FCA 2017.12.31 20FA


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 20-F/A
(Amendment No. 1)
 
o
REGISTRATION STATEMENT PURSUANT TO SECTIONS 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2017
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
o
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-36675
 
Fiat Chrysler Automobiles N.V.
(Exact Name of Registrant as Specified in Its Charter)
 
The Netherlands
(Jurisdiction of Incorporation or Organization)
 
25 St. James's Street
London SW1A 1HA
United Kingdom
Tel. No.: +44 (0) 20 7766 0311
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)
 
Giorgio Fossati
25 St. James's Street
London SW1A 1HA
United Kingdom
Tel. No.: +44 (0) 20 7766 0311
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Company Contact Person)
 
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
 
Name of Each Exchange on which Registered
Common Shares, par value €0.01
 
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 1,540,089,690 common shares, par value €0.01 per share, and 408,941,767 special voting shares, par value €0.01 per share.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Act of 1934. Yes o No þ
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required




to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer þ
 
Accelerated filer o
 
Non-accelerated filer o
Emerging growth company o
 
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP o International Financial Reporting Standards as issued by the International Accounting Standards Board þ Other o
If “Other” has been checked in response to the previous question indicate by check mark which financial statement item the registrant has elected to follow: Item 17 o or Item 18 o.
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No þ
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes o No o

        




EXPLANATORY NOTE
                        
This Amendment No. 1 on Form 20-F/A (the “Amendment”) amends the Annual Report on Form 20-F for the year ended December 31, 2017 of Fiat Chrysler Automobiles N.V. (“FCA”), as originally filed with the U.S. Securities and Exchange Commission on February 20, 2018 (the “Original Filing”). FCA is filing the Amendment to include the financial statements and related notes of FCA Bank S.p.A. (“FCA Bank”), an unconsolidated joint venture incorporated in Italy, as required by Rule 3-09 of Regulation S-X under the Securities Exchange Act of 1934, as amended (“Rule 3-09”). The Amendment also includes certifications by our Chief Executive Officer and Chief Financial Officer and corrects a typographical error in the Section 906 certifications in the Original Filing.

Rule 3-09 provides that if a 50 percent-or-less-owned person accounted for by the equity method meets the first or third condition of the significant subsidiary tests set forth in Rule 1-02(w) of Regulation S-X, substituting 20 percent for 10 percent, separate financial statements for such 50 percent-or-less-owned person shall be filed. We own a 50 percent non-controlling interest in FCA Bank and account for FCA Bank using the equity method of accounting. FCA Bank met the significant subsidiary test described above at December 31, 2015 and for the year then ended, and did not meet the significant subsidiary test at December 31, 2016 and 2017 and for the years then ended. Financial statements at December 31, 2017, 2016 and 2014 and for the years then ended are provided for comparative purposes and are not required to be audited.

The Original Filing is being amended by this Amendment to include as exhibits: (i) the FCA Bank audited financial statements at December 31, 2015 and for the year then ended, and unaudited financial statements at December 31, 2016 and 2017 and for the years then ended, prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board; the designation “IFRS” also includes International Accounting Standards as well as all interpretations of the IFRS Interpretations Committee, (ii) the consent of the independent auditor of FCA Bank and (iii) certifications by our Chief Executive Officer and Chief Financial Officer. This Amendment does not affect any other parts of, or exhibits to, the Original Filing, nor does it reflect events occurring after the date of the Original Filing. Accordingly, this Amendment should be read in conjunction with the Original Filing and any documents filed with or furnished to the Securities and Exchange Commission by FCA subsequent to February 20, 2018.

i



TABLE OF CONTENTS
 
Page
 
 
 
 
 
 
 
 
Item 19.
1
 
2


ii



Item 19. Exhibits
Exhibit
Number
Description of Documents


 
There have not been filed as exhibits to this Form 20-F certain long-term debt instruments, none of which relates to indebtedness that exceeds 10% of the consolidated assets of Fiat Chrysler Automobiles N.V. Fiat Chrysler Automobiles N.V. agrees to furnish the Securities and Exchange Commission, upon its request, a copy of any instrument defining the rights of holders of long-term debt of Fiat Chrysler Automobiles N.V. and its consolidated subsidiaries.


1



SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F/A and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
 
FIAT CHRYSLER AUTOMOBILES N.V.
 
(Registrant)
 
 
 
 
By:
/s/ Richard K. Palmer
 
 
 
 
Name: Richard K. Palmer
 
Title: Chief Financial Officer
Dated: March 2, 2018
 
 


2
Exhibit 12.1 20171231 20FA


Exhibit 12.1
FIAT CHRYSLER AUTOMOBILES N.V.
SECTION 302 CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
I, Sergio Marchionne, Chief Executive Officer and Director of Fiat Chrysler Automobiles N.V., certify that:
1.
I have reviewed this annual report on Form 20-F, as amended by Amendment No.1 thereto, of Fiat Chrysler Automobiles N.V.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4.
The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and
5.
The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.





 
 
 
 
Date: March 2, 2018
/s/ Sergio Marchionne
 
Sergio Marchionne
 
Chief Executive Officer and Director
 
 


Exhibit 12.2 20171231 20FA


Exhibit 12.2
FIAT CHRYSLER AUTOMOBILES N.V.
SECTION 302 CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
I, Richard K. Palmer, Chief Financial Officer of Fiat Chrysler Automobiles N.V., certify that:
1.
I have reviewed this annual report on Form 20-F, as amended by Amendment No.1 thereto, of Fiat Chrysler Automobiles N.V.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4.
The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and
5.
The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.





 
 
 
 
Date: March 2, 2018
/s/ Richard K. Palmer
 
Richard K. Palmer
 
Chief Financial Officer


Exhibit 13.1 20171231 20FA




Exhibit 13.1
FIAT CHRYSLER AUTOMOBILES N.V.
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Sergio Marchionne, Chief Executive Officer and Director of Fiat Chrysler Automobiles N.V. (the “Company”), hereby certify pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
1.
the Company’s Annual Report on Form 20-F for the year ended December 31, 2017, as amended by Amendment No. 1 thereto, to which this statement is furnished as an exhibit (the “Report”), fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2.
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


 
 
 
 
Date: March 2, 2018
/s/ Sergio Marchionne
 
Sergio Marchionne
 
Chief Executive Officer and Director
 
 





Exhibit 13.2 20171231 20FA




Exhibit 13.2
FIAT CHRYSLER AUTOMOBILES N.V.
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Richard K. Palmer, Chief Financial Officer of Fiat Chrysler Automobiles N.V. (the “Company”), hereby certify pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
1.
the Company’s Annual Report on Form 20-F for the year ended December 31, 2017, as amended by Amendment No. 1 thereto, to which this statement is furnished as an exhibit (the “Report”), fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2.
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


 
 
 
 
Date: March 2, 2018
/s/ Richard K. Palmer
 
Richard K. Palmer
 
Chief Financial Officer





Exhibit 23.1 20171231 20FA


Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 

We consent to the incorporation by reference in the following Registration Statements:

1)
Registration Statement (Form F-3 No. 333-217806) of Fiat Chrysler Automobiles N.V.,

2)
Registration Statement (Form S-8 No. 333-201440) pertaining to the Fiat Chrysler Automobiles N.V. Equity Incentive Plan and the Fiat Chrysler Automobiles N.V. Remuneration Policy of Fiat Chrysler Automobiles N.V.;

of our reports dated February 22, 2016, with respect to the consolidated financial statements of FCA Bank S.p.A. for the year ended December 31, 2015 included in this Amendment to the Annual Report on Form 20-F (Form 20-F/A - Amendment No.1) for the year ended December 31, 2017.



/s/Ernst & Young S.p.A.

Turin, Italy

March 2, 2018




Exhibit 99.1 FCA Bank 2017/2016


Exhibit 99.1
FCA Bank Group
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017


















CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
    














FCA Bank S.p.A.
Registered office: Corso G. Agnelli, 200 - 10135 Turin – www.fcabankgroup.com - Paid-up Share Capital: Euro 700,000,000 - Turin Companies Register n. 08349560014, - Tax and VAT Code 08349560014 - Entered in the Bank Register n. 5764 - Holding of FCA Bank Banking Group - Entered in the Banking Group Register - Cod. ABI 3445 - Entered in Single Register of Insurance Intermediaries (RUI) no. D00016456.

3




CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statement of Financial Position
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows














4




CONSOLIDATED STATEMENT OF FINANCIAL POSITION



ASSETS
(€/thousand)
 
 
 
 
 
 
 
 
BALANCE SHEET - ASSETS
31/12/2017
31/12/2016
10.
Cash and cash balances
476
176
20.
Financial assets held for trading
100
2,339
40.
Available-for-sale financial assets
-
12
50.
Held-to-maturity investments
9,594
9,563
60.
Loans and receivables with banks
2,097,642
1,497,903
70.
Loans and receivables with customers
21,253,799
18,555,896
80.
Hedging derivatives
67,119
95,131
90.
Changes in fair value of portfolio hedge items (+/-)
5,124
39,742
100.
Investments in associates and joint ventures
44
47
110.
Insurance reserves attributable to reinsurers
11,321
15,504
120.
Property, plant and equipment
1,959,430
1,490,894
130.
Intangible assets
237,023
226,021
 
- goodwill
181,824
181,824
140.
Tax assets
269,253
320,380
 
a) current tax assets
110,269
158,550
 
b) deferred tax assets
158,984
161,830
160.
Other assets
1,276,052
1,030,027
TOTAL ASSETS
27,186,977
23,283,635
 
 
 
 





5




LIABILITIES AND NET EQUITY
(€/thousand)
 
 
 
 
 
 
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
31/12/2017
31/12/2016
10.
Deposits from banks
8,555,557
8,021,610
20.
Deposits from customers
1,483,490
701,695
30.
Debt securities in issue
13,336,292
11,087,597
40.
Financial liabilities held for trading
5,603
6,996
60.
Hedging derivatives
43,309
68,936
80.
Tax liabilities
166,658
136,019
 
a) current tax liabilities
55,559
43,565
 
b) deferred tax liabilities
111,098
92,454
100.
Other liabilities
871,348
777,205
110.
Provision for employee severance pay
11,947
12,273
120.
Provisions for risks and charges
187,790
213,943
 
a) post-retirement benefit obligations
45,280
46,188
 
b) Other reserves
142,510
167,755
130.
Insurance reserves
12,579
19,526
140.
Revaluation reserves
(29,961)
(18,127)
165.
Interim dividends
(100,000)
-
170.
Reserves
1,328,740
1,015,718
180.
Share premium
192,746
192,746
190.
Issued capital
700,000
700,000
210.
Minorities (+/-)
43,322
38,521
220.
Net Profit (Loss) for the year (+/-)
377,557
308,977
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
27,186,977
23,283,635
 
 
 
 



6




CONSOLIDATED INCOME STATEMENT
CONSOLIDATED INCOME STATEMENT
(€/thousand)
 
 
 
 
Item
2017
2016
10.
Interest income and similar revenues
854,953
764,377
20.
Interest expenses and similar charges
(266,183)
(262,984)
30.
Net interest margin
588,770
501,393
40.
Fee and commission income
132,753
122,567
50.
Fee and commission expenses
(49,357)
(42,605)
60.
Net fee and commission
83,396
79,962
80.
Net income from financial assets and liabilities held for trading
(2,210)
(1,023)
90.
Fair Value adjustments in hedge accounting
(1,900)
(3,203)
100.
Profits (losses) on disposal or repurchase of
(12)
-
 
b) available-for-sale financial assets
(12)
-
120.
Operating income
668,044
577,129
130.
Impairment losses on:
(32,588)
(47,337)
 
a) loans
(32,588)
(47,337)
140.
Net profit from financial activities
635,456
529,792
150.
Net premium earned
763
1,038
160.
Net other operating income/charges from insurance activities
2,850
2,937
170.
Net profit from financial and insurance activities
639,069
533,767
180.
Administrative costs
(251,743)
(244,908)
 
a) payroll costs
(159,313)
(149,106)
 
b) other administrative costs
(92,430)
(95,802)
190.
Net provisions for risks and charges
5,098
(10,697)
200.
Impairment on tangible assets
(309,569)
(280,443)
210.
Impairment on intangible assets
(9,143)
(6,946)
220.
Other operating income/charges
447,405
425,767
230.
Operating costs
(117,952)
(117,227)
240.
Profits (losses) on investments in associates and companies subject to joint control
(53)
(32)
280.
Profit before taxes from continuing operations
521,064
416,508
290.
Tax expense related to profit from continuing operations
(138,536)
(104,948)
300.
Net profit from continuing operations
382,528
311,560
320.
Net profit
382,528
311,560
330.
Net profit attributable to Non-controlling interests
(4,971)
(2,583)
340.
Net profit attributable to owners of the parent
377,557
308,977
 
 
 
 



7




CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME



(€/thousand)
 
 
 
 
 
 
2017
2016
10.
Net profit
382,528
311,560
 
Items of comprehensive income after taxes that will not be reclassified to profit or loss in subsequent periods:
 
 
40.
Defined-benefit plans
2,987
(8,107)
 
Items of comprehensive income after taxes that may be reclassified to profit or loss in subsequent periods:
 
 
80.
Exchange rate differences
(13,665)
(55,979)
90.
Cash flow hedge
2,930
379
130.
Total other Comprehensive income after taxes
(7,748)
(63,707)
140.
Total Comprehensive income (item 10+130)
374,780
247,853
150.
Total Comprehensive income attributable to Non-controlling interests
4,919
2,583
160.
Total Comprehensive income attributable to Owners of the parent
369,861
245,270
 
 
 
 




8





CONSOLIDATED STATEMENT OF CHANGES IN EQUITY AS OF 31/12/2017 AND 31/12/2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(€/thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Closing balance as at 31/12/2016
Changes in opening balance
Balance as at 01/01/2017
Allocation on profit from previous year
Changes during the year
Equity as at
31/12/2017
Equity attributable to Parent Company's shareholders as at
31/12/2017
Non-controlling interests as at 31/12/2017
 
Changes in reserves
Equity transactions
Consolidated comprehensive income for 31/12/2017
 
Reserves
Dividends and other allocations
New share issues
Share buyback
Special dividends paid
Changes in equity instruments
Other changes
Derivatives on shares
Stock options
Interim dividends
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
a) common shares
703.389
-
703.389
-
-
-
-
-
-
-
-
-
-
-
703.389
700.000
3.389
b) other shares
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Share premium reserve
195.623
-
195.623
-
-
-
-
-
-
-
-
-
-
-
195.623
192.746
2.877
Reserves:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
a) retained earnings
1.045.364
-
1.045.364
311.560
-
3.932
-
-
-
-
-
-
-
-
1.360.856
1.328.740
32.116
b) other
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Valuation reserve
(18.101)
-
(18.101)
-
-
(4.143)
-
-
-
-
-
-
-
(7.748)
(29.992)
(29.961)
(31)
Equity instruments
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Interim dividends
-
-
-
-
-
-
-
-
(100.000)
-
-
-
-
-
(100.000)
(100.000)
-
Treasury shares
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Profit (loss) for the year
311.560
-
311.560
(311.560)
-
-
-
-
-
-
-
-
-
382.528
382.528
377.557
4.971
Equity
2.237.835
-
2.237.835
-
-
(211)
-
-
(100.000)
-
-
-
-
374.780
2.512.404
 
 
Equity attributable to parent Company's shareholders
2.199.314
-
2.199.314
-
-
(93)
-
-
(100.000)
-
-
-
-
369.861
 
2.469.082
 
Non- controlling interests
38.521
-
38.521
-
-
(118)
-
-
-
-
-
-
-
4.919
 
 
43.322

    










9



 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(€/thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Closing balance as at 31/12/2015
Changes in opening balance
Balance as at 01/01/2016
Allocation on profit from previous year
Changes during the year
Equity as at
31/12/2016
Equity attributable to Parent Company's shareholders as at
31/12/2016
Non-controlling interests as at 31/12/2016
 
Changes in reserves
Equity transactions
Consolidated comprehensive income for 31/12/2016
 
Reserves
Dividends and other allocations
New share issues
Share buyback
Special dividends paid
Changes in equity instruments
Other changes
Derivatives on shares
Stock options
Share capital:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
a) common shares
702.500
-
702.500
-
-
889
-
-
-
-
-
-
-
-
703.389
700.000
3.389
b) other shares
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Share premium reserve
192.746
-
192.746
-
-
2.877
-
-
-
-
-
-
-
-
195.623
192.746
2.877
Reserves:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
a) retained earnings
907.726
-
907.726
124.088
-
13.553
-
-
-
-
-
-
-
-
1.045.367
1.015.718
29.649
b) other
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Valuation reserve
45.603
-
45.603
-
-
-
-
-
-
-
-
-
-
(63.707)
(18.104)
(18.127)
23
Equity instruments
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Interim dividends
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Treasury shares
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Profit (loss) for the year
249.088
-
249.088
(124.088)
(125.000)
-
-
-
-
-
-
-
-
311.560
311.560
308.977
2.583
Equity
2.097.663
-
2.097.663
-
(125.000)
17.319
-
-
-
-
-
-
-
247.853
2.237.835
 
 
Equity attributable to parent Company's shareholders
2.080.774
-
2.080.774
-
(125.000)
(1.730)
-
-
-
-
-
-
-
245.270
 
2.199.314
 
Non- controlling interests
16.889
-
16.889
-
-
19.049
-
-
-
-
-
-
-
2.583
 
 
38.521




10



CONSOLIDATED STATEMENT OF CASH FLOW (DIRECT METHOD)

(€/thousands)
 
 
 
 
2017
2016
A. OPERATING ACTIVITIES
 
 
1. Business operations
862,842
786,408
- interest income (+)
949,546
855,948
- interest expense (-)
(281,413)
(261,699)
- fee and commission income (expense) (+/-)
83,396
79,955
- personnel expenses (-)
(144,587)
(134,895)
- net earned premiums (+)
670
1,038
- other insurance income/expenses (+/-)
2,850
2,937
- other expenses (-)
(422,534)
(413,180)
- other revenue (+)
791,376
731,014
- taxes and levies (-)
(116,462)
(74,710)
2. Cash flows from increase/decrease of financial assets
(3,590,303)
(3,537,202)
- financial assets held for trading
2,239
653
- available-for-sale financial assets
12
(12)
- receivables - due from customers
(2,825,082)
(3,240,924)
- receivables - due from banks: other credits
(599,741)
(189,254)
- other assets
(167,731)
(107,665)
3. Cash flows from increase/decrease of financial liabilities
3,610,057
3,502,002
- payables - due to banks: demand
(225,664)
(2,959,149)
- payables - due to banks: other payables
775,690
3,320,056
- payables - due to customers
783,649
267,102
- notes issued
2,288,114
2,832,964
- financial liabilities held for trading
(1,395)
(1,008)
- other liabilities
(10,337)
42,037
Cash flows generated by/(used for) operating activities
882,595
751,208
B. INVESTING ACTIVITIES
 
 
1. Cash flows generated by
247,346
88,462
- disposals of tangible assets
247,346
88,462
2. Cash flows used for
(1,029,641)
(714,516)
- purchases of property, plant and equipment
(1,010,967)
(706,183)
- purchases of intangible assets
(18,674)
(12,494)
- purchases of subsidiaries and business branches
-
4,161
Cash generated by / (used for) investing activities
(782,295)
(626,054)
C. FINANCING ACTIVITIES
 
 
- dividend and other distributions
(100,000)
(125,000)
Cash generated by / (used for) financing activities
(100,000)
(125,000)
CASH GENERATED /(USED) DURING THE YEAR
300
154
 
 
 



RECONCILIATION

 
2017
2016
Cash and cash equivalents - opening balance
176
22
Cash generated (used) during the year
300
154
Cash and cash equivalents - closing balance
476
176
 
 
 



11







12



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
PART A - ACCOUNTING POLICIES
A1 – GENERAL INFORMATION
Section 1 - Statement of compliance with International Financial Reporting Standards
The accompanying consolidated financial statements of FCA Bank S.p.A. as of and for the years ended December 31, 2017 and 2016 are being provided pursuant to Rule 3-09 of the United States Securities and Exchange Commission Regulation S-X. These consolidated financial statements are prepared in accordance with the International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”). The designation IFRS also includes International Accounting Standards (“IAS”) as well as all the interpretations of the International Financial Reporting Interpretations Committee (“IFRIC” and “SIC”).

In accordance with Rule 3-09 of Regulation S-X, only the 2015 consolidated financial statements are required to be audited under U.S. Generally Accepted Auditing Standards as 2015 was the only year in which FCA Bank S.p.A. met the conditions of a significant subsidiary under Rule 1-02(w) of Regulation S-X. The consolidated financial statements as of and for the years ended December 31, 2017 and December 31, 2016 are unaudited.

Banca d’Italia, whose powers in relation to the accounts of banks and financial companies subject to its supervision were laid down by Legislative Decree no. 87/92, established the formats of the accounts and the notes used to prepare these consolidated financial statements through circular no. 262 of 22 December 2005, as amended.
Section 2 – Basis of preparation
The consolidated financial statements consist of the Statement of financial position, the Income statement, the Statement of comprehensive income, the Statement of changes in equity, the Statement of cash flows and the Notes.
The financial statements and the notes show the amounts for the year just ended at 31 December 2017 well as the comparative figures at 31 December 2016.
The FCA Bank Group’s consolidated financial statements were prepared in accordance with IAS 1 and the guidelines of Banca d’Italia’s circular no. 262 of 22 December 2005, 4th update of 15 December 2015. In particular:
Formats of the consolidated Statement of financial position, Income statement and notes.

13



The statement of financial position and the income statement do not contain items with zero balances in the year just ended and in the previous one.
Statement of comprehensive income.
The statement of comprehensive income reflects, in addition to net profit for the year, other items of income and expenses divided between those that can be reversed and those that cannot be reversed to income statement.
Statement of changes in consolidated equity.
The statement of changes in equity shows the composition and changes in equity for the year under review and the comparable period. The items are allocated between the amounts attributable to the Parent Company’s shareholders and non-controlling interests.
Consolidated statement of cash flows.
The Statement of cash flows was prepared under the direct method.
Unit of account.
Amounts in the financial statements and the notes are reported in thousands of euros.
Going concern, accrual basis of accounting and consistency of presentation of financial statements.
The Group is expected to remain viable in the foreseeable future. Accordingly, the financial statements as of and for the year ended 31 December 2017 were prepared on the assumption that the Company is a going concern, in accordance with the accrual basis of accounting and consistent with the financial statements for the previous year.
There were no departures from the application of IAS/IFRSs.

Risks and uncertainties related to the use of estimates
In accordance with IFRSs, management is required to make assessments, estimates and assumptions which affect the application of IFRSs and the amounts of reported assets, liabilities, costs and revenues and the disclosure of contingent assets and liabilities. The estimates and the relevant assumptions are based on past experience and other factors considered reasonable under the circumstances and are adopted to determine the carrying amount of assets and liabilities.

In particular, estimates were made to support the carrying amounts of certain significant items of the consolidated financial statements as of 31 December 2017, in accordance with IAS/IFRSs and the above-mentioned guidelines. Such estimates concerned largely the future recoverability of the reported carrying amounts in accordance with the applicable rules and based on a going concern assumption.

Estimates and assumptions are revised regularly and updated from time to time. In case performance fails to meet expectations, carrying amounts might differ from original estimates and should, accordingly, be changed. In these cases, changes are recognized through profit or loss in the period in which they occur or in subsequent years.
The main areas where management is required to make subjective assessments include:
recoverability of receivables and, in general, financial assets and the determination of any impairment;

14



determination of the fair value of financial instruments to be used for financial reporting purposes; in particular, the use of valuation models to determine the fair value of financial instruments not traded in active markets;
quantification of employee provisions and provisions for risks and charges;
recoverability of deferred tax assets and goodwill.
Section 3 - Scope and methods of consolidation
The consolidated financial statements as of 31 December 2017 include the accounts of the Parent Company, FCA Bank S.p.A., and its direct and indirect Italian and foreign subsidiaries, as required by IFRS 10.
They reflect also the entities, including structured entities, in relation to which the Parent Company has exposure or rights to variable returns and the ability to affect those returns through power over them.
To determine the existence of control, the Group considers the following factors:
the purpose and design of the investee, to identify the entity’s objectives, the activities that give rise to its returns and how such activities are governed;
the power over the investee and whether the Group has contractual arrangements, which attribute it the ability to govern the relevant activities; to this end, attention is paid only to substantive rights, which provide practical governance capabilities;
the exposure to the investee to determine whether the Group has arrangements with the investee whose returns vary depending on the investee’s performance.
If the relevant activities are governed through voting rights, control may be evidenced by considering potential or actual voting rights, the existence of any arrangements or shareholders’ agreements giving the right to control the majority of the voting rights, to appoint the majority of the members of the board of directors or otherwise the power to govern the financial and operating policies of the entity.
Subsidiaries may include any structured entities, where voting rights are not paramount to determine the existence of control, including special purpose vehicles (SPVs). Structured entities are considered subsidiaries where:
the Group has the power, through contractual arrangements, to govern the relevant activities;
the Group is exposed to the variable returns deriving from their activities.

The Group does not have any investments in joint ventures.
The table below shows the companies included in the scope of consolidation.

15



1.
List of subsidiaries

NAME
REGISTERED OFFICE
TOWN OF INCORPORATION (*)
  TYPE OF
CONTROL (**)
PARENT COMPANY
(***)
OWNERSHIP %
FCA Bank S.p.A.
Turin - Italy
 
 
 
 
Leasys S.p.A.
Turin - Italy
Rome - Italy
1
 
100.00
FCA Capital France S.A.
Trappes - France
 
1
 
100.00
Leasys France S.A.S.
Trappes - France
 
1
Leasys S.p.A.
100.00
FCA Leasing France SNC
Trappes - France
 
1
FCA Capital France SA
99.99
FCA Bank Deutschland GmbH
Heilbronn - Germany
 
1
 
100.00
FCA Automotive Services UK Ltd
Slough - UK
 
1
 
100.00
FCA Dealer Services UK Ltd
Slough - UK
 
1
 
100.00
Leasys UK Ltd
Slough - UK
 
1
Leasys S.p.A.
100.00
FCA Capital Espaňa EFC S.A.
Alcala de Henares - Spain
 
1
 
100.00
FCA Dealer Services Espaňa S.A.
Alcala de Henares - Spain
 
1
 
100.00
FCA Capital Portugal IFIC S.A.
Lisbon - Portugal
 
1
 
100.00
FCA Dealer Services Portugal S.A.
Lisbon - Portugal
 
1
 
100.00
FCA Capital Suisse S.A.
Schlieren - Switzerland
 
1
 
100.00
FCA Leasing Polska Sp. Zo.o.
Warsaw - Poland
 
1
 
100.00
FCA-Group Bank Polska S.A.
Warsaw - Poland
 
1
 
100.00
FCA Capital Netherlands B.V.
Lijnden - Netherlands
 
1
 
100.00
FCA Capital Danmark A/S
Glostrup - Denmark
 
1
 
100.00
FCA Capital Belgium S.A.
Auderghem - Belgium
 
1
 
99.99
FCA Bank GmbH
Vienna - Austria
 
2
 
50.00
Ferrari Financial Services GmbH
Pullach - Munchen
 
1
 
50.0001
FCA Leasing GmbH
Vienna - Austria
 
1
 
100.00
FCA Capital Hellas S.A.
Athens - Greece
 
1
 
99.99
FCA Insurance Hellas S.A.
Athens - Greece
 
1
FCA Capital Hellas SA
99.99
FCA Capital RE DAC
Dublin - Ireland
 
1
 
100.00
FCA Capital Sverige AB
Sweden
 
1
FCA Capital Danmark A/S
100.00
FCA Capital Norge AS
Norway
 
1
FCA Capital Danmark A/S
100.00
 
 
 
 
 
 
(*) If different from Registered Office
 
 
 
(**) Type of control:
1 = majority of voting rights at ordinary meetings
2 = dominant influence at ordinary meeting

 
 
 
 
(***) If different from FCA Bank S.p.A.
 
 
 

The structured entities related to securitization transactions, whose details are provided below, are fully consolidated:


16



NAME
COUNTRY
A-BEST NINE S.r.l.
Conegliano (TV) - Italy
A-BEST TEN S.r.l.
Conegliano (TV) - Italy
A-BEST ELEVEN UG
Frankfurt am Main - Germany
A-BEST TWELVE S.r.l.
Conegliano (TV) - Italy
A-BEST THIRTEEN FT
Madrid - Spain
A-BEST FOURTEEN S.r.l.
Conegliano (TV) - Italy
A-BEST FIFTEEN S.r.l.
Conegliano (TV) - Italy
Nixes Five Ltd
Island of Jersey
Nixes Six Plc
London - UK
Nixes Seven B.V.
Amsterdam - Nederland
ERASMUS FINANCE LIMITED
Dublin - Ireland
FAST 3 S.r.l.
Milan - Italy


2.
Subsidiaries with significant non-controlling interests
Non-controlling interests, availability of non-controlling interests’ voting rights and dividends paid to non-controlling interests


Name
Non-controlling interests (%)
Availability of non-controlling interests' voting rights (%)
Dividends distributed to
non-controlling interests
FCA BANK GMBH (Austria)
50
%
50
%
-
FERRARI FINANCIAL SERVICES GMBH (Germania)
49.99
%
49.99
%
-


Pursuant to IFRS 10, FCA Bank GmbH (Austria), a 50%-held subsidiary and Ferrari Financial Services GmbH a 50.0001%-held subsidiary are included in the consolidation area.

Subsidiaries with significant non-controlling interests.
The table below provides financial and operating highlights of FCA Bank GmbH and of Ferrari Financial Services GmbH before intercompany eliminations required by IFRS 12:


17





 
(amounts in thousands of euros)
 
 
 
FCA BANK GMBH (AUSTRIA)
31/12/2017
31/12/2016
Total assets
295,997
223,386
Financial assets
293,230
222,298
Financial liabilities
249,855
190,002
Equity
41,574
30,748
Net interest income
6,971
4,001
Net fee and commission income
1,028
803
Banking income
8,000
4,804
Net result from investment activities
8,303
4,504
Net result from investment and insurance activities
8,303
4,504
Operating costs
(2,054)
(1,695)
Profit (loss) before taxes from continuing operations
6,249
2,809
Net profit (loss) for the period
4,527
1,985
 
 
 



 
(amounts in thousands of euros)
 
 
 
FERRARI FINANCIAL SERVICES GMBH (GERMANY)
31/12/2017
31/12/2016
Total assets
514,796
500,609
Financial assets
507,901
492,195
Financial liabilities
457,857
447,298
Equity
44,705
39,922
Net interest income
16,076
3,204
Net fee and commission income
42
(102)
Banking income
16,175
3,181
Net result from investment activities
14,980
2,820
Net result from investment and insurance activities
14,980
2,820
Operating costs
(8,419)
(1,486)
Profit (loss) before taxes from continuing operations
6,561
1,334
Net profit (loss) for the period
4,873
1,834
 
 
 



Consolidation methods
In preparing the consolidated financial statements, the financial statements of the parent company and its subsidiaries, prepared according to IAS/IFRSs, are consolidated on a line-by-line basis by aggregating together like items of assets, liabilities, equity, income and expenses.
The carrying amount of the parent’s investment in each subsidiary and the corresponding portions of the equity of each subsidiary are eliminated.

18



Any difference arising during this process – after the allocation to the assets and liabilities of the subsidiary – is recognized as goodwill on first time consolidation and, subsequently, among other reserves.
The share of net profit pertaining to non-controlling interests is indicated separately, so to determine the amount of net profit attributable to the parent company’s shareholders.
Assets, liabilities, costs and revenues arising from intercompany transactions are eliminated.
The financial statements of the Parent Company and those of the subsidiaries used for the consolidated financial statements are all as of the same date.
For foreign subsidiaries, which prepare their accounts in currencies other than the euro, assets and liabilities are translated at the exchange rate prevailing on the balance sheet date while revenues and costs are translated at the average exchange rate for the period.
Exchange differences arising from the conversion of costs and revenues at the average exchange rate and the conversion of assets and liabilities at the reporting date are reported in exchange rate differences in the comprehensive income.
Exchange differences arising from the equity of consolidated subsidiaries are recognized in other comprehensive income and reversed to profit and loss when loss of control over the subsidiaries occurs.
The exchange rates used to translate the financial statements at 31 December 2017 are as follows:

 
31/12/2017
Average
2017
31/12/2016
Average
2016
Polish Zloty (PLN)
4.177
4.257
4.410
4.363
Danish Crown(DKK)
7.445
7.439
7.434
7.445
Swiss Franc (CHF)
1.170
1.112
1.074
1.090
GB Pound (GBP)
0.887
0.877
0.856
0.819
Norwegian Krone (NOK)
9.840
9.327
9.086
9.291
Moroccan Dirham (MAD)
11.219
10.961
-
-
Swedish Krona (SEK)
9.844
9.635
9.553
9.468
 
 
 
 
 


19




Other information
To prepare the consolidated financial statements use was made of the following:
financial statements at 31 December 2017 of the Parent Company FCA Bank S.p.A.;
accounts as of 31 December 2017, approved by the competent bodies and functions, of the other fully consolidated companies, as adjusted to take into account the consolidation process and, where necessary, to comply with the Group’s accounting policies.
Section 4 - Subsequent events
No events occurred after the balance sheet date which should result in adjustments of the consolidated financial statements as of 31 December 2017.


20





ACCOUNTING STANDARDS, AMENDMENTS, IFRS AND IFRIC INTERPRETATIONS NOT YET MANDATORILY APPLICABLE AND NOT ADOPTED EARLY BY THE GROUP AT 31 DECEMBER 2017
Standard/
amendment
Issuance
(IASB)
Effective
from
Description of standard/amendment
IFRS 9 – Financial instruments
July 2014

1 January 2018
The document reflects the results of the phases related to classification and measurement, impairment and hedge accounting of IASB's plan to replace IAS 39. The standard introduces new criteria to classify and measure financial assets and liabilities. In particular, for the financial assets the new standard uses a single approach based on the management of financial instruments and the characteristics of the contractual cash flows of the financial assets to determine their measurement method, replacing the different methods provided for by IAS 39.
 
 
 
 
 
On the other hand, for financial liabilities the main change concerns the accounting treatment of changes in the fair value of a financial liability designated as a financial liability recognized at fair value through profit or loss, in case these changes are due to changes in the issuer's credit rating at fair value. Under the new standard, these changes must be recognized through other comprehensive income and no longer through profit or loss.
 
 
 
 
 
 
With reference to the impairment model, the new standard requires loan loss estimates be made on the basis of the expected loss model (not on the incurred loss model) using supportable information, available without unreasonable costs or efforts that would include historical, current and prospective data. The standard requires that this model be applied to all financial instruments, that is to all financial assets measured at amortized cost, to those recognized at fair value through other comprehensive income, to receivables arising from rental contracts and to trade receivables.
 
 
 
 
 
 
Lastly, the standard introduces a new model of hedge accounting to modify the requirements of the current IAS 39, which sometimes are considered too strict and unsuited to reflect entities' risk management policies. The main developments of the document concern:
- increase in the number of transactions eligible for hedge accounting, including also the risks of non-financial assets/liabilities eligible for hedge accounting treatment;
- change of accounting treatment of forward contracts and options when they are embedded in a hedge accounting relationship, to reduce the volatility of the income statement;
- amendments to the effectiveness test by replacing the current procedure based on the 80%-125% range with the concept of "economic relationship" between hedged item and hedging instrument. A retrospective assessment of effectiveness of the hedging relationship will no longer be required.
 
 
 



21




Standard/
amendment
Issuance
(IASB)
Effective
from
Description of standard/amendment
IFRS 15 – Revenue
from Contracts with Customers
May 2014
Amended in
September 2015
1 January 2018
The objective of IFRS 15 is to establish a new revenue recognition model which will apply to all contracts entered into with customers except those that fall within the scope of other IFRSs/IAS, such as leases, insurance contracts and financial instruments. The key steps to account for revenue according to the new model include:
- identify the contract(s) with the customer;
- identify the performance obligations of the contract;
- determine the transaction price;
- allocate the transaction price to the performance obligations in the contract;
- recognize revenue when (or as) the entity satisfies a performance obligation.
In September 2015 amendments were issued clarifying some requirements and providing additional transitional relief for companies that are implementing the new Standard. The amendments clarify how to:
 
- identify a performance obligation (the promise to transfer a good or a service to a customer) in a contract;
- determine whether a company is a principal (the provider of a good or service) or an agent (responsible for arranging for the good or service to be provided);
- determine whether the revenue from granting a license should be recognized at a point in time or over time.
 
In addition to the clarifications, the amendments include two additional reliefs to reduce cost and complexity for a company when it first applies the new Standard.
Adoption of this principle did not result in a ny effect on the Group’s consolidated financial statements.
 
 
IFRS 4 - Insurance contracts
September 2016
1 January 2018
 
 
 
The amendment to IFRS 4, published in September 2016, is aimed at enabling insurance companies to manage the possible accounting mismatches arising from early adoption of IFRS 9 (which affects the assets of the insurance companies) with respect to the new standard on insurance contracts (which affects the liabilities of those companies). The exercise of this option allows the insurance companies to remove from profit and loss any effects resulting from the measurement at fair value through profit or loss (FVTPL) – in implementation of IFRS 9 – of specific eligible financial assets related to insurance contracts, which would not be measured at FVTPL in full in application of IAS 39. This effect would be reclassified to equity; - the temporary exemption allows insurance companies whose predominant activity is the issuing of insurance contracts to exercise the option not to apply IFRS 9 on 1 January 2018.

IFRS 16 Leases
January 2016
1 January 2019
The new standard constitutes an innovation in that it established that leases be reported in entities' balance sheets, thus enhancing the visibility of their assets and liabilities.
 
IFRS 16 repeals the distinction between operating leases and finance leases (for the lessee), requiring that all lease contracts be treated as finance leases.
Short-term contracts (12 months) and those involving low value items (e.g. personal computers) are exempted from this treatment. The new standard will take effect on 1 January 2019, Early adoption is permitted provided that also IFRS 15, Revenue from Contracts with Customers, is
applied.



22



Standard/
amendment
 Issuance
(IASB)
Effective
from
Description of standard/amendment
IFRS 17
Insurance
 contracts
May 2017
1 January 2021
On 18 May 2017, the IASB issued IFRS 17 - Insurance Contracts which applies to annual reporting periods beginning on or after 1 January 2021. The new standard, which replaces IFRS 4, intends to improve the understanding of investors, among others, of insurers’ risk exposure, operating performance, financial position and cash flows. The IASB published a final version after a long consultation phase. IFRS 17 is a complex standard which will include certain key differences from the current accounting treatment regarding the measurement of liabilities and the recognition of profits. IFRS 17 applies to all insurance contracts. The accounting model of reference, the General Model, is based on the present value of expected cash flows, the identification of a risk adjustment and a contractual service margin (“CSM”), which cannot be negative and represents the present value of unearned profit, to be released to profit or loss in each period with the passage of time.
IFRIC 23 - Uncertainty over Income Tax Treatments
June 2017
1 January 2019
IASB published IFRIC 23 – Uncertainty Over Income Tax Treatment, which provides guidance on how to account for taxes when there is uncertainty over the tax treatment of a transaction.
IFRIC 23 is effective as of 1 January 2019.
Amendment to
IFRS 2
Share-based Payment

June 2016
1 January 2018
The Board issued amendments to IFRS 2, clarifying how to account for certain types of share-based payment transactions. The amendments provide requirements on the accounting for:
 
- the effects of vesting and non-vesting conditions on the measurement of cash-settled share-based payments;
 
- share-based payment transactions with a net settlement feature for withholding tax obligations; and
- a modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to equity-settled.


23




Standard/
amendment
Issuance (IASB)
Effective
from
Description of standard/amendment
Annual Improvements to IFRS Standards 2014-2016 Cycle
December 2016
1 January 2017
1 January 2018
The improvements concern:
- IFRS 12 - Disclosure of Interests in Other Entities; the issue is related to clarify the scope of the disclosure requirements by specifying that the disclosure requirements in IFRS 12, other than those in paragraphs B10–B16, apply to interests that are classified as held for sale or discontinued operations. The date of application is 1 January 2017.
- IFRS 1 - First-time Adoption of International Financial Reporting Standards; the objective of this project is to delate some of the short-term exemptions from IFRSs in Appendix E of IFRS 1, after those short-term exemptions have served their intended purpose. The date of application is 1 January 2018.
 
- IAS 28 -
Investments in Associates and Joint Ventures; the issue is to clarify whether an entity has an investment-by- investment choice for measuring investees at fair value in accordance with IAS 28 by a venture capital organization, or a mutual fund, unit trust or similar entities including investment linked insurance funds. Additionally, an entity that is not an investment entity may have an associate or joint venture that is an investment entity. The Board noted that paragraph 36A of IAS 28 permits such an entity the choice to retain the fair value measurements used by that investment entity associate or joint venture when applying the equity method. The date of application is 1 January 2018.

 
 
 
IFRIC 22 - Foreign Currency Transactions and Advance Consideration
December 2016
1 January 2018
IFRIC 22 provides requirements about which exchange rate to use in reporting foreign currency transactions when payment is made or received in advance.
Amendments to IAS 40 - Investment Property
December 2016
1 January 2018
The amendments concern the application of paragraph 57 of IAS 40 Investment Property, which provides guidance on transfers to, or from, investment properties.


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Standard/
amendment
 
Issuance
 (IASB)
Effective
from
Description of standard/amendment
Prepayments
Features with Negative
Compensation
(Amendments to IFRS 9)
October 2017
1 January 2019
Under IFRS 9, a debt instrument can be measured at amortized cost or at fair value through other comprehensive income, provided that the contractual cash flows are ‘solely payments of principal and interest on the principal amount outstanding’ (the SPPI criterion) and the instrument is held within the appropriate business model for that classification. The amendments to IFRS 9 clarify that a financial asset passes the SPPI criterion regardless of the event or circumstance that causes the early termination of the contract and irrespective of which party pays or receives reasonable compensation for the early termination of the contract.
 
 
 
The amendments must be applied retrospectively; earlier application is permitted. The amendment provides specific transition provisions if it is only applied in 2019 rather than in 2018 with the remainder of IFRS 9.
 
 
 
 
 
 
Most likely, the costs to terminate a ‘plain vanilla’ interest rate swap that is collateralized, so as to minimize the credit risks for the parties to the swap, will meet this requirement.
 
 
 
 
 
 
This means that the gain or loss arising on modification of a financial liability that does not result in derecognition, calculated by discounting the change in contractual cash flows at the original effective interest rate, is immediately recognized in profit or loss.
 
 
 
 
 
 
The IASB stated specifically that this clarification relates to the application of IFRS 9. As such, it would appear that this clarification does not need to be applied to the accounting for modification of liabilities under IAS 39 Financial Instruments: Recognition and Measurement. Any entities that have not applied this accounting under IAS 39 are therefore likely to have a change of accounting on transition. As there is no specific relief, this change needs to be made retrospectively.

Long-term interests
In associates and
Joint ventures
(Amendments to IAS 28)
October 2017
1 January 2019
The amendments clarify that an entity applies IFRS 9 Financial Instruments to long-term interests in an associate or joint venture to which the equity method is not applied but that, in substance, form part of the net investment in the associate or joint venture (long-term interests). This clarification is relevant because it implies that the expected credit loss model in IFRS 9 applies to such long-term interests.
 
 
 
The Board also clarified that, in applying IFRS 9, an entity does not take account of any losses of the associate or joint venture, or any impairment losses on the net investment, recognized as adjustments to the net investment in the associate or joint venture that arise from applying IAS 28 Investments in Associates and Joint Ventures.
 
 
 
To illustrate how entities apply the requirements in IAS 28 and IFRS 9 with respect to long-term interests, the Board also published an illustrative example when it issued the amendments.
 
 
 
Entities must apply the amendments retrospectively, with certain exceptions. Early application of the amendments is permitted and must be disclosed.



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Standard/
amendment

Issuance
 (IASB)
Effective
from
Description of standard/amendment
Annual improvements to IFRS Standards 2015-2017 Cycle
December 2017
1 January 2019
IFRS 3 Business Combinations - The amendments clarify that, when an entity obtains control of a business that is a joint operation, it applies the requirements for a business combination achieved in stages, including remeasuring previously held interests in the assets and liabilities of the joint operation at fair value. In doing so, the acquirer remeasures its entire previously held interest in the joint operation. An entity applies those amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 January 2019. Earlier application is permitted.
 
 
 
IFRS 11 Joint Arrangements - A party that participates in, but does not have joint control of, a joint operation might obtain joint control of the joint operation in which the activity of the joint operation constitutes a business as defined in IFRS 3. The amendments clarify that the previously held interests in that joint operation are not remeasured. An entity applies those amendments to transactions in which it obtains joint control on or after the beginning of the first annual reporting period beginning on or after 1 January 2019. Earlier application is permitted.
 
 
 
IAS 12 Income Taxes - The amendments clarify that the income tax consequences of dividends are linked more directly to past transactions or events that generated distributable profits than to distributions to owners. Therefore, an entity recognizes the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognized those past transactions or events. An entity applies those amendments for annual reporting periods beginning on or after 1 January 2019. Earlier application is permitted. When an entity first applies those amendments, it applies them to the income tax consequences of dividends recognized on or after the beginning of the earliest comparative period.
 
 
 
IAS 23 Borrowing Costs - The amendments clarify that an entity treats as part of general borrowings any borrowing originally made to develop a qualifying asset when substantially all of the activities necessary to prepare that asset for its intended use or sale are complete. An entity applies those amendments to borrowing costs incurred on or after the beginning of the annual reporting period in which the entity first applies those amendments. An entity applies those amendments for annual reporting periods beginning on or after 1 January 2019. Earlier application is permitted.


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IFRS 9 PROJECT
In 2015 the FCA Bank Group started the project to implement IFRS 9 – Financial Instruments, the new financial reporting standard that, as of 1 January 2018, will replace IAS 39 for the classification and measurement of financial instruments as well as for the calculation of impairments. The project is designed to explore the different areas of application of the new financial reporting standard in relation to “Classification and Measurement”, “Impairment” and “Hedge Accounting” and to define its quantitative impacts.
The project was conducted by a working party under the joint stewardship of the Finance and Risk & Permanent Control departments. The working party includes representatives from all company functions, with the creation of theme sub-groups on the basis of the ramifications of IFRS 9 and the Group’s activity segments.

Classification and measurement
IFRS 9 introduces a model whereby the classification of financial assets is guided, on one side, by the contractual cash flow characteristics of the instruments and, on the other, management’s intent regarding the instruments.
Regarding the SPPI test of financial assets, the methodology to be used has been defined and the analysis of the composition of the existing financial instrument and loan and receivable portfolios were completed, so as to classify them properly when IFRS 9 is adopted.
In the context of the project, modular analyses were performed for loans and receivables taking into account the significance of the portfolios, their consistency and the various activity segments. In this respect, consistent approaches have been used for the retail and corporate segments of the loan and receivable portfolio. The analyses revealed that all the financial assets passed the SPPI test.
Regarding the second method to classify financial assets (business model), the analysis conducted with retail and corporate counterparts showed that there is a single Hold-to-Collect business model.
As a result of the business model assessment and the SPPI tests, we can confirm that no significant impacts will occur with the application of IFRS 9.
 
Impairment
Regarding the new impairment model, the key elements completed were the following:
The definition of parameters to determine the significant increase of credit risk, for the proper allocation of exposures in stage 1 or stage 2. These parameters are consistent with the Bank’s credit analysis policies. Non-performing exposures, allocated in stage 3, have been considered such in keeping with prudential rules;
The determination of the short-term and lifetime PD;
The definition of the forward-looking models.
The criteria considered for the purposes of the considerations on the transfers between stages are based on qualitative and quantitative elements, in accordance with the standard.

Organizational impacts

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In parallel with the implementation in the information systems, similar analyses and actions are under way in relation to the organization. Specifically, the main organizational impacts concern the review and adaptation of the existing operational processes, the design and implementation of new processes and the review of the dimensioning and expansion of the responsibilities available within the different operational, administrative and control departments.
Specifically, the actions related to the Classification and Measurement area concern, in the first place, the Marketing function, to identify the Business Models and to define the operational and monitoring processes for the SPPI test, with special emphasis on the process for the development of new products.

Operating and equity impacts
The impacts of the adoption of IFRS 9 on the FCA Bank Group derive from the application of the new impairment accounting model, with an increase in impairment charges, as well as the application of the new rules for the transfer of exposures between the different classification stages provided for by the new standard.
Based on the analyses performed and the implementations under way, the impact in question, to be recognized in equity on adoption of the new standard, is in no way critical for the FCA Bank Group’s equity and regulatory capital, as it accounts for no more than 1% of consolidated equity.


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A.2 - MAIN ITEMS IN THE FINANCIAL STATEMENTS
This section shows the accounting policies adopted to prepare the consolidated financial statements as of 31 December 2017. Such description is provided with reference to the recognition, classification, measurement and derecognition of the different assets and liabilities.
1.
Held-for-trading financial assets
This item includes financial assets held in the trading portfolio, reflecting essentially the positive value of derivative contracts not designated as hedging instruments.
Derivatives are recognized as assets if their fair value is positive and as liabilities if their fair value is negative. Assets and liabilities arising from transactions with the same counterparty can be offset only if there is the legally enforceable right to offset the amounts recognized and the parties intend to settle on a net basis (see IAS 32).
No reclassifications to other financial asset categories are permitted, save for the existence of unusual events that can hardly take place again in the short term. In these cases, debt and equity instruments that are no longer held for trading can be reclassified only for in particular situations, under IAS 39 (Financial assets held to maturity, Available for sale financial assets, Receivables). These assets are transferred at their fair value at the time of reclassification.
Initial recognition takes place on the date of settlement for debt and equity instruments and on the execution date for derivative contracts. Held-for-trading assets are initially recognized at their fair value, which is normally the price paid, without considering transaction costs and income attributable to the instrument.
After initial recognition, held-for-trading financial assets and liabilities are measured at their fair value. Any changes in fair value are recognized through profit or loss under item 80. “Net result of trading activities”.
The fair value of derivative contracts quoted in an active market is determined on the basis of the market value of such contracts at the end of the period. In the absence of an active market, use is made of estimation methods and valuation models that take into account the risk factors associated to the instruments and based on market data, such as interest rates. Equity instruments, units of UCITS and derivatives with equity instruments as underlying not quoted in an active market, for which the fair value cannot be determined reliably according to the above guidelines, are reported at cost.
Held-for-trading financial assets and liabilities are derecognized when the contractual rights to the cash flows deriving therefrom expire or when the financial asset or liability is sold, substantially transferring all related risks and rewards.

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2.
Available-for-sale financial assets
These are financial assets other than derivatives which are not classified as receivables, financial assets held to maturity or assets recognized at their fair value. These assets are held for an indefinite period of time and can be sold to generate liquidity or to meet changes in interest rates, exchange rates and prices.
Available-for-sale financial assets include money market, debt and equity instruments; they include non-controlling equity interests that do not qualify as investments in subsidiaries, joint ventures or associated companies.
Debt and equity instruments are recognized as financial assets on the settlement date while receivables are recognized on the disbursement date.
Financial assets are initially recognized at their fair value, including transaction costs and income attributable directly to the instrument. Financial assets reclassified from Financial assets held to maturity are initially recognized at their fair value at the time of transfer.
Subsequently, Available-for-sale financial assets are measured at their fair value. Interest, calculated with the amortized cost method is recognized in the income statement while changes in fair value are recognized through equity, in item 140 “Valuation reserve”. Changes in fair value are reported also in the Statement of comprehensive income.

Fair value is determined on the basis of the criteria already illustrated for held-for-trading financial assets.
Equity instruments not quoted in an active market and whose fair value cannot be determined due to lack of reliable information are recognized at cost, which reflects the latest reliably measured fair value.

Tests to determine the existence of objective evidence of impairment are conducted at year-end or interim reporting dates.
When there is evidence of impairment, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognized in the statement of profit or loss – is removed from OCI and recognized in the statement of profit or loss.
Impairment losses are reported in item 130.b) “Impairment/reinstatement of value of available-for-sale financial assets”.
If the reasons for the impairment no longer apply, following the occurrence of an event after the recognition of the relevant loss, the impairment loss previously recognized is reversed through profit or loss, in the case of debt instruments, and through OCI, in the case of equity instruments. The amount of the reinstatement cannot, under any circumstance, exceed the amortized cost that the instruments would have had in the absence of previous impairments.
In case of disposal of the financial asset, cumulative gains and losses are released to the income statement to item 100.b) “Gains (losses) on disposal or buyback of available-for-sale financial assets”.
3.
Financial assets held to maturity
Held-to-maturity investments are non-derivative financial assets that have either fixed or determinable payments and a fixed maturity – other than those that can be classified as loans to banks or loans to customer - and for which there is the ability and the intention to hold to maturity.
If during the year a significant amount of such investments is sold or reclassified, before their maturity, the remaining financial assets held to maturity would be reclassified as available-for-sale financial assets and use of this category would be precluded for the following two years, unless the sales or reclassifications:
are so close to the maturity date or the date of the option for the repayment of the financial asset that interest rate fluctuations would not have a significant effect on the fair value of the asset;
take place after the collection of substantially all the original capital of the financial asset through planned or advance repayments;

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are attributable to an isolated, uncontrollable event that is not recurring and could not be reasonably predicted.
Initial recognition of these financial instruments takes place at the settlement date. Financial assets held to maturity are initially recognized at their fair value, including any income and transaction costs that are directly attributable. Subsequently, they are measured at amortized cost by using the effective interest rate method.
Gains or losses related to financial assets held to maturity are recognized through profit or loss when such assets are derecognized or impaired or through the amortization of the difference between the initial carrying amount and the amount repayable at maturity.
Tests to determine the existence of objective evidence of impairment are conducted at year-end or interim reporting dates. In the presence of such objective evidence, the amount of the loss is measured as the difference between the carrying amount of the asset and the present value of the estimated future cash flows, as discounted at the original effective interest rate. Impairment losses are reported in item 130.c) “Impairment/reinstatement of value of financial assets held to maturity”.
If the reasons for the impairment no longer apply, following the occurrence of an event after the recognition of the relevant loss, the impairment loss previously recognized is reversed through profit or loss. The amount of the reinstatement cannot, under any circumstance, exceed the amortized cost that the instruments would have had in the absence of previous impairments.
Financial assets held to maturity are derecognized when the contractual rights to the cash flows deriving therefrom expire or when the financial asset is sold, substantially transferring all related risks and rewards. In case of disposal/derecognition of the financial asset, cumulative gains and losses are released to the income statement to item 100.c) “Gains (losses) on disposal or buyback”.
4.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, and are not recognized as “Assets held for trading” or designated as “Available-for-sale assets” or “Assets held to maturity”.
“Loans to customers” include receivables originated from instalment loans, finance leases and loans disbursed, in connection with the factoring business, on a recourse basis. Regarding receivables sold on a non-recourse basis, these are reported in the presence of contractual clauses that do not transfer substantially the relevant risks and rewards.
Lease agreements are classified as finance leases whenever the relevant terms and conditions are such as to transfer substantially all the risks and benefits of ownership from the lessor to the lessee. All the other leases are operating leases. The amounts due from lessees under finance leases are recognized as receivables for the amount of the Group’s investment in the leased assets.
Loans and receivables are recognized initially upon disbursement.
Upon initial recognition, loans and receivables are recorded at fair value, which is typically the amount of the sum disbursed, including income and transaction costs that are directly attributable to the single loan or receivable and determinable since inception of the transaction, even though the relevant monetary amount is collected or paid subsequently.
Subsequently, loans and receivables are measured at amortized cost, or the difference between their carrying amount on initial recognition – as increased or decreased for any principal repayment, impairments or reinstatements – and the amortization, calculated with the effective interest rate, of the difference between the amount disbursed and that due at maturity, taking into account costs or income directly attributable to the individual loan or receivable. The effective interest rate is equal to the discount rate that sets the present value of the future cash flows of the loan or receivable, in terms of principal and interest, equal to the amount disbursed less any cost/income attributable to the loan or receivable. This accounting treatment, based on a cash flow rationale, makes it possible to distribute the effects of costs/income throughout the terms to maturity of the loan or receivable. Short-term loans or receivables, which are not impacted by the time value of money, are reported at their initial carrying amount.
Gains and (losses) on loans are recognized through profit or loss:
when the financial asset in question is derecognized, in item 100.a) “Gains (losses) on loan or receivable disposals”; or:

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when the financial asset is impaired (or when the original value is reinstated), in item 130.a) “Impairment/reinstatement of value due to impairment of loans or receivables”.
Interest earned on loans or receivables are recognized in item 10. “Interest and similar income” and is recognized in accordance with the effective interest rate method as apportioned throughout the remaining term of the loan.
The carrying amount of loans and receivables is tested from time to time for recoverability through an analysis designed to identify those that, following the occurrence of events after their disbursement, show objective evidence of possible impairment. These include loans or receivables classified as non-performing, non-accruing, restructured or past due, in accordance with the rules enacted by Banca d’Italia in force at 31 December 2017, consistent with IAS/IFRSs.
These deteriorated loans and receivables are evaluated individually and the amount of the adjustment for each is equal to the difference between its carrying amount upon initial recognition (amortized cost) and the present value of future cash flows, as discounted at the original effective interest rate.
Loans and receivables for which no objective evidence of impairment has been gathered individually are tested for any collective impairment. The evaluation is carried out by grouping these loans and receivables by consistent credit risk categories and the loss percentages are estimated taking into account the time series of the losses associated with each category.
The losses are recognized through profit or loss. If an impaired loan or receivable is recovered, the amount is recognized as a debit to “Impairment losses due to credit deterioration”.
The full or partial write-off of an uncollected loan or receivable takes place when such loan or receivable is considered as definitely irrecoverable. The loss is recognized in the income statement less any previous impairment losses taken.
Deteriorated loans are derecognized only if the sale entailed the substantial transfer of all related risks and rewards. By contrast, when the risks and rewards of the loans or receivables sold have not been transferred, these continue to be reported on the balance sheet, even though ownership of the loan or the receivable has been transferred. In the event that the substantial transfer of risks and rewards cannot be ascertained, the loans or receivables are derecognized whenever no type of control has been maintained over them. By converse, keeping control, in whole or in part, involves the on-balance-sheet recognition on the balance sheet of the loans or receivables for the balance outstanding, as measured by the exposure to changes in value of the loans or receivables sold and the changes in the relevant cash flows. Lastly, loans or receivables sold are recognized whenever the contractual rights to receive the related cash flows are maintained whenever the entity is required to pay such cash flows to a third party.
Deteriorated loans or receivables
Deteriorated exposures – i.e. those with the features outlined in paragraphs 58-61 of IAS 39 – are classified in the categories listed below, in accordance with Banca d’Italia’s guidance contained in Circular no. 272 of 30 July 2008 as amended:
non-performing: the total amount of cash and off-balance-sheet exposure toward an entity in a state of insolvency (including in the absence of a court ruling) or in substantially similar situations, regardless of any loss forecasts by the bank. This category does not include any deterioration determined by country risk. The assessment is generally made on an individual basis.
probable defaults (“unlikely to pay”): the total amount of cash and off-balance-sheet exposure which does not qualify as non-performing but which are considered as unlikely to be repaid (in terms of principal or interest), absent any action such as calling on guarantees, by the borrower. This assessment is generally made regardless of any past due amount or instalment. Probable defaults are generally assessed on an individual basis or by applying a pre-set percentage to the various credit risk categories.
Past due and/or excess exposures: these are cash exposures other than those classified as non-performing or probable defaults that, at the reporting date, are either past due or exceed approved credit limits. Past due and/or excess exposures can be determined by reference to either the individual borrower or the individual transaction.
Securitized receivables
Certain Group companies participate in receivable securitization programs as sellers and subscribers of bonds issued under these programs.

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Securitization transactions involve the sale on a non-recourse basis of a receivable portfolio to a vehicle company, which in turn finances the purchase of these receivables by issuing asset-backed securities, that is bonds whose repayment of principal and interest depend on the cash flow generated by the receivable portfolio.
Asset-backed securities are ranked by seniority and rating, with the senior placed in the market with investors while the junior notes, which are subordinated to senior notes in priority of repayment, are placed with companies of the FCA Group.
According to IFRS 10, vehicles are included in the scope of consolidation, as the placement of junior asset-backed securities and participation of the originator in the set-up of the program, imply control over the SPE.
5.
Hedging transaction
Hedging transactions are intended to offset potential losses/gains on a specific item or group of items, attributable to a specific risk, through the gains/losses generated on another instrument or group of instruments in the event that the specific risk in question materializes. The FCA Bank Group hedges its exposure to the interest rate risk associated with receivables arising from instalment loans and bonds issued at fixed interest rates with derivatives designated as fair value hedges. Derivatives entered into to hedge the variable interest rate risk associated with the debt of the companies engaged in long-term rental are designated as cash flow hedges..
Only derivatives entered into with a counterparty not belonging to the Group may be treated as hedging instruments.
Hedging derivatives are stated at fair value. Specifically:
in the case of cash flow hedges, derivatives are recognized a their fair value. Any change in the fair value of the effective part of the hedge is recognized through OCI, in item 140. “Valuation reserve” while any change in the fair value of the ineffective part of the hedge is recognized through profit or loss in item 90. “Net result of hedging activities”;
in the case of fair value hedges, any change in the fair value of the hedging instrument is recognized through profit or loss in item 90. “Net result of hedging activity”. Any change in the fair value of the hedged item, attributable to the risk hedged with the derivative instrument, is recognized through profit and loss as an offsetting entry of the change in the carrying amount of the hedged item.
The fair value of derivative instruments is calculated on the basis of interest and exchange rates quoted in the market, taking into account the counterparties’ creditworthiness, and reflects the present value of the future cash flows generated by the individual contracts.
Gains or losses on derivatives hedging interest rate risk are allocated either to “Interest and similar income” or “Interest and similar expenses”, as the case may be.
A derivative contract is designated for hedging activities if there is a formal document of the relationship between the hedged instrument and the hedging instrument and whether the hedge is effective since inception and, prospectively, throughout its life.
A hedge is effective (in a range between 80% and 125%) when the changes in the fair value (or cash flows) of the hedging financial instrument almost entirely offset the changes in hedged item with regard to the risk being hedged.
Effectiveness is assessed at every year-end or interim reporting date by using:
prospective tests, to demonstrate an expectation of effectiveness in order to qualify for hedge accounting;
retrospective tests, to ensure that the hedging relationship has been highly effective throughout the reporting period, measuring the extent to which the achieved hedge deviates from a perfect hedge.
If the tests fail to demonstrate hedge effectiveness, hedge accounting, as indicated above, is discontinued and the derivative contract is reclassified to held-for-trading financial assets or financial liabilities and is therefore measured in a manner consistent with its classification. In case of macro hedging, IAS 39 permits the establishment of a fair value hedge for the interest rate risk exposure of a designated amount of financial assets or liabilities so that a group of derivative contracts can be used to offset the changes in fair value of the hedged items as interest rates vary.

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Macro hedges cannot be applied to a net position being the difference between financial assets and liabilities.
Macro hedging is considered highly effective if, like fair value hedges, at inception and in subsequent periods the changes in fair value of the hedged amount are offset by the changes in fair value of the hedging derivatives in the range of 80% to 125%.
6.
Investments
Investments in joint ventures (IFRS 11) as well as in companies subject to significant influence (IAS 28) are recognized with the equity method.
Under the equity method, the investment in an associate or a joint venture is initially recognized at cost.

If there is any evidence that the value of an investment has been impaired, the recoverable value of the investment is estimated, taking account the present value of the future cash flows that it will generate, including its disposal value.
If the recovery value is lower than book value, the difference is recorded in the income statement.
In subsequent periods, if the reasons for the impairment cease to exist, the original value may be restored through the income statement.
7.
Tangible assets
This item includes furniture, fixtures, technical and other equipment and assets related to the leasing business.
These tangible assets are used to provide goods and services, to be leased to third parties, or for administrative purposes and are expected to be utilized for more than one period.
This item consists of:
assets for use in production;
assets held for investment purposes.
Assets held for use in production are utilized to provide goods and services as well as for administrative purposes and are expected to be used for more than one period. Typically, this category includes also assets held to be leased under leasing arrangements.
This item includes also assets provided by the Group in its capacity as lessor under operating lease agreements. Assets leased out include vehicles provided under operating lease agreements by the Group’s long-term car rental companies. Trade receivables to be collected in connection with recovery procedures in relation to operating leases are classified as “Other assets”. Operating lease agreements with a buyback clause are also included in “Other assets”.
Tangible assets comprise also leasehold improvements, whenever such expenses are value accretive in relation to identifiable and separable assets. In this case, classification takes place in the specific sub-items of reference in relation to the asset.
Assets held for investment purposes refer to investment property as per IAS 40, i.e. properties held (owned or
under a finance lease) in order to receive rental income and/or an appreciation of the invested capital.
Tangible assets are initially recognized at cost, inclusive of purchase price and all the incidental charges incurred directly to purchase and to put the asset in service. Costs incurred after purchase are only capitalized if they lead to an increase in the future economic benefits deriving from the asset to which they relate. All other costs are recorded in the income statement as incurred.
Subsequently, tangible assets are recognized at cost, less accumulated depreciation and impairment losses. Depreciation is calculated on a straight-line basis considering the remaining useful life and value of the asset.
At every reporting date, if there is any evidence that an asset might be impaired, the book value of the asset is compared with its realizable value – equal to the greater of fair value, net of any selling costs, and the value in use of the asset, defined as the net present value of future cash flows generated by the asset. Any impairment losses and adjustments are recorded in the income statement, item 200 “Impairment/reinstatement of tangible assets”.

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If the reasons that gave rise to the impairment no longer apply, then the loss is reversed for the amount that would restore the asset to the value that it would have had in the absence of any impairment, less accumulated depreciation.
Initial direct costs incurred in the negotiation and execution of an operating agreement are added to the leased assets in equal instalments, based on the length of the agreement.
Tangible assets are derecognized upon disposal or when they are retired from production and no further economic benefits are expected from them. Any difference between the selling price or realizable value and the carrying amount is recognized through profit or loss, item 270 “Gains (losses) from the sale of investments”.
8.
Intangible assets
Intangible assets are non-monetary long-term assets, identifiable even though they are intangible, controlled by the Group and which are likely to generate future economic benefits.
Intangible assets include mainly goodwill, software, trademarks and patents.
Goodwill arising in a business combination is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount recognized for non-controlling interests) and any previous interest held over the fair value of net identifiable assets acquired and liabilities assumed.
In the case of software generated internally the costs incurred to develop the project are recognized as intangible assets provided that the following conditions are met: technical feasibility, intention to complete, future usefulness, availability of sufficient technical and financial resources and the ability to measure reliably the costs of the project.
Intangible assets are recognized if they are identifiable and originated from legal or contractual rights.
Intangible assets purchased separately and/or generated internally are initially recognized a cost and, except for goodwill, are amortized on a straight line basis over their remaining useful life.
Subsequently, they are measured at cost net of accumulated amortization and any accumulated impairment losses. The useful life of intangible assets is either definite or indefinite.
Definite-life intangibles are amortized over their remaining useful life and are tested for impairment every time there is objective evidence of a possible loss of value. The amortization period of a definite-life intangible asset is reviewed at least once every year, at year end. Changes in the useful life in which the future economic benefits related to the asset will materialize result in changes in the amortization period and are considered as changes in estimates. The amortization of definite-life intangible asset is recognized in the income statement in the cost category consistent with the function of the intangible asset.
Indefinite-life intangible assets, including goodwill, are not amortized but are tested every year for impairment both individually and at the level of cash generating units. Every year (or whenever there is evidence of impairment) goodwill is tested for impairment. To this end, the cash generating unit to which goodwill is to be attributed is identified. The amount of any impairment is calculated as the difference between the carrying amount of goodwill and its recoverable value, if lower. Recoverable value is equal to the greater of the fair value of the cash generating unit, less any selling costs, and the relevant value in use. Any adjustments are recognized in the income statement, item 260. “Goodwill impairment”. No reversal of impairment is permitted for goodwill.
Intangible assets are derecognized upon disposal or when and no further economic benefits are expected from them. Any difference between the selling price or realizable value and the carrying amount is recognized through profit or loss, item 270. “Gains (losses) from the sale of investments”.
9.
Current and deferred taxation
Deferred tax assets and liabilities are recognized on the balance sheet of the consolidated financial statements in items 140. “Tax assets” and 80. “Tax liabilities”.

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Tax assets and liabilities are recognized in the consolidated statement of financial position in line item 140. “Tax assets” on the asset side and line item 80. “Tax liabilities” on the liability side.
In accordance with the balance sheet method, current and deferred taxes are accounted for as follows:
current tax assets, that is payments in excess of taxes due under applicable national tax laws;
current tax liabilities, or taxes payable under applicable national tax laws;
deferred tax assets, that is income taxes recoverable in future years and related to:
deductible temporary differences;
unused tax loss carry-forwards; and
unused tax credits carried forward;
deferred tax liabilities, that is income tax amounts payable in future years due to the excess of income over taxable income due to timing differences.
Current and deferred tax assets and liabilities are calculated by applying national tax laws in force and are accounted for as an expense (income) in accordance with the same accrual basis of accounting applicable to the costs and revenues that generated them.
Generally, deferred tax assets and liabilities arise in the cases where the deductibility of a cost or the taxability of a revenue is deferred with respect to their recognition.
Deferred tax assets and liabilities are recognized on the basis of the tax rates that, at the balance sheet date, are expected to be applicable in the year in which the asset will be realized or the liability extinguished, on the basis of the tax legislation in force, and are periodically revised to take account of any change in legislation.
Deferred tax assets are recognized, to the extent that they can be recovered against future income. In accordance with IAS 12, the probability that there is sufficient taxable income in future should be verified from time to time. If the analysis reveals that there is no sufficient future income, the deferred tax assets are reduced accordingly.
Current and deferred taxes are recognized in the income statement, item 290 “Income tax on continuing operations”, with the exception of those taxes related to items recognized, in the current or in another year, directly through equity, such as those related to gains or losses on available-for-sale financial assets and those related to changes in the fair value of cash flow hedges, whose changes in value are recognized, on an after-tax basis, directly in the statement of comprehensive income in the “Valuation reserve”.
Current tax assets are shown in the balance sheet net of current tax liabilities whenever the following conditions are met:
existence of an enforceable right to offset the amounts recognized;
the parties intend to settle the assets and liabilities in a single payment on a net basis or to realize he asset and simultaneously extinguish the liability.
Deferred tax assets are reported in the Statement of financial position net of deferred tax liabilities whenever the following conditions are met:
existence of a right to offset the underlying current tax assets with current tax liabilities; and
both deferred tax assets and liabilities relate to income taxes applied by the same tax jurisdiction on the same taxable entity or on different taxable entities that intend to settle the current tax assets and liabilities on net basis (typically in the presence of a tax consolidation agreement).
10.
Provisions for risks and charges
Post-employment benefits and similar obligations
Post-employment benefits are established in accordance with labor agreements and are qualified as defined-benefit plans.

36



Obligations associated with employee defined-benefit plans and the relevant pension costs associated to current employment are recognized based on actuarial estimates by applying he projected unit credit method. Actuarial gains/losses resulting from the valuation of the liabilities of the defined-benefit plan are recognized through Other Comprehensive Income (OCI) in the “Valuation reserve”. Such re-measurements are not reclassified to profit or loss in subsequent periods.”
The discount rate used to calculate the present value of the obligations associated with post-employment benefits changes depending on the country/currency in which the liability is denominated and is set on the basis of yields, at the balance sheet date, of bonds issued by prime corporates with an average maturity consistent with that of the liability. Net interest is calculated by applying the discount rate to the net defined benefit liability or asset.”
Other provisions
Other provisions for risks and charges relate to costs and charges of a specified nature and existence certain or probable but whose amount or date of payment is uncertain on the balance sheet date. Provisions for risks and charges are made solely whenever:
a) there is a current (legal or constructive) obligation as a result of a past event;
b) fulfilment of this obligation is likely to be onerous;
c) the amount of the liability can be reliably estimated.
When the time value of money is significant, the amount of a provision is calculated as the present value of the expenses that will supposedly be incurred to extinguish the obligation.
This item includes also long-term benefits to employees whose expenses are determined with the same actuarial criteria as those of the defined-benefit plans. Actuarial gains or losses are all recognized as incurred through profit or loss.
11.
Debts, securities outstanding and other liabilities
The items Bank borrowings, Due to customers and Securities outstanding include the financial instruments (other than financial liabilities held for trading and recognized at their fair value) issued to raise funds from external sources. In particular, securities outstanding reflect bonds issued by Group companies and securities issued by the SPEs in relation to receivable securitization transactions.
These financial liabilities are recognized on the date of settlement at fair value, which is normally the amount collected or the issue price, less any transaction costs directly attributable to the financial liability. Subsequently, these instruments are recognized at their amortized cost, on the basis of the effective interest method. The only exception is short-term liabilities, as the time value of money is negligible, which continue to be recognized on the basis of the amount collected.
Financial liabilities are derecognized when they reach maturity or are extinguished. Derecognition takes place also in the presence of a buyback of previously issued securities. The difference between the carrying amount of the liability and the price paid to buy it back is recognized through profit or loss, item 100.d) “Gains (Losses) on buyback of financial liabilities”.
12.
Financial liabilities held for trading
Financial liabilities held for trading include mainly derivative contracts that are not designated as hedging instruments.
These financial liabilities are recognized initially at their fair value initially and subsequently until they are extinguished, with the exception of derivative contracts to be settled with the delivery of an unlisted equity instrument whose fair value cannot be determined reliably and that, as such, are recognized at cost.
13.
Insurance assets and liabilities

37



IFRS 4 defines insurance contracts as contracts under which one party (the insurer) accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder (or a party designated by the policyholder) if a specified uncertain future event (the insured event) adversely affects the policyholder.
The Group’s insurance activity concerns the reinsurance of life and non-life insurance policies sold by insurance companies to customers of consumer credit companies to protect the payment of the debt.
The items described below reflect, as prescribed by paragraph 2 of IFRS 4, the operating and financial effects deriving from the reinsurance contracts issued and held.
In essence the accounting treatment of such products calls for the recognition:
in items 150. “Net premiums” and 160. “Income (losses) from insurance activities” of the income statement, (i) of the premiums, which include the premiums written for the year following the issue of contracts, net of cancellations; (ii) changes in technical provisions, reflecting the variation in future obligations toward policyholders arising from insurance contracts; (iii) commissions for the year due to intermediaries; (iv) cost of claims, redemptions and expirations for the period;
in item 130. “Technical provisions”, on the liability side, of the obligations toward policyholders, calculated individually for every contract with the prospective method, on the basis of demographic/financial assumptions currently used by the industry;
in item 110. “Technical provisions ceded to reinsurers”, on the asset side, the obligations attributable to reinsurers.
14.
Other information
Employee Severance Fund
The FCA Bank Group has established different defined-benefit and defined-contribution pension plans, in line with the conditions and practices in the countries in which it carries out its activities.
In Italy, the Employee Severance Fund is treated as “post-employment benefits”, classified as:
“defined-contribution plan” for the severance amounts accrued to employees as of 1 January 2007 (effective date of Legislative Decree no. 252 on the reform of supplementary pension funds), both in case the employee exercised the option to allocate the sums attributable to him/her to supplementary pension funds and in case the employee opted for the allocation of these sums to INPS’s Treasury fund. For these sums, the amount accounted for as personnel expenses is determine on the basis of the contributions due without applying actuarial calculation methods;
“defined-benefit plan”, recognized on the basis of its actuarial value as determined by using the projected credit unit method, for the severance amounts accrued until 31 December 2006. These amounts are recognized on the basis of their actuarial value as determined by using the projected credit unit method. To discount these amounts to present value, the discount rate was determined on the basis of yields of bonds issued by prime corporates taking into account the average remaining duration of the liability, as weighted by the percentage of any payment and advance payment, for each payment date, in relation to the total amount to be paid and paid in advance until the full amount of the liability is extinguished.
Costs related to the employee severance fund are recognized in the income statement, item no. 180.a) “Administrative expenses: personnel expenses” and include, for the part relating to the defined-benefit plan (i) service costs related to companies with less than 50 employees; (ii) interest cost accrued for the year, for the defined-contribution part; (iii) the severance amounts accrued in the year and credited to either the pension funds or to INPS’s Treasury fund.
On the Statement of financial position, the “Employee severance fund” reflects the balance of the fund exiting at 31 December 2006, minus any payment made until 31 December 2017. Item 100 “Other liabilities” – “Due to social security institutions” shows the debt accrued at 31 December 2017 relating to the severance amounts payable to pension funds and INPS’s Treasury fund.
Actuarial gains and losses, reflecting the difference between the carrying amount of the liability and the present value of the obligation at year-end, are recognized through equity in the Valuation reserve, in accordance with IAS 19 Revised.
Revenue recognition

38



Revenue arising from the use by others of the Company’s assets yielding interest is recognized, when it is probable that the economic benefits associated with the transaction will flow to the Company and the amount can be reliably quantified. In particular, for all financial instruments measured at amortized cost, such as loans and receivables to customers and banks, and interest-bearing financial assets classified as AFS, interest income is recorded using the effective interest rate (EIR) and classified under “Interest and similar income”.
Commissions receivable upon execution of a significant act or upon the rendering of a service are recognized as revenue when the significant act has been completed or when the services are provided. On the other hand, commissions related to origination fees received by the entity relating to the creation or acquisition of a financial asset are deferred and recognized as an adjustment to the effective rate of interest.
Revenues from services are recognized when the services are rendered.
Dividends are recognized in the year in which their distribution is approved.
Cost recognition
Costs are recognized as they are incurred. Costs attributable directly to financial instruments measured at amortized cost and determinable since inception, regardless of when the relevant outlays take place, flow to the income statement via application of the effective interest rate.
Impairment losses are recognized as incurred.
Finance leases
Lease transactions are accounted for in accordance with IAS 17.
In particular, recognition of a lease agreement as a lease transaction is based on the substance that the agreement on the use of one or more specific assets and whether the agreement transfers the right to use such asset.
A lease is a finance lease if it transfers all the risks and benefits incidental to ownership of the leased asset; if it does not, then a lease is an operating lease.
For finance lease agreements where the FCA Bank Group acts as lessor, the assets provided under finance lease arrangements are reported as a receivable in the statement of financial position for a carrying amount equal to the net investment in the leased asset. All the interest payments are recognized as interest income (finance component in lease payments) in the income statement while the part of the lease payment relating to the return of principal reduce the value of the receivable.
Foreign currency transactions
Foreign currency transactions are entered, upon initial recognition, in the reference currency by applying to the foreign currency amount the exchange rate prevailing on the transaction date. At every interim and year-end reporting date, items originated in a foreign currency are reported as follows:
cash and monetary items are converted at the exchange rate prevailing at the reporting date;
non-monetary items, recognized at historical cost, are converted at the exchange rate prevailing on the date of the transaction;
non-monetary items, recognized at fair value, are converted at the exchange rate prevailing at the reporting date.
Exchange rate differences arising from the settlement of monetary items and the conversion of monetary items at exchange rates other than the initial ones, or those used to translate the previous year’s accounts, are recognized in the income statement as incurred. When a gain or a loss related to a non-monetary item is recognized through OCI, the exchange rate difference related to such item is also recognized through OCI. By converse, when a gain or a loss is recognized through profit or loss, the exchange rate difference related to such item is also recognized through profit or loss.

Use of estimates
Financial reporting requires use of estimates and assumptions which might determine significant effects on the amounts reported in the Statement of financial position and in the Income statement, as well as the disclosure of contingent assets and liabilities. The preparation of these estimates

39



implies the use of the information available and subjective assessments, based on historical experience, used to make reasonable assumptions to record the transactions. By their nature the estimates and assumptions used may vary from one year to the next and, as such, so may the carrying amounts in the following years, significantly as well, as a result of changes in the subjective assessments made.
The main cases where subjective assessments are required include:
quantification of losses on loans and receivables, investments and, in general, on financial assets;
evaluation of the recoverability of goodwill and other intangible assets;
quantification of employee provisions and provisions for risks and charges;
estimates and assumptions on the recoverability of deferred tax assets.
The estimates and assumptions used are periodically and regularly updated by the Group. Variations in actual circumstances could require that those estimates and assumptions are subsequently adjusted. The impacts of any changes in estimates and assumptions are recognized directly in profit or loss in the period in which the estimates are revised, if the revision impacts only that period, or also in future periods, if the revision impacts both the current and future periods.
Following are the key considerations and assumptions made by management in applying IFRS and that could have a significant impact on the amounts recognized in the consolidated financial statements or where there is significant risk of a material adjustment to the carrying amounts of assets and liabilities during a subsequent financial period.

Recoverability of deferred tax assets

At 31 December 2017, the Group had deferred tax assets on deductible temporary differences and theoretical tax benefits arising from tax loss carry forwards. The Group has recorded this amount because it believes that it is likely to be recovered.
In determining this amount, management has taken into consideration figures from budgets and forecasts consistent with those used for impairment testing and discussed in the preceding paragraph on the recoverable amount of non-current assets.
Moreover, the contra accounts that have been recognized (i.e. deferred tax assets not recognized to the extent that it is not probable that taxable profit will be available against which the unused tax losses or unused tax credits can be utilized) are considered to be sufficient to protect against the risk of a further deterioration of the assumptions in these forecasts, taking account of the fact that the net deferred assets so recognized relate to temporary differences and tax losses which, to a significant extent, may be recovered over a very long period, and are therefore consistent with a situation in which the time needed to exit from the crisis and for an economic recovery to occur extends beyond the horizon implicit in the above-mentioned estimates.

Pension plans and other post-employment benefits

Employee benefit liabilities with the related assets, costs and net interest expense are measured on an actuarial basis, which requires the use of estimates and assumptions to determine the net liabilities or net assets.
The actuarial method takes into consideration parameters of a financial nature such as the discount rate and the expected long term rate of return on plan assets, the growth rate of salaries as well as the likelihood of potential future events by using demographic assumptions such as mortality rates, dismissal or retirement rates.
In particular, the discount rates selected are based on yields curves of high quality corporate bonds in the relevant market. The expected returns on plan assets are determined considering various inputs from a range of advisors concerning long-term capital market returns, inflation, current bond yields and other variables, adjusted for any specific aspects of the asset investment strategy. Salary growth rates reflect the Group’s long-term actual expectation in the reference market and inflation trends. Changes in any of these assumptions may have an effect on future contributions to the plans.


40



Contingent liabilities

The Group makes provisions for pending disputes and legal proceedings when it is considered probable that there will be an outflow of funds and when the amount of the losses arising therefrom can be reasonably estimated. If an outflow of funds becomes possible but the amount cannot be estimated, the matter is disclosed in the notes. The Group is the subject of legal and tax proceedings covering a range of matters which are pending in various jurisdictions. Due to the uncertainty inherent in such matters, it is difficult to predict the outflow of funds which will result from such disputes. Moreover, the cases and claims against the Group often derive from complex and difficult legal issues which are subject to a different degree of uncertainty, including the facts and circumstances of each particular case, the jurisdiction and the different laws involved. In the normal course of business the Group monitors the stage of pending legal procedures and consults with legal counsel and experts on legal and tax matters. It is therefore possible that the provisions for the Group’s legal proceedings and litigation may vary as the result of future developments of the proceedings under way.


41



A.3 - INFORMATION ON TRANSFERS BETWEEN PORTFOLIOS OF FINANCIAL ASSETS
In 2017 no inter-portfolio transfers were made.

A.4 – INFORMATION ON FAIR VALUE
According to IFRS 13, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). IFRS 7 introduces instead the definition of “fair value hierarchy”. This standard calls for fair value to be determined in accordance with a three-level hierarchy based on the significance of the inputs used in such measurement. The objective is to set the price at which the asset can be sold.
 
The three levels are as follows:
Level 1 (L1): quoted prices (without adjustments) in an active market – as defined by IAS 39 – for the assets and liabilities to be measured;
Level 2 (L2): inputs other than quoted market prices included within Level 1 that are observable either directly (prices) or indirectly (derived from prices) in the market;
Level 3 (L3): inputs that are not based on observable market data.

The methods adopted by the Company to determine fair value are illustrated below:
Austrian government bonds purchased by the Austrian subsidiary, quoted in regulated markets (Caption: assets held to maturity);
bonds issued by the subsidiaries in Ireland, Poland and Switzerland under, the Euro Medium Term Notes programme and listed in regulated markets (Caption: bonds outstanding);
bonds issued in connection with securitization transactions, placed with the public or with private investors, by different Group entities (Caption: bonds outstanding).
For listed bonds issued in connection with securitization transactions, reference to prices quoted by Bloomberg.
Financial assets and liabilities classified as (L2), whose fair value is determined by using inputs other than quoted market prices that are observable either directly (prices) or indirectly (derived from prices) in the market, refer to:
OTC trading derivatives to hedge securitization transactions;
OTC derivatives entered into to hedge Group companies’ receivables;
trade receivable portfolio (Caption: Receivables);
borrowings;
bonds issued in connection with securitization transactions, placed with the public or with private investors, by different Group entities.
Derivatives are measured by discounting their cash flows at the rates plotted on the yield curves provided by Bloomberg. Receivables and payables are measured in the same way.
Bonds outstanding reflect the prices published by Bloomberg. For unlisted bonds reference is made to quoted prices for comparable transactions.

42



In accordance with IFRS 13, to determine fair value, the FCA Bank Group considers default risk, which includes changes in the creditworthiness of the entity and its counterparties.

In particular:
a CVA (Credit Value Adjustment) is a negative amount that takes into account scenarios in which the counterparty fails before the company and the company has a positive exposure to the counterparty. Under these scenarios, the company incurs a loss equal to the replacement value of the derivative;
a DVA (Debt Value Adjustment) is a positive amount that takes into account scenarios in which the company fails before the counterparty and the company has a negative exposure to the counterparty. Under these scenarios, the company obtains a gain for an amount equal to the replacement cost of the derivative.

For listed bonds issued in connection with private securitization transactions, reference is provided by prime banks active in the market taking as reference equivalent transactions, or made to the nominal value of the bonds or the fair value attributed by the banking counterparty that subscribed to them.
The Group uses measurement methods (mark to model) in line with those generally accepted and used by the market. Valuation models are based on the discount of future cash flows and the estimation of volatility; they are reviewed both when they are developed and from time to time, to ensure that they are fully consistent with the objectives of the valuation.

These methods use inputs based on prices prevailing in recent transactions on the instrument being measured and/or prices/quotations of instruments with similar characteristics in terms of risk profile.

43




A.4.5 FAIR VALUE HIERARCHY

A.4.5.1 Assets and liabilities measure at fair value on a recurring basis: breakdown by fair value levels
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial assets/Liabilities measures at fair value
31/12/2017
31/12/2016
L1
L2
L3
L1
L2
L3
1. Financial assets held for trading
-
100
-
-
2,339
-
2. Financial assets at fair value through P&L
-
-
-
-
-
-
3. Available for sale financial assets
-
-
-
-
-
12
4. Hedging derivatives assets
-
-
-
-
95,131
-
5. Property, plant and equipment
-
-
-
-
-
-
6. Intangible assets
-
-
-
-
-
-
Total
-
100
-
-
97,470
12
1. Financial liabilities held for trading
-
5,603
-
-
6,996
-
2. Financial liabilities at fair value through P&L
-
-
-
-
-
-
3. Hedging derivative liabilities
-
43,309
-
-
68,936
-
Total
-
48,912
-
-
75,932
-
 
 
 
 
 
 
 
L1 = Level 1
 
 
 
 
 
 
L2 = Level 2
 
 
 
 
 
 
L3 = Level 3
 
 
 
 
 
 



44




A.4.5.4 Assets and liabilities not measured at fair value or measured at fair value on a non-recurring basis: distributions for levels of fair value
 
 
 
 
 
 
 
 
 
Assets/Liabilities not measured at fair value or measured at fair value on a non recurring - basis
31/12/2017
31/12/2016
VB
L1
L2
L3
BV
L1
L2
L3
1. Held to maturity investments
9,594
10,498
-
-
9,563
10,458
-
-
2. Loans and receivables with banks
2,097,642
-
2,097,642
-
1,497,903
-
1,497,903
-
3. Loans and receivables with customers
21,253,799
-
21,258,923
-
18,555,896
-
18,535,611
-
4. Available for sale financial assets
   -
-
-
-
-
-
-
-
5. Non current assets classified as held for sale
   -
-
-
-
-
-
-
-
Total
23,361,036
10,498
23,356,566
-
20,063,362
10,458
10,583,064
-
1. Deposits from banks
8,555,557
-
8,822,429
-
8,021,610
 
8,300,518
 
2. Deposits from customers
1,483,490
-
1,519,172
-
701,695
-
710,833
-
3. Debt certificates including bonds
13,336,292
9,873,486
3,508,963
19,153
11,087,597
7,639,216
3,247,762
289,155
4. Liabilities included in disposal group classified as hfs
   -
-
-
-
-
-
-
-
Total
23,375,339
9,873,486
13,850,564
19,153
19,810,902
7,639,216
12,259,113
289,155
 
 
 
 
 
 
 
 
 
BV= Balance sheet value
 
 
 
 
 
 
 
 
L1 = Level 1
 
 
 
 
 
 
 
 
L2 = Level 2
 
 
 
 
 
 
 
 
L3 = Level 3
 
 
 
 
 
 
 
 






45




A.5 – Information regarding “day one profit/loss”
IFRS 7, Paragraph 28 regulates the particular case in which, in the event that the purchase of a financial instrument calculated at fair value but not listed in market the transaction cost, that generally represent the best estimate at fair value in an initial basis, diverges to the fair value determined with the evaluative technics adopted by the entity.
In this case an evaluative profit/loss is realized and an adequate informative note for class of financial instrument must be provided at the purchase place.
At 31 December 2017, in the Consolidated Financial Statement this case is not present.




46




PART B - INFORMATION ON THE CONSOLIDATED BALANCE SHEET
ASSETS    
Section 1 – Cash and cash equivalents – Item 10
This item includes cheques, cash and cash equivalent items.

1.1 Cash and cash balances
 
 
 
 
 
 
 
31/12/2017
31/12/2016
a) Cash
24
29
b) Demand deposits with Central banks
452
147
Total
476
176
 
 
 





47



Section 2 – Financial assets held for trading – Item 20    
2.1 Financial assets held for trading: product breakdown
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item/Values
31/12/2017
31/12/2016
L1
L2
L3
L1
L2
L3
A. Balance-sheet assets
 
 
 
 
 
 
1. Debt securities
-
-
-
-
-
-
1.1 Structured securities
-
-
-
-
-
-
1.2 Other
-
-
-
-
-
-
2. Equity instruments
-
-
-
-
-
-
3. Units in investment funds
-
-
-
-
-
-
4. Loans
-
-
-
-
-
-
4.1 Repos
-
-
-
-
-
-
4.2 Other
-
-
-
-
-
-
Total (A)
-
-
-
-
-
-
B. Derivative instruments
 
 
 
 
 
 
1. Financial derivatives:
-
100
-
-
2,339
-
1.1 Trading
-
100
-
-
2,339
-
1.2 Related to fair value option assets / liabilities
-
-
-
-
-
-
1.3 Other
-
-
-
-
-
-
2. Credit derivatives:
-
-
-
-
-
-
2.1 Trading
-
-
-
-
-
-
2.2 Related to fair value option assets / liabilities
-
-
-
-
-
-
2.3 Other
-
-
-
-
-
-
Total (B)
-
100
-
-
2,339
-
Total (A+B)
-
100
-
-
2,339
-
 
 
 
 
 
 
 
L1 = Level 1
 
 
 
 
 
 
L2 = Level 2
 
 
 
 
 
 
L3 = Level 3
 
 
 
 
 
 


This item includes the positive valuation of financial derivative instruments related to the securitization transactions, which were entered into by the banks involved in such transactions.







48



2.2 Financial instruments held for trading: breakdown by debtors/issuers
 
 
 
 
 
 
Items/Values
31/12/2017
31/12/2016
A. Financial assets (non-derivatives)
 
 
1. Debt securities
-
-
a) Governments and central banks
-
-
b) Other public-sector entities
-
-
c) Banks
-
-
d) Other issuers
-
-
2. Equity instruments
-
-
a) Banks
-
-
b) Other issuers:
-
-
- Insurance companies
-
-
- Financial companies
-
-
- Non-financial companies
-
-
- Other
-
-
3. Units investment funds
-
-
4. Loans
-
-
a) Governments and Central Banks
-
-
b) Other public-sector entities
-
-
c) Banks
-
-
d) Other issuers
-
-
Total A
-
-
B. Derivative instruments
 
 
a) Banks
100
2,339
- Fair value
100
2,339
b) Customers
-
-
- Fair value
-
-
Total B
100
2,339
Total (A+B)
100
2,339
 
 
 

Derivatives instruments are entered into with top banking institution counterparties and are represented by non-listed Interest Rate Swaps (Over the Counter).

49




Section 3 – Financial assets measured at fair value – Item 30
The Group doesn’t hold financial assets designated at fair value through profit and loss.
Section 4 – Financial assets available-for-sale – Item 40
The caption includes the net amount of equity instruments underwritten in 2009 by FCA Bank S.p.A., for a total of euro 639 thousand, in connection with the restructuring of a dealer’s payables. This amount was written off in 2009.


4.1 Available-for-sale financial instruments: product breakdown
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Items/Values
31/12/2017
31/12/2016
L1
L2
L3
L1
L2
L3
1. Debt securities
-
-
-
-
-
-
1.1 Structured securities
-
-
-
-
-
-
1.2 Other
-
-
-
-
-
-
2. Equity instruments
-
-
-
-
-
12
2.1 Designated at fair value
-
-
-
-
-
12
2.2 Recognized at cost
-
-
-
-
-
-
3. Units investment funds
-
-
-
-
-
-
4. Loans
-
-
-
-
-
-
Total
-
-
-
-
-
12
 
 
 
 
 
 
 
L1 = Level 1
 
 
 
 
 
 
L2 = Level 2
 
 
 
 
 
 
L3 = Level 3
 
 
 
 
 
 


50




4.2 Financial assets available-for-sale: composition by debtor/issuer
 
 
 
 
Items/Values
31/12/2017
31/12/2016
1. Debt securities
-
-
a) Governments and Central Banks
-
-
b) Other public entities
-
-
c) Banks
-
-
d) Other issuers
-
-
2. Equity securities
-
12
a) Banks
-
12
b) Other issuers:
-
-
- insurance undertakings
-
-
- financial companies
-
-
- non-financial corporations
-
-
- other
-
-
3. Units of collective investment undertakings
-
-
4. Loans