the revaluation difference is amortised over the remaining life of the hedged items; - Cash flow hedges: the hedging instrument is valued at fair value through profit or loss. Amounts accumulated in equity in respect of the effective portion of the hedge remain in equity until the hedged flows of the hedged item affect profit or loss. For interest rate hedged items, the Income Statement is affected gradually, in line with the payment of interest. In practice, the revaluation surplus is amortised over the remaining life of the hedged items. - Hedges of net investment in a foreign operation: The amounts accumulated in other comprehensive income in respect of the effective portion of the hedging remain in other comprehensive income as long as the net investment is held. The income is recorded if the net investment in a foreign operation is excluded from the scope of consolidation. Embedded derivatives An embedded derivative is a component of a hybrid contract that meets the definition of a derivative product. This definition applies only to financial liabilities and non-financial contracts. Embedded derivatives must be accounted for separately from the host contract if the following three conditions are met: - the hybrid contract is not measured at fair value through profit or loss; - when considered separately from the host contract, the embedded item has the characteristics of a derivative; - the characteristics of the derivative are not closely related to those of the host contract. DETERMINATION OF THE FAIR VALUE OF FINANCIAL INSTRUMENTS The fair value of financial instruments is determined by making maximum use of observable inputs. It is shown according to the hierarchy defined in IFRS 13. IFRS 13 defines fair value as the price that would be received on the sale of an asset or paid to transfer a liability in an ordinary transaction between market participants, on the main or most advantageous market at the valuation date. Fair value applies to each financial asset or financial liability individually. As an exception, it can be estimated by portfolio if the risk management and monitoring strategy permits and is appropriately documented. Thus, certain fair value parameters are calculated on a net basis when a group of financial assets and financial liabilities is managed on the basis of its net exposure to market or credit risks. CFM Indosuez Wealth considers that the best indication of fair value is reference to quoted prices published on an active market. In the absence of such quoted prices, fair value is determined using valuation techniques that maximise use of relevant observable data and minimise use of unobservable data. When a debt is valued at fair value through profit or loss (by nature or designated), fair value takes account of the issuer’s own credit risk. Hierarchy of fair value The standard classifies fair value according to three levels based on the observability of inputs used in valuation. Level 1: fair values corresponding to (unadjusted) prices in active markets Level 1 financial instruments are those directly quoted on active markets for identical assets and liabilities to which CFM Indosuez Wealth has access at the valuation date. These include equities and bonds listed on an active market, units in investment funds listed on an active market and derivatives contracted on an organised market, in particular futures. A market is deemed active if quoted prices are readily and regularly available from an exchange, broker, dealer, pricing service or regulatory agency, and those prices represent actual and regularly occurring market transactions conducted on an arm's length basis. For financial assets and liabilities with offsetting market risks, CFM Indosuez Wealth uses mid-price quotes as the basis for determining the fair value of these positions. For net short positions, the market values used are the bid prices and for net long positions, ask prices are used. Level 2: fair values calculated using directly or indirectly observable data, other than level 1 These data are directly observable (i.e. prices) or indirectly observable (derived from price data) and generally meet the following conditions: they are data not specific to CFM Indosuez Wealth which are publicly available/accessible and based on a market consensus. The following are present in level 2: • shares and bonds quoted on a market that is considered inactive, or not quoted in an active market, but for which the fair value is determined using a valuation method commonly used by market participants (such as discounted cash flows, the Black & Scholes model) and based on observable market data; • Instruments traded over-the-counter for which valuation is performed with models that use observable market data, i.e. that can be obtained from multiple external sources independent of internal sources and on a regular basis. For example, the fair value of interest rate swaps is generally derived from yield curves based on the market’s interest rates as observed at the reporting date. Annual Report 2025 89
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