2007 REGISTRATION DOCUMENT

CONSOLIDATED FINANCIAL STATEMENTS5Notes to the financial s tatements p repared in accordance with I nternational Financial Reporting S tandards as adopted by the European Union< Contents >5.5 Notes to the financial s tatements p repared inaccordance with I nternational F inancial R eportingS tandards as adopted by the European Union1Note1.SUMMARY O F S IGNIFICANT A CCOUNTING P OLICIES A PPLIEDBY T HE BNP PARIBAS GROUP21.a APPLICABLE ACCOUNTING STANDARDSInternational Financial Reporting Standards (IFRS) were applied to theconsolidated financial statements from 1 January 2005 (the date of firsttimeadoption) in accordance with the requirements of IFRS 1 “First-timeAdoption of International Financial Reporting Standards” and of otherIFRS, based on the version and interpretations of standards adoptedwithin the European Union (1) , and excluding therefore certain provisionsof IAS 39 on hedge accounting.The Group has applied those standards, amendments and interpretationsendorsed by the European Union and applicable as of 1 January 2007 (inparticular IFRS 7 “Financial Instruments: Disclosures”). It has not earlyadoptedstandards, amendments and interpretations whose applicationin 2007 is optional.1.b CONSOLIDATION1.b.1Scope of c onsolidationThe consolidated financial statements of BNP Paribas include all entitiesunder the exclusive or joint control of the Group or over which the Groupexercises significant influence, with the exception of those entities whoseconsolidation is regarded as immaterial to the Group. The consolidation ofan entity is regarded as immaterial if it fails to meet any of the followingthresholds: a contribution of more than EUR 8 million to consolidatednet banking income, more than EUR 1 million to consolidated grossoperating income or net income before tax, or more than EUR 40 millionto total consolidated assets. Companies that hold shares in consolidatedcompanies are also consolidated.Subsidiaries are consolidated from the date on which the Group obtainseffective control. Entities under temporary control are included in theconsolidated financial statements until the date of disposal.The Group also consolidates special purpose entities (SPEs) formedspecifically to manage a transaction or a group of transactions withsimilar characteristics, even where the Group has no equity interest inthe entity, provided that the substance of the relationship indicates thatthe Group exercises control as assessed by reference to the followingcriteria:■ the activities of the SPE are being conducted exclusively on behalfof the Group, such that the Group obtains benefits from thoseactivities;■ the Group has the decision-making and management powers toobtain the majority of the benefits of the ordinary activities of theSPE (as evidenced, for example, by the power to dissolve the SPE, toamend its bylaws, or to exercise a formal veto over amendments toits bylaws);■ the Group has the ability to obtain the majority of the benefits of theSPE, and therefore may be exposed to risks incident to the activitiesof the SPE. These benefits may be in the form of rights to some or allof the SPE’s earnings (calculated on an annual basis), to a share ofits net assets, to benefit from one or more assets, or to receive themajority of the residual assets in the event of liquidation;■ the Group retains the majority of the risks taken by the SPE in orderto obtain benefits from its activities. This would apply, for example,if the Group remains exposed to the initial losses on a portfolio ofassets held by the SPE.1.b.2Consolidation m ethodsEnterprises under the exclusive control of the Group are fully consolidated.The Group has exclusive control over an enterprise where it is in aposition to govern the financial and operating policies of the enterpriseso as to obtain benefits from its activities. Exclusive control is presumedto exist when the BNP Paribas Group owns, directly or indirectly, morethan half of the voting rights of an enterprise. It also exists when theGroup has power to govern the financial and operating policies of theenterprise under an agreement; to appoint or remove the majority ofthe members of the Board of Directors or equivalent governing body;or to cast the majority of votes at meetings of the Board of Directors orequivalent governing body.Currently exercisable or convertible potential voting rights are taken intoaccount when determining the percentage of control held.Jointly-controlled companies are consolidated by the proportionalmethod. The Group exercises joint control when under a contractualarrangement, strategic financial and operating decisions require theunanimous consent of the parties that share control.Enterprises over which the Group exercises significant influence(associates) are accounted for by the equity method. Significant influenceis the power to participate in the financial and operating policy decisionmakingof an enterprise without exercising control. Significant influenceis presumed to exist when the Group holds, directly or indirectly, 20% ormore of the voting power of an enterprise. Interests of less than 20% areexcluded from consolidation unless they represent a strategic investmentand the Group effectively exercises significant influence. This applies345678910(1) The full set of standards adopted for use in the European Union can be consulted on the website of the European Commission at: http://ec.europa.eu/internal_market/accounting/ias_fr.htm#adopted-commission.2007 Registration document - BNP PARIBAS 11511