FINANCIAL STATEMENTS 3Statutory Auditors’ report on the consolidated financial statements Presentation and measurement of derivative financial instruments Risk identified Our response Klépierre has entered into various derivatives, mainly interest rate swaps We obtained an understanding of management’s controls over the valuation of and caps and cross-currency swaps, to decrease its exposure to movements derivatives and involved our internal specialists. in interest and currency exchange rates. We obtained an understanding of the valuation performed by management These derivatives, including those used in hedge accounting, are carried and recalculated, independently, the fair value for a sample of derivatives. at fair value for amounts on the balance sheet of €50.9 million (assets) and We assessed the hedging relationship documentation, effectiveness tests €30.5 million (liabilities). Hedge accounting is applied for most of the derivatives and accounting treatment. held by Klépierre; some derivatives negotiated in order to mitigate interest rate risks do not meet the hedge accounting criteria and We considered the appropriateness of the disclosures in the consolidated are therefore accounted for as trading instruments. financial statements in respect of financial derivatives and hedge accounting. Hedge accounting requires comprehensive documentation in compliance with accounting standards, in particular designation of hedged items and hedging instruments, hedged risk, prospective and retrospective measurement of hedge effectiveness. The risk for the consolidated financial statements consists in incorrect measurement and accounting treatment of derivatives due to the fact that the valuation is dependent on market assumptions and on the criteria to meet hedge accounting. As such, it is considered as a key audit matter. Refer to Note 5.11 to the consolidated financial statements. Verification of the information risks management systems and where applicable, its internal audit, pertaining to the Group presented regarding the accounting and financial reporting procedures. in the management report The consolidated financial statements were approved by the Executive Board. As required by law we have also verified in accordance with professional standards applicable in France the information pertaining to Statutory Auditors’ responsibilities the Group presented in the Executive Board’s management report. We have no matters to report as to its fair presentation and its consistency for the audit of the consolidated with the consolidated financial statements. financial statements Objectives and audit approach Report on other legal and Our role is to issue a report on the consolidated financial statements. regulatory requirements Our objective is to obtain reasonable assurance about whether the Appointment of the Statutory Auditors consolidated financial statements as a whole are free from material misstatement. Reasonable assurance is a high level of assurance, We were appointed as statutory auditors of Klépierre by your Annual but is not a guarantee that an audit conducted in accordance with General Meeting held on June 28, 2006 for Deloitte & Associés and professional standards will always detect a material misstatement held on April 19, 2016 for Ernst & Young Audit. when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could th As at December 31, 2017, Deloitte & Associés was in the 12 year reasonably be expected to influence the economic decisions of users of total uninterrupted engagement and Ernst & Young Audit in taken on the basis of these consolidated financial statements. nd the 2 year. As specified in Article L. 823-10-1 of the French Commercial Code (Code de commerce), our statutory audit does not include assurance Responsibilities of Management on the viability of the Company or the quality of management of the and those charged with governance affairs of the Company. for the consolidated financial statements As part of an audit conducted in accordance with professional standards applicable in France, the statutory auditor exercises Management is responsible for the preparation and fair presentation of professional judgment throughout the audit and furthermore: the consolidated financial statements in accordance with International > identifies and assesses the risks of material misstatement of the Financial Reporting Standards as adopted by the European Union and consolidated financial statements, whether due to fraud or error, for such internal control as management determines is necessary to designs and performs audit procedures responsive to those enable the preparation of consolidated financial statements that are risks, and obtains audit evidence considered to be sufficient and free from material misstatement, whether due to fraud or error. appropriate to provide a basis for his opinion. The risk of not In preparing the consolidated financial statements, management is detecting a material misstatement resulting from fraud is higher responsible for assessing the Company’s ability to continue as a going than for one resulting from error, as fraud may involve collusion, concern, disclosing, as applicable, matters related to going concern forgery, intentional omissions, misrepresentations, or the override and using the going concern basis of accounting unless it is expected of internal control; to liquidate the Company or to cease operations. > obtains an understanding of internal control relevant to the audit The Audit Committee is responsible for monitoring the financial in order to design audit procedures that are appropriate in the reporting process and the effectiveness of internal control and circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control; 130 KLÉPIERRE 2017 REGISTRATION DOCUMENT