Software developed internally, when it meets the criteria for recognition, is recognized at its development cost, which includes external expenditures on hardware and services and staff expenses that can be directly attributed to its pro- duction and preparation for use. After initial recognition, fixed assets are carried at cost less accumulated depreciation and impairment. When they are ready to be used, fixed assets are depreciated linearly over their expected useful life. Depreciation is recognized in the income statement under the item Depreciation and amortization . The component approach is applied to all fixed assets. The depreciation periods are as follows: as such a risk is identified. They are mainly used to hedge certain liabilities, debt securities and customer loans. Results of foreign exchange hedging transactions are accounted for by recognizing the difference between the hedging rate and the spot rate – contango or backwarda- tion – prorata temporis in the income statement. 1.2.9. Guarantees As part of its activity to refinance large export credits, SFIL enters into credit insurance policies received from BPI France Assurance Export, acting on behalf of the French State. Expenses related to these guarantees are recognized prorata temporis in the net interest margin. 1.2.10. Other income Charges which are not re-invoiced exactly up to the same amount are recognized as Other income. 1.2.11. Employee benefits Staff expenses include all costs related to employees, particu- larly expenses of the period related to profit-sharing and incen- tive plans. Employee benefits are classified in four categories: 1.2.11.1. Short-term benefits Short-term benefits are those expected to be settled wholly in twelve months after the end of the annual reporting period during which employee services are rendered; they are not discounted and are recognized as an expense of the reporting period. Annual leave is recognized when the ben- efits are granted to the employee. To this purpose, a provi- sion is recognized based on rights vested by employees at closing date. 1.2.11.2. Long-term benefits These benefits, generally related to seniority, are paid to current employees. Their payment is deferred for more than twelve months after the end of the annual period during which the employees rendered the related service. They represent, specially, long service awards. The actuarial gains and losses related to these benefits and all service costs are recognized immediately in the income statement. 1.2.11.3. Termination benefits Employee termination benefits result either from the deci- sion by SFIL to terminate an employment contract before the legal retirement age or by a decision of voluntary redun- dancy in exchange for termination benefits. A charge for termination benefits at the end of the employment contract is recognized only when SFIL is no longer able to withdraw its offer. Termination benefits payable at more than twelve months after the closing date are discounted to their pres- ent value. 1.2.11.4. Post-employment benefits Post-employment benefits are only made of defined contri- bution plans. The assets of these plans are generally held by insurance companies or pension funds. The pension plans are generally funded by payments from both SFIL and its employees. Under defined benefit plans, SFIL has a formal or construc- tive obligation to provide the agreed benefits to current and