2007 REGISTRATION DOCUMENT

5 NotesCONSOLIDATED FINANCIAL STATEMENTSto the financial s tatements p repared in accordance with I nternational Financial Reporting S tandards as adopted by the European Union< Contents >to companies developed in partnership with other groups, where theBNP Paribas Group participates in the strategic decision-making of theenterprise through representation on the Board of Directors or equivalentgoverning body, exercises influence over the enterprise’s operationalmanagement by supplying management systems or decision-makingtools, and provides technical assistance to support the enterprise’sdevelopment.Changes in the net assets of associates (companies accounted for underthe equity method) are recognised in “Investments in associates” onthe assets side of the balance sheet, and in the relevant componentof shareholders’ equity. Goodwill on associates is also included in“Investments in associates”.If the Group’s share of losses of an associate equals or exceeds thecarrying amount of its investment in the associate, the Group discontinuesincluding its share of further losses. The investment is reported at nilvalue. Additional losses of the associate are provided for only to theextent that the Group has a legal or constructive obligation to do so, orhas made payments on behalf of the associate.Minority interests are presented separately in the consolidated profitand loss account and balance sheet. The calculation of minority intereststakes account of outstanding cumulative preferred shares classified asequity instruments and issued by subsidiaries, and held outside theGroup.Realised gains and losses on investments in consolidated undertakingsare recognised in the profit and loss account under “Net gain on noncurrentassets”.1.b.3Consolidation p roceduresThe consolidated financial statements are prepared using uniformaccounting policies for reporting like transactions and other events insimilar circumstances.Elimination of intragroup balances and transactionsIntragroup balances arising from transactions between consolidatedenterprises, and the transactions themselves (including income, expensesand dividends), are eliminated. Profits and losses arising from intragroupsales of assets are eliminated, except where there is an indication thatthe asset sold is impaired. Unrealised gains and losses included in thevalue of available-for-sale assets are maintained in the consolidatedfinancial statements.Translation of financial statements expressedin foreign currenciesThe consolidated financial statements of BNP Paribas are prepared ineuros.The financial statements of enterprises whose functional currency is notthe euro are translated using the closing rate method. Under this method,all assets and liabilities, both monetary and non-monetary, are translatedusing the spot exchange rate at the balance sheet date. Income andexpense items are translated at the average rate for the period.The same method is applied to the financial statements of enterpriseslocated in hyperinflationary economies, after adjusting for the effectsof inflation by applying a general price index.Differences arising on the translation of balance sheet items and profitand loss items are recorded in shareholders’ equity under “Cumulativetranslation adjustment” for the portion attributable to shareholders, andin “Minority interests” for the portion attributable to outside investors.Under the optional treatment permitted by IFRS 1, the Group has resetat zero, by transfer to retained earnings, all cumulative translationdifferences attributable to shareholders and to minority interests in theopening balance sheet at 1 January 2004.On liquidation or disposal of some or all of the interest held in a foreignenterprise, the portion of the cumulative translation adjustment recordedin shareholders’ equity in respect of the interest liquidated or disposedof is recognised in the profit and loss account.1.b.4Business c ombinationsand m easurement of g oodwillBusiness combinationsBusiness combinations are accounted for by the purchase method. Underthis method, the acquiree’s identifiable assets, liabilities and contingentliabilities that meet the IFRS recognition criteria are measured at fairvalue at the acquisition date except for non-current assets classifiedas assets held for sale, which are accounted for at fair value less coststo sell. The Group may recognise any adjustments to the provisionalaccounting within 12 months of the acquisition date.The cost of a business combination is the fair value, at the date ofexchange, of assets given, liabilities assumed, and equity instrumentsissued to obtain control of the acquiree, plus any costs directly attributableto the combination.Goodwill represents the difference between the cost of the combinationand the acquirer’s interest in the net fair value of the identifiable assets,liabilities and contingent liabilities of the acquiree at the acquisitiondate. Positive goodwill is recognised in the acquirer’s balance sheet, andbadwill is recognised immediately in profit or loss, on the acquisition date.Goodwill is recognised in the functional currency of the acquiree andtranslated at the closing exchange rate.The BNP Paribas Group tests goodwill for impairment on a regularbasis.As permitted under IFRS 1, business combinations that took place before1 January 2004 and were recorded in accordance with the previouslyapplicable accounting standards (French GAAP), have not been restatedin accordance with the principles set out above.Cash-generating unitsThe BNP Paribas Group has split all its activities into cash-generatingunits (1) , representing major business lines. This split is consistent with theGroup’s organisational structure and management methods, and reflectsthe independence of each unit in terms of results and managementmethods; it is subject to regular review in order to take account ofevents likely to affect the composition of cash-generating units, suchas acquisitions, disposals and major reorganisations.12345678910(1) As defined by IAS 36.111162007 Registration document - BNP PARIBAS