UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________

FORM 6-K

_________________

Report of Foreign Issuer

Pursuant to Rule 13a-16 or 15d-16

under the Securities Exchange Act of 1934

For the month of March, 2020

Commission File Number: 001-37777

_________________

GRUPO SUPERVIELLE S.A.

(Exact name of registrant as specified in its charter)

SUPERVIELLE GROUP S.A.

(Translation of registrant’s name into English)

_________________

Bartolomé Mitre 434, 5th Floor

C1036AAH Buenos Aires

Republic of Argentina

(Address of principal executive offices)

_________________

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F  ☒            Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Yes  ☐             No  ☒

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Yes  ☐             No  ☒

Explanatory Note

All figures presented throughout this document are expressed in Argentine pesos (AR$) and all financial information has been prepared in accordance with the valuation and disclosure criteria set forth by the Argentine Central Bank, which differ in certain material aspects from IFRS as issued by the IASB.

For the Grupo Supervielle 20-F filed with the SEC on May 10, 2019 financial statements should be prepared in accordance with IFRS, as issued by the IASB, or in accordance with US GAAP or provide a reconciliation with US GAAP. As the Argentine Central Bank is in a convergence plan towards the application of IFRS for entities under its supervision, Grupo Supervielle S.A. prepared its financial statements included in its SEC annual report in accordance with IFRS, as issued by the IASB.

The abovementioned convergence plan, effective for fiscal years beginning on or after January 1, 2018, has two exceptions to the application of IFRS: (i) item 5.5 (Impairment) of IFRS 9 “Financial Instruments”, and (ii) IAS 29 “Financial Reporting in Hyperinflationary Economies”, both of which were waived until January 1, 2020, at which time entities will be required to apply the provisions of IFRS in full.

GRUPO SUPERVIELLE S.A.

TABLE OF CONTENTS

Consolidated Financial Statements

For the financial year ended on

December 31, 2019, presented on comparative basis

Contents

Consolidated Financial Statements

For the financial year ended on

December 31 2019, presented on comparative basis

Composition of Capital Stock as of December 31, 2019

Consolidated Statement of Financial Position

As of December 31, 2019, 2018

(Expressed in thousands of pesos)

The accompanying notes and schedules are an integral part of the Consolidated Financial Statements .

Consolidated Statement of Financial Position

As of December 31, 2019, 2018

(Expressed in thousands of pesos)

The accompanying notes and schedules are an integral part of the Consolidated Financial Statements .

Consolidated Statement of Comprehensive Income

For the financial years ended on December 31, 2019 and 2018

(Expressed in thousands of pesos)

The accompanying notes and schedules are an integral part of the Consolidated Financial Statements..

Consolidated Statement of Comprehensive Income

For the years ended on December 31, 2019 and 2018

(Expressed in thousands of pesos)

The accompanying notes and schedules are an integral part of the Consolidated Financial Statements

Consolidated Statement of Comprehensive Income

For the years ended on December 31, 2019 and 2018

(Expressed in thousands of pesos)

The accompanying notes and schedules are an integral part of the Consolidated Financial Statements..

Consolidated Statement of Changes in Shareholders´ Equity

For the financial years ended on December 31, 2019 and 2018

(Expressed in thousands of pesos)

The accompanying notes and schedules are an integral part of the Consolidated Financial Statements..

Consolidated Statement of Changes in Shareholders´ Equity

For the financial years ended on December 31, 2019 and 2018

(Expressed in thousands of pesos)

The accompanying notes and schedules are an integral part of the Consolidated Financial Statements..

CONSOLIDATED STATEMENT OF CASH FLOWS

For the financial years ended on December 31, 2019 and 2018

(Expressed in thousands of pesos)

The accompanying notes and schedules are an integral part of the Consolidated Financial Statements.

CONSOLIDATED STATEMENT OF CASH FLOWS

For the financial years ended on December 31, 2019 and 2018

(Expressed in thousands of pesos)

(*) In the items “Loans and other financing - non-financial sector and foreign residents”, “Other Assets” and “Other liabilities” 3,032,240 and 991,547 corresponding to non-monetary transactions were eliminated.

The accompanying notes and schedules are an integral part of the Consolidated Financial Statements.

Notes to Consolidated Financial Statements

As of December 31, 2019 presented in comparative basis

(Expressed in thousands of pesos)

Grupo Supervielle S.A. (hereinafter, "the Group"), is a company whose main activity is investment in other companies, Its main income comes from the distribution of dividends from these companies and the obtaining of income from other financial assets.

The consolidated financial statements of Grupo Supervielle S.A. they have been consolidated, line by line with the financial statements of Banco Supervielle S.A., Cordial Compañía Financiera S.A., Sofital S.A. F. e I.I., Tarjeta Automática S.A., Supervielle Asset Management S.A., Espacio Cordial Servicios S.A., Supervielle Seguros S.A., InvertirOnline S.A.U., InvertirOnline,Com Argentina S.A.U., Micro Lending S.A.U., Supervielle Productores Asesores de Seguros S.A., Bolsillo Digital S.A.U. and Futuros del Sur S.A.

The main investment of the Company is its shareholding in Banco Supervielle S.A., a financial entity included in Law No. 21.526 of Financial Institutions and subject to BCRA regulations, for which the valuation and exposure guidelines used have been adopted by said Entity (see Note 1.1) in accordance with that established in Title IV, Chapter I, Section I, Article 2 of the 2013 Orderly Text of the National Securities Commission (CNV).

These consolidated financial statements have been approved by the Board of Directors of the Company at its meeting held on February 19, 2020.

1.1.a) Differences between the accounting framework established by the BCRA and IFRS

The Central Bank of the Argentine Republic (BCRA), through Communications "A" 5541 and amendments, established the convergence plan towards the International Financial Reporting Standards (IFRS) issued by the International Financial Reporting Standards Board (IASB, for its acronym in English) and the interpretations issued by the Committee on Interpretations of International Financial Reporting Standards (IFRIC), for the entities under its supervision, for the periods beginning on or after January 1, 2018, with the exception of the application of point 5.5 "Impairment" of IFRS 9 "Financial Instruments" and of IAS 29 "Financial Information in Hyperinflationary Economies".

(i) Impairment of financial assets

In accordance with Communication “A” 6114, for the recognition of credit losses in these financial statements, the Group has applied the “Minimum provisions for bad debt” provisions set forth in the Liquidity and Solvency standards (LISOL 1) of the BCRA (Note 1.14)

For this purpose, IFRS 9 provides for a model of expected credit losses, by which financial assets are classified into three stages of impairment, based on changes in credit quality since their initial recognition, which dictate how an entity measures losses due to impairment, impairment and applies the effective interest method.

Should the impairment model contemplated in point 5.5 of IFRS 9 be applied, the Group’s equity and results would differ significantly from the balances currently reported.

(ii) Restatement for inflation of the financial statements

IAS 29 "Financial information in hyperinflationary economies" requires that the financial statements of an entity, whose functional currency is that of a high inflation economy, be expressed in terms of the current unit of measurement as of the closing date of the financial year that is reported, regardless of whether they are based on the historical cost method or the current cost method. For this, in general terms, inflation produced from the date of acquisition or from the revaluation date, as applicable, must be computed in the non-monetary items. These requirements also include the comparative information of the financial statements.

In order to conclude on whether an economy is categorized as high inflation in the terms of IAS 29, the standard details a series of factors to be considered among which is a cumulative rate of inflation in three years that approximates or exceeds The 100%. It is for this reason that, according to IAS 29, the Argentine economy must be considered as high inflation starting on July 1, 2018.

Notes to Consolidated Financial Statements

As of December 31, 2019 presented in comparative basis

(Expressed in thousands of pesos)

Briefly, the restatement mechanism of IAS 29 establishes that monetary assets and liabilities will not be restated since they are already expressed in the current unit of measurement at the end of the reporting period. Assets and liabilities subject to adjustments based on specific agreements will be adjusted in accordance with such agreements. The non-monetary items measured at their current values at the end of the reporting period, such as the net realization value or others, will not be restated. The remaining non-monetary assets and liabilities will be restated by a general price index. The loss or gain from the net monetary position will be included in the net result of the reporting period, revealing this information in a separate line item.

Through Communication "A" 6651, the B.C.R.A. established that the Financial Institutions should begin to apply the provisions on restatement for inflation of the financial statements as of the years beginning on January 1, 2020. Therefore, IAS 29 has not been applied in these unaudited consolidated condensed financial statements.

The application of IAS 29 "Financial information in hyperinflationary economies" has general effects in these unaudited separate condensed financial statements affecting balances significantly, increasing the Group's equity and its comprehensive income as of December 31, 2019 approximately to 24,170 and (1,445) millions, respectively.

1.1.b) Changes in the accounting framework set by the Argentine Central Bank and to be implemented as from 01/01/2020

Pursuant to Communication “A” 6651, issued by the Argentine Central Bank, Financial Entities shall begin to apply regulations related to the re-expression of inflation of financial statements as from fiscal years starting on January 1, 2020. Communication “A” 6849 included the guidelines for the application of the financial statements re-expression procedure set by IAS 29, including the financial statements comparative re-expression procedure. The impact produced by the application of this regulation is set forth in note 1.1.a)(i).

Additionally, pursuant to Communication “A” 6430 provisions on Financial Assets Impairment included in paragraph 5.5 of IFRS 9 as from fiscal years starting on 01/01/2020 shall be started. Later, Communication “A” 6778 established that Group “B” entities may extend the impact produced by the application of such regulation over 5 years, whereas Group “A” entities will not rely on such possibility. Pursuant to Communication “A” 6847, debt securities of the Non-Financial public sector will be excluded temporarily from IFRS 9 application scope; therefore, such securities will not be affected by provisions on impairment of financial assets. Likewise, financial entities will be allowed to re-categorize, as from 01/01/2020, instruments of the non-financial public sector rated at fair value through profit and loss and at fair value through profit and loss in OCI at an amortized cost criterion, while utilizing the accounting value of such date as addition value. As for instruments affected by this option, interest accrual and accessories shall be interrupted as long as the accounting value is above its fair value.

Upon the application of impairment model included in the accounting framework set by the Argentine Central Bank, a decrease in the shareholders´equity would have been recorded as of December 31, 2019 as well as a decrease in income of approximately $ 57 million.

Likewise, pursuant to Communication “A” 6851, provisions on “Minimum Provisions for uncollectibillity risk” shall keep a “regulatory” scope, regardless of the fact that financial statements of financial entities shall be subject to International Financial Reporting Standards (IFRS). Financial entities shall, temporarily, deduct the positive difference between the “regulatory” provision calculated pursuant regulations on “Minimum provisions for uncollectibillity risk” or the accounting for the last fiscal year closed upon disclosure of said communication, the higher of both, and the new accounting standard recorded as per paragraph 5.5 of IFRS 9 from its computable equity responsibility. In virtue of the re-calculation of the minimum capital position included in Section 3 of standards om “Distribution of income”, Grupo “B” financial entities shall apply paragraph 5.5 of IFRS 9.

These consolidated financial statements have been prepared in accordance with the Accounting Framework established by the B.C.R.A. described in Note 1.1.(a).

(a)       Going concern

As of the date of these consolidated financial statements there are no uncertainties with respect to events or conditions that may raise doubts regarding the possibility that the Group continues to operate normally as a going concern.

Notes to Consolidated Financial Statements

As of December 31, 2019 presented in comparative basis

(Expressed in thousands of pesos)

(b)       Measuring unit

The Group’s consolidated financial statements recognize the changes in the purchasing power of the currency until February 28, 2003, after adjusting for inflation, as of that date, as required by the Communication " A "3921 B.C.R.A., taking considerations on Note 1.1.(a) (ii).

(c)       New accounting standards, amendments and interpretations issued by the IASB that have been adopted by the Group

The Group has applied the following standard for the first time as of January 1, 2019:

IFRS 16 “Leases”: In January 2016, the IASB issued IFRS 16 "Leases", which establishes the new lease transaction registration model. Under IFRS 16, a contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for a consideration. IFRS 16 requires the lessee to recognize the lease liability that reflects future lease payments and a right to use assets, for almost all lease agreements, with the exception of certain short-term leases and leases of asset Low value. The accounts of the lessors are maintained as indicated in IAS 17; however, it is expected that the new accounting model for lessees will impact the negotiations between landlords and tenants. Through the Com, "A" 6560 the B.C.R.A. introduced changes to the chart of accounts and information regimes as a consequence of the entry into force of said IFRS as of January 1, 2019.

As a consequence of IFRS 16 adoption, the Group recognized financial lease liabilities related to those financial leases that had been classified as operating leasing pursuant to the previous regulation (IAC 17). Such liabilities were rated at the current value of remaining payments under leasing contracts, discounted through the utilization of an incremental interest rate average as of January 1, 2019. The utilized rate amounted to the 44.26% for operations in pesos and 14.36% for operations in US dollars.

As for financial lease classified as operating financial lease pursuant to the previous regulation, the Group recognized an asset through use right and liabilities from financial lease equal to the accounting value of the assets and liabilities from financial lease recorded prior to the initial application date. Measurement principles of IFRS 16 are applied after such date. The re-measurement of financial lease liabilities was recognized as an adjustment of assets through use right after the initial application date.

(i)       Practical solutions utilized

In the initial application of IFRS 16, the Group has applied the following practical solutions allowed by the regulation:

The Group also decided not to re-evaluate whether a contract is or contains a lease as of initial application date. For contracts entered into prior to the transition date, the Group kept the evaluation pursuant to IAC 17 and the interpretation 4.

(ii)       Measurement of leasing liabilities

Notes to Consolidated Financial Statements

As of December 31, 2019 presented in comparative basis

(Expressed in thousands of pesos)

(iii)       Measurement of leasing assets

The asset through use right was measured by an amount equal to the leasing liabilities.

(iv)       Adjustments recognized in the financial position as of January 1, 2019

The change in the accounting policy affected the following items in the financial position as of January 1, 2019:

(d)       New accounting standards and amendments issued by the IASB that have not been adopted by the Group

With the approval of new IFRS, modifications or derogations of the standards in force, and once such changes are adopted through Adoption Bulletins issued by Federación Argentina de Consejos Profesionales en Ciencias Económicas (FACPCE), the Argentine Central Bank will determine the approval of such standards for financial entities. In general terms, no anticipated IFRS application shall be allowed unless upon adoption such anticipated measure is specified.

New released standards, modifications and interpretations that have not become in force for fiscal years starting on January 1, 2019 and have not been adopted in advance are described below:

IFRS 17 “Insurance contracts”: In May 18, 2017, the IASB issued IFRS 17 “Insurance contracts” as replacement for IFRS 4. It requires a current measurement model where estimates are re-measured each reporting period. Contracts are measured using the building blocks of discounted probability-weighted cash flows, an explicit risk adjustment, and a contractual service margin representing the unearned profit of the contract which is recognized as revenue over the coverage period. This standard is effective for fiscal years beginning on or after November 1, 2021. The Group is evaluating the impact of the adoption of this new standard.

There are no other IFRS or IASB interpretations not yet effective and which are expected to have a significant impact on the Group.

1.2.       Critical accounting policies and estimates

The preparation of financial statements requires the Group to make estimates and evaluations that affect the amount of the assets and liabilities recorded, and the disclosure of contingencies, as well as the income and expenses recorded in the year. In this sense, estimates are made to calculate, for example, provisions for uncollectible, useful lives of property, plant and equipment, depreciation and amortization, the recoverable value of assets, the charge for income tax, some labor positions and the contingency, labor, civil and commercial lawsuits. Actual future results may differ from the estimates and evaluations made at the date of preparation of these consolidated financial statements.

The Group has identified the following areas that involve a higher degree of judgment or complexity, or areas in which the assumptions and estimates are significant for the consolidated financial statements that are essential for understanding the underlying accounting / financial reporting risks:

a)       Fair value of derivatives and other instruments

The fair value of financial instruments that do not list in active markets are measured through the use of valuation techniques. Such techniques are validated and regularly reviewed by qualified independent personnel of the area that developed such techniques. All models are evaluated and adjusted before being use in order to make sure that results express current information and comparative market prices. As long as possible, models use only observable information; however, factors such as credit risk (own or counterparty), volatilities and correlations require the use of estimates. Changes in assumptions regarding such factors may impact on the fair value reported for financial instruments.

The information on instruments that have not been valuated based on the market information is included in Note 5.

Notes to Consolidated Financial Statements

As of December 31, 2019 presented in comparative basis

(Expressed in thousands of pesos)

b)       Allowances for loan losses and advances.

The Group produces forecasts on repayment capacity of clients in order to determine the provisioning level to be applied pursuant to provisions set by the Argentine Central Bank.

Such forecasts are carried out with the regularity set by minimum provisioning standards set by the Argentine Central Bank.

c)       Impairment of Non-Financial Assets

Intangible assets with finite lives and property, plants and equipment are amortized or depreciated along their useful lives in a straight-line method. The Group reviews the conditions related to these assets to determine whether events and circumstances justify a review of the amortization and remaining depreciation period and whether there are factors or circumstances that imply an impairment in the value of assets that cannot be recovered.

The Group has applied the judgment in the identification of impairment indicators for property, plant and equipment and intangible assets. The Group has defined that there was no evidence of impairment for any period included in the consolidated Financial Statements. Given the aforementioned, no recoverable value has been calculated.

The evaluation process for potential impairment of an asset of indefinite useful life is subject to and require a significant judgment in many points over the course of the analysis, including the identification of its cash-generating unit, the identification and allocation of assets and liabilities to a cash-generating unit and the definition of their recoverable value. The recoverable value is compared with the carrying value in order to define the non-recoverable portion of such value. When calculating the recoverable value of the cash-generating unit in virtue of the assessment of annual or regular impairment, the Group use estimates and significant judgments on future cash flows of the cash-generating unit. Its cash flow forecasts are based on assumptions that account for the best use of its cash-generating unit.

Although the Group believes that assumptions and forecasts used are suitable in virtue of the information available for the administration, changes in assumptions or circumstances may require changes in the assessment. Negative changes in assumptions utilized in an impairment tests of indefinite useful life intangible assets may result in the reduction or removal of the excess of fair value over the book value, which would result in the potential recognition of the impairment.

The Group decided that it would not be necessary to recognize an impairment loss in indefinite useful life intangible assets under such conditions.

d)       Structured Entities.

Structured entities are designed so that the vote or similar rights do not account for the dominant factor when deciding who controls the entity. Likewise, judgment to determine whether the relation between the Group and a structured entity indicates that the structured entity is controlled by the Group is required. The Group does not consolidate non-controlled structured entities.

Given the fact that it might be difficult to determine whether the Group controls a structured entity, the administration evaluates its risk exposure and rewards, as well as its capacity to take operating decisions for such structured entity. In many cases, there are elements that, considered in an isolated manner, shows the control or lack of control over a structured entity, but when considered as a whole, it is difficult to draw up a clear conclusion. In those cases in which there are more arguments for the existence of control, the structured entity is consolidated. The following elements were utilized to determine the control existence or lack of control existence:

Notes to Consolidated Financial Statements

As of December 31, 2019 presented in comparative basis

(Expressed in thousands of pesos)

e)       Income tax and deferred tax

A significant judgment is required to determine liabilities and assets from current and deferred taxes. The current tax is measured at the amount expected to be paid to the taxation authority using the tax rates that have been enacted or substantially enacted by the end of the reporting period. The deferred tax is measured over temporary differences between tax basis of assets and liabilities and book values at the tax rates that are expected to apply when the asset is realized or the liability settled.

Assets from deferred tax are recognized upon the possibility of relying on future taxable earnings against which temporary differences can be used, based on the Senior Management´s assumptions regarding amounts and opportunities of future taxable earnings. Later, it is necessary to determine whether assets from deferred tax are likely to be used and set off future taxable earnings. Real results may differ from estimates, such as changes in tax legislation or the result of the final review of affidavits issued by tax authorities and tax courts.

Likely future tax earnings and the number of tax benefits are based on a medium term business plan prepared by the administration. Such plan is based on reasonable expectations.

A subsidiary is an entity (or subsidiary), including structured entities, in which the Group has control because it (i) has the power to manage relevant activities of the subsidiary (ii) has exposure, or rights, to variable returns from its involment with the subsidiary, and (iii) has the ability to use its power over the subsidiary in order to affect the amount of the investor´s returns. The existence and the effect of the substantive rights, including substantive rights of potential vote, are considered when evaluating whether the Group has power over the other entity. For a right to be substantive, the right holder must have the practical competence to exercise such right whenever it is necessary to make decisions on the direction of the entity’s relevant activities. The Group can have control over an entity, even when it has less voting powers than those required for the majority.

Accordingly, the protecting rights of other investors, as well as those related to substantive changes in the subsidiary´ activities or applicable only in unusual circumstances, do not prevent the Group from having power over a subsidiary. The subsidiaries are consolidated as from the date on which control is transferred to the Group, ceasing its consolidation as from the date on which control ceases.

The following chart provides the subsidiaries which are object to consolidation:

It should be noted that the Group has begun to recognize in its Consolidated Financial Statements, Supervielle Productores Asesores de Seguros S.A. and Bolsillo Digital S.A.U as of the date of the constitution and Futuros del Sur S.A. as of the date of acquisition (See Note 20).

In virtue of the consolidation, the following Financial Statements were utilized as of December 31, 2018 Financial Statements of Banco Supervielle S.A., Cordial Compañía Financiera S.A., Supervielle Seguros S.A, Sofital S.A. F. e I.I., Supervielle Asset Management S.A., Tarjeta Automática S.A., Espacio Cordial de Servicios S.A., Micro Lending S.A.U., InvertirOnline S.A.U. and InvertirOnline.Com Argentina S.A.U. which cover the same period of time regarding the Group´s Financial Statements. Financial Statements of Banco Supevielle S.A. and Cordial Compañía Financiera S.A. have been prepared based on the accounting framework set by the Argentine Central Bank (See Note 1.2).

Financial Statements of Supervielle Seguros S.A. have been prepared pursuant to accounting standards issued by the National Insurance Superintendence.

Financial Statements of Tarjeta Automática S.A., Supervielle Asset Management S.A., Supervielle Seguros S.A, Sofital S.A. F. e I.I., Espacio Cordial de Servicios S.A., InvertirOnline S.A.U., InvertirOnline.Com Argentina S.A.U., Micro Lending S.A.U., Supervielle Productores Asesores de Seguros S.A., Bolsillo Digital S.A.U and Futuros del Sur S.A. have been adjusted so that such Financial Statements include criteria similar to those applied by the Group in the preparation of Consolidated Financial Statements.

Assets and liabilities and income from operations among members of the Group that were not transferred to third parties have been removed from the Consolidated Financial Statements.

Non-controlling investment accounts for that portion of net income and shareholders´ equity of a subsidiary attributable to interest which is not owned, directly or indirectly, by the Group. Non-controlling investments are included in a separate item of the shareholders´ equity of the Group.

In accordance with the provisions of IFRS 3, the acquisition method is used to account for the acquisition of subsidiaries. The identifiable assets acquired and the contingent liabilities assumed in a business combination are measured at their fair values at the acquisition date.

Notes to Consolidated Financial Statements

As of December 31, 2019 presented in comparative basis

(Expressed in thousands of pesos)

The goodwill is measured as the difference between the net of the amounts at the date of acquisition of the identifiable assets acquired, the liabilities assumed, the consideration transferred, the amount of the non-controlling interest in the acquiree and the fair value of a share in the acquiree prior to the acquisition date.

The consideration transferred in a business combination is measured at the fair value of the assets transferred by the acquirer, the liabilities incurred by it with the previous owners of the acquiree and the equity interests issued by the acquirer. Transaction costs are recognized as expenses in the periods in which costs have been incurred and services have been received, except for transaction costs incurred to issue equity instruments that are deducted from equity and transaction costs incurred to issue debt that are deducted from their book value.

The Group has securitized certain financial instruments, mainly loans, originated by personal and pledge loans through the transfers of said instruments to financial trusts that issue multiple classes of debt securities and participation certificates.

Regarding the financial statements as of December 31, 2019 the following consolidated structured entities have been consolidated as of the date of these consolidated financial statements:

*The Financial Trusts III and IV of Micro Lending S.A.U. are in the process of liquidation.

The Group controls a structured entity when it is exposed to, or holds the right to, variable returns and has the capacity to allocate returns through its power to run the activities of the entity, Structured entities are consolidated as from the date on which the control is transferred to the Group. The consolidation of such entities is ceased on the date on which such control is terminated.

As for financial trusts, the Group has evaluated the following:

In accordance with the aforementioned, the Group has decided that it holds control on such financial trusts and, therefore, such structured entities have been consolidated.

Notes to Consolidated Financial Statements

As of December 31, 2019 presented in comparative basis

(Expressed in thousands of pesos)

The following chart details the assets and liabilities of Structured Entities that have been consolidated by the Group as of December 31, 2019:

The Group applies a policy aimed at treating non-controlling interest transaction as if such transactions were carried out with shareholders of the Group. As for non-controlling interest acquisitions, the difference between any paid compensation and the relevant interest at book value of net assets acquired by the subsidiary is recognized in the shareholder´s equity. Earnings and losses for the sale of interest, as long as control is held, are also recognized in the shareholders´ equity.

1.6.       Associates

The associates are entities over which the Group has significant influence (directly or indirectly), but not control, generally accompanying a participation of between 20 and 50 percent of the voting rights. Investments in associates are accounted for using the equity method, and are initially recognized at cost. The book value of the associates includes the business key identified in the acquisition less accumulated impairment losses, if applicable. Dividends received from associates reduce the book value of the investment in them. Other changes subsequent to the acquisition of the Group's interest in the net assets of an associate are recognized as follows: (i) the Group's share in the profits or losses of associates is recorded in the income statement as a result by associates and joint ventures and (ii) the Group's participation in other comprehensive income is recognized in the statement of other comprehensive income and is presented separately. However, when the Group's share in losses in an associate equals or exceeds its interest in the same, the Group will cease to recognize its participation in the additional losses, unless it has incurred obligations or made payments on behalf of the associate.

Unrealized gains on transactions between the Group and its associates are eliminated to the extent of the Group's participation in the associates; unrealized losses are also eliminated unless the transaction provides evidence of impairment of the transferred asset.

1.7.        Information by segment

An operating segment accounts for an item of an entity that (a) engages in business activities from which the Group may earn revenues and incur in expenses (including revenues and expenses relating to transactions with other components of the same entity), (b) whose operating results is reviewed on a regular basis by the Senior Management to make decisions about which discrete to be allocated to the segment and performance, and (c) for about which discrete financial information is available.

The information by segments is provided in a consistent manner with those internal reports delivered to:

Notes to Consolidated Financial Statements

As of December 31, 2019 presented in comparative basis

(Expressed in thousands of pesos)

(a)       Functional and presentation currency

Figures included in the consolidated financial statements as per each entity of the Group are expressed in the functional currency, that is, in the currency of the main economic setting where it operates. Consolidated financial ftatements are expressed in Argentine pesos, which is the functional currency and the reporting currency of the Group.

(b)       Transactions and balances

Transactions in foreign currency are converted in the functional currency at the reference Exchange rate released by the Argentine Central Bank and those carried out in other currencies, at the repo rate in US dollars for the reference Exchange rate released by the Argentine Central Bank. Earnings and losses in foreign currency that result in the liquidation of such transactions and the conversion of monetary assets and liabilities denominated in foreign currency at closing exchange rates, are recognized in the integral income statement, under “Difference of exchange rate in gold and foreign currency”, except when such items are deferred in the shareholders’ equity for transactions classified as cash flow hedging, when applicable.

As of December 31, 2019 and 2018 the balances in US dollars were converted at the reference exchange rate determined by the B.C.R.A. In the case of foreign currencies other than US dollars, they have been converted to this currency using the types of passes reported by the B.C.R.A.

Cash and due from banks includes cash available, freely available deposits in local banks and correspondent banks abroad, which are liquid short-term instruments and have a maturity of less than three months from the date of origination.

Assets recorded in cash and due from Banks are recorded at amortized cost which is close to its fair value.

Cash equivalents are made up by highly liquid short-term securities with three-month or shorter initial maturities, with fair value rating.

The composition of the cash as of December 31, 2019, 2018 and 2017 is detailed below:

For their part, the reconciliations between the balances of those items considered cash equivalents in the Statement of Cash Flow and those reported in the Statement of Financial Position as of the indicated dates are set out below:

Notes to Consolidated Financial Statements

As of December 31, 2019 presented in comparative basis

(Expressed in thousands of pesos)

Reconciliation of financing activities at December 31, 2019 and 2018 is as follows:

Initial Recognition

The Group recognizes financial assets or liabilities in its Financial Statements, as applicable, when it is established in the contract clauses of the financial instrument in question. Purchases and sales are recognized at the trade date of the transaction by which the Group undertakes to the purchase or sale of the asset.

In the initial recognition, the Group measures financial assets or liabilities at their fair value. Instruments that are not recognized at fair value through profit or loss are recorded at the fair value adjusted by the transaction costs that are directly attributed to its acquisition or issuance, such as fees and commissions.

When fair value differs from the cost of the initial recognition, the Group will recognize the difference as follows:

Financial Assets

a – Debt Instruments

The Group consider debt instruments as those regarded as financial liabilities for the issuer, such as loans, public and private securities, debt securities and accounts receivable from clients.

Classification

Pursuant to IFRS 9, the Entity classifies financial assets depending on whether these are subsequently measured at amortized cost, fair value through other comprehensive incomes or fair value through profit or loss, on the basis of:

Notes to Consolidated Financial Statements

As of December 31, 2019 presented in comparative basis

(Expressed in thousands of pesos)

Business Model

The business model refers to the way in which the Group manages a group of financial assets in order to achieve a concrete business objective. It represents the form in which instruments are held for generating funds.

Business models the Group may adopt are the following:

The Group determines its business model in the level that better reflects how it manages the groups of financial assets to achieve a concrete business objective.

The business model of the Group does not depend on the management’s intentions for an individual instrument. Consequently, such business model is not assessed instrument by instrument, but at a higher aggregated level of disaggregated portfolios and it is based on observable factors such as:

The evaluation of the business model is based on reasonably expected scenarios, irrespective of worst-case or stress case scenarios. If after the initial recognition cash flows are realized in a different manner from the original expectations, the Group will not change the classification of the remaining financial assets held in that business model, but it will consider such information for evaluating recent purchases or originations. An instrument’s reclassification is only made when, and only when, an entity changes its business model for managing financial assets.

Cash Flow Characteristics

The Group evaluates the contractual terms of its financial instruments to identify if the cash flow return of these grouped financial assets is not significantly different from the contribution that it would receive only from interests, otherwise these shall be measured at fair value through profit or loss.

Based on the aforementioned, there are three different categories of Financial Assets:

i)       Financial assets at amortize cost.

Financial assets shall be measured at amortized cost if:

(a)       the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows and

(b)       the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

These financial instruments shall be measured at its fair value plus incremental, directly attributable, transaction costs, and subsequently measured at amortized cost.

A financial asset’s amortized cost is the amount at which it is acquired minus the cumulative amortization plus accrued interests (using the effective interest method), net of any impairment loss.

Notes to Consolidated Financial Statements

As of December 31, 2019 presented in comparative basis

(Expressed in thousands of pesos)

The effective interest method uses the rate that allows the estimated future cash flows to be discounted to be received or paid over the life of the instrument or a shorter period, if appropriate, equalizing the net book value. By applying this method, the Group identifies the incremental direct costs as an integral part of the effective interest rate.

ii)       Financial assets at fair value through other comprehensive income:

Financial assets shall be measured at fair value through other comprehensive income when:

These instruments shall be initially recognized at fair value plus incremental, directly attributable, transaction costs, and subsequently measured at fair value through other comprehensive incomes. Gains and losses arising out of changes in fair value shall be included in other comprehensive incomes within a separate component of equity. Impairment losses or reversal, interest revenue and foreign exchange rate gains and losses shall be recognized in profit or loss. At the time of sale or disposal, the accumulated gain or loss previously recognized in other comprehensive incomes are reclassified from equity to the income statement.

iii)       Financial assets at fair value through profit or loss:

Financial assets at fair value through profit or loss comprise:

These financial instruments shall be initially recognized at fair value and any gain or loss shall be recognized in profit or loss upon effectiveness.

The Group classifies a financial instrument as held for trading if it is acquired or incurred with an intention to sell or repurchase them in the short term, or it is part of a portfolio of financial instruments that are managed together and for which there is evidence of a recent pattern of short-term profit-taking or it is a derivative which is not embedded in a qualifying hedging relationship. Derivatives and instruments held for trading shall be classified as held for trading and are recognized at fair value.

The fair value of these instruments was calculated using current prices at the closing of each period in active markets, in case they are representative. In the event that there is no active market, valuation techniques were used, which included the use of arm’s length market transactions between knowledgable and willing parties, provided that they are available, as well as references to the current fair value of another instrument that is substantially similar, or the analysis of discounted cash flows. Fair values’ estimate is explained in more detail in section “critical accounting policies and estimates”.

Additionally, financial assets can be valued ("designated") at fair value through profit or loss when, in doing so, the Group eliminates or significantly reduces an inconsistency in measurement or recognition.

b – Equity Instruments

Equity instruments are those recognized as such by the issuer, that is, instruments that do not imply any payable contractual obligation and that record a residual interest over the asset of the issuer after deducting its total liabilities.

Such instruments are valued at fair value through profit and loss, except in those cases in which the senior management has utilized, upon initial recognition, the irrevocable option of measuring such instruments at fair value through other comprehensive income. This method is applicable when instruments are not held to negotiate and results are recorded in OCI with no reclassification option, even when effective. Receivable dividends that result from such instrument would be recognized only under the right to receive such payment.

Notes to Consolidated Financial Statements

As of December 31, 2019 presented in comparative basis

(Expressed in thousands of pesos)

Derecognition of Financial Assets

The Group recognizes the write-off of financial assets only when any of the following conditions is met:

The Group derecognizes financial assets that have been transferred only when the following characteristics are met:

a.       The Group is not obliged to pay any amount before receiving the cash flow for the asset transfer;

b.       The Group is banned from selling the financial asset; and

c.       The Group has to refer the fund flows to which it has committed.

Financial Liabilities

Classification

The Group classifies its financial liabilities at amortized cost utilizing the effective rate method except for:

Financial Liabilities valued at fair value through profit or loss: The Group can choose to use, at the beginning, the irrevocable option to designate a liability at fair value through profit or loss if and only if by doing so, it reflects more appropriately the financial information because:

Financial guarantee contract: A guarantee contract is a contract which requires the issuer to make specific payments to reimburse the holder for the loss incurred when a specific debtor default on his debt as they fall due, according to the conditions, either original or amended, of a debt instrument.

Financial guarantee contracts and agreements on granting loans below market rate are valued at fair value, in the first instance; so later, a comparison between the higher value of the commission to be accrued at the financial year closing and the applicable allowance.

Derecognition of financial liabilities

The Group derecognizes financial liabilities only when they have expired; this is, when they have been settled, paid or the contract expired. For cases of repurchase of own debt, see Note 1.24.

Derivatives, including currency contracts, interest rate futures, term contracts, interest rate and currency swaps, and options over currency and interest rates are registered at their fair value.

Notes to Consolidated Financial Statements

As of December 31, 2019 presented in comparative basis

(Expressed in thousands of pesos)

All derivative instruments are recorded as assets when their fair value is positive, and as liabilities when their fair value is negative, related to the agreed price. Any change in the fair value of derivative instruments is included in the financial year income.

The Group has not applied hedge accounting.

The sale and repurchase agreements (“repo liability operations”), which effectively provide the lender’s return to the counterparty, are treated as guaranteed financing transactions. Securities sold under those sale and repurchase agreements are not withdrawn from accounts. The securities are not reclassified in the statement of financial position unless the assignee has the right by contract or sale to sell or replace them. In such case, securities are reclassified as recoverable accounts by repurchase. Appropriate liabilities are presented within Financings received from Argentine Central Bank and other Financial Institutions item.

The securities purchased pursuant to the resale agreements (“repo asset transactions”), which effectively provide the lender’s return to the Group, are registered as debts within Financings received from Argentine Central Bank and other Financial Institutions item.

The difference between the sale price and the repurchase price or the purchase price and the resale price, adjusted by interest and dividends received by the counterparty or by the Group, as appropriate, constitute the premium of the operation. Such premium is treated as interest income or expenses, which are accrued during the effectiveness of the agreements.

Provisions set by the Argentine Central Bank on the classification of debt are aimed at both providing guidelines to identify and classify the quality of assets and evaluating the real or potential risk of capital or interest losses to determine (taking into account guarantees) whether there are suitable provisions for such contingencies. The Group must classify its loan portfolio in two categories: (i) consumer loans or mortgage loans and (ii) commercial loans. Consumer or mortgage loans (including credit card financing), loans of up to 19,800 to Micro-Crdit Institutions and Micro-entrepreneurs, and other types of commercial loans of up to 19,800 with or without guarantee. Any other loan is considered as commercial loan. Consumer or Mortgage loans that exceed 19,800 and which repayment is tied to its productive or commercial activity evolution, are classified as commercial loans.

At the Group´s sole discretion, commercial loans of up to 19,800, with or without preferred guarantees, may be classified as consumption or mortgage loans, and will be treated under the said loans conditions. If a client holds both type of loans (commercial loans and consumer or mortgage loans), consumer or mortgage loans are included in the commercial portfolio to determine under which portfolio the must be classified depending of the amounts. In these cases, loans with preferred guarantees are recognized at the 50% of their nominal value.

Under this classification system, each client, as well as his/her outstanding debts, are included in a one out of six sub-categories. Debt classification criteria applied to consumer loan portfolios for are mainly based on objective factors related to the fulfilment of obligations on behalf of clients and their legal situation; whereas the key criterion to classify commercial loan portfolios is given by each client´s payment capacity based on their future cash flow.

Classification of commercial loans

The main criterion utilized by the Group to evaluate a commercial loan is given by the borrower´s repayment capacity, which is measured by the future cash flow of such borrower. Pursuant to provisions issued by the Argentine Central Bank, commercial loans are classified as follows:

Notes to Consolidated Financial Statements

As of December 31, 2019 presented in comparative basis

(Expressed in thousands of pesos)

Classification of consumer and mortgage loans

The main criterion utilized for the evaluation of consumer and mortgage loan portfolio is given by default terms. Pursuant to provisions issued by the Argentine Central Bank, debtors are classified as follows:

Notes to Consolidated Financial Statements

As of December 31, 2019 presented in comparative basis

(Expressed in thousands of pesos)

Loan loss Provisions

As regards uncollectibility risk provisions, the standards on “Minimum uncollectibility risk provisions” in Section VIII of LISOL (by its Spanish acronym) are still effective and described as follows:

Over the total of clients’ debt, the following minimum uncollectibility guidelines must be applied:

In turn, the situation assigned to each debtor of the commercial and consumer portfolio is defined in accordance with the client´s repayment capacity and, only at a second stage, in accordance with the liquidation of assets; whereas, as for consumer portfolio, the situation assigned for each debtor is defined in accordance with delinquency days recorded by each debtor.

The Group has chosen to interrupt the accrual of interest of those clients who report delays longer than 90 days instead of setting aside allowances for their 100%.

Operating leases

The Group (lessor) recognizes the leasing payments as positive results in a linear manner. If another method of recognition is more appropriate, the Group will apply the recognition of income in that manner. In turn, the Group recognizes costs, such as amortization and expenses.

The initial recognition value adds direct costs incurred in detaining an operating lease at the carrying amount of the underlying asset and recognise those costs as an expense during the lease term on the same basis as the lease income.

The depreciation policy for depreciable underlying assets subject to operating leases is consistent with the group´s similar assets. In addition, the Group applies IAS 36 to account for any impairment loss identified.

Financial leases

They have been registered at the current value of unearned amounts, calculated according to agreed conditions in their respective contracts, depending on the interest rate implicit in the lease.

Notes to Consolidated Financial Statements

As of December 31, 2019 presented in comparative basis

(Expressed in thousands of pesos)

Initial measurement

The Group utilizes the interest rate implicit in the lease to measure the net investment, which is defined in such a way that the income initial direct costs are automatically included in the net investment of the lease.

The initial direct costs, which are different from those incurred by the manufacturer or retailers, are included in the initial measurement of the lease net investment and decrease the amount of income recognized during the lease term. The interest rate implicit in the lease is defined in such a way that the initial direct costs are included automatically into the lease net investment; there is no need to add them separately.

The difference between the receivable gross amount and the current value is represented in the financial income that is recognized during the lease term. The financial income from the leases is recorded within the result for the year. Impairment losses are recognized in profit or loss.

The Group utilizes the criteria described in Note 1.14 to determine whether there is objective evidence that there was an impairment loss as regards loans at amortized cost.

For the cases in which the Group acts as lessee, the policies detailed in note 1.2.c) have been applied.

Land and buildings are recorded their revalued values based on periodic appraisals, using the service of independent appraisers, net of the consequent depreciation for buildings. A revaluation reserve is recognized in Other Comprehensive Income.

Carried at it´s acquisition or construction cost less any accumulated depreciation and any accumulated impairment losses, except from real state, in virtue of which, the Group adopted the revaluation method. The cost includes expenses directly attributable to the acquisition or building of these items.

Management updates the valuation of the fair value of land, buildings, facilities and machinery (classified as property, plant and equipment), taking into account independent valuations. Management determines the value of a property, plant and equipment within a range of estimates of their fair value and considering the currency in which transactions are carried out in the market. The revaluations are carried out with sufficient regularity, in order to ensure that the book value, at all times, does not differ significantly from the fair value of each asset subject to revaluation.

The subsequent costs are included in the carrying value or are recognized as a separate asset, as appropriate, if and only if it is probable that they will generate future economic benefits for the Group, and their costs can be fairly measured. The carrying value of the asset that is being replaced is withdrawn, thus the new asset is amortized by the number of years of useful life left at the moment of the improve.

The maintenance and reparations expenses are recognised in profit or loss as incurred.

The depreciation is calculated following the straight-line method, applying annual rates sufficient to extinguish the values of assets at the end of their estimated useful life. In those cases in which an asset includes significant components with different useful lives, such components are recognized and depreciated as separate items.

The following chart presents the useful life for each of the items forming part of the item property, plant and equipment:

The residual value of the property, plant and equipment, useful lives and depreciation methods are reviewed and adjusted if necessary, at each financial year closing or when there are devaluation signs.

Notes to Consolidated Financial Statements

As of December 31, 2019 presented in comparative basis

(Expressed in thousands of pesos)

The Carrying amount of an item of property, plant and equipment is immediately reduced at its recoverable amount when the Carrying amount is greater than the estimated recoverable amount.

The results for the sale of property, plant and equipment are calculated by comparing the income obtained with the book value of the respective good. The resulting profits or losses are recorded in the consolidated statement of comprehensive income.

The following table reveals the following information related to the class of assets that have been recorded at their revalued value, as well as the book values that would have been recognized if the assets had been accounted for under the cost model:

The revaluation of the land and buildings owned by the entity shows a surplus of 562,398 and 451,340 as of December 31, 2019 and 2018, respectively, which added to its historic cost and net of revaluation depreciation, totals 1,825,297 and 1,106,054 for this active class, as of December 31, 2019 and 2018, respectively.

In fiscal year 2019, the sum of Pesos 746,640 is charged to Other Comprehensive Income (OCI).

The investment properties are composed of buildings held for obtaining a rent or for capital appreciation or both, but is never occupied by the Group.

Investment properties are measured at its fair value, and any gain or loss arising from a change in the fair value is recognized in profit or loss when arises. Investment properties are never depreciated. The fair value is determined using sales comparison approach prepared by the Group’s management considering a report of an independent expert.

The investment properties under the cost approach reflect the amount that would be required at the present time to replace the service capacity of the asset. They were valued at acquisition or construction cost, net of accumulated depreciation and / or accumulated depreciation losses. The cost includes expenses that are directly attributable to the acquisition or construction of these items.

Notes to Consolidated Financial Statements

As of December 31, 2019 presented in comparative basis

(Expressed in thousands of pesos)

The movements in investment properties for the year ended December 31, 2019 and 2018 were as follows:

The net result generated by the investment property as of December 31, 2019 and 2018 amounts to an income of 429,477 and 208,377 respectively, and is recognized in the captions "Other operating income", "Administrative expenses" and "Other operating expenses". in the consolidated comprehensive income statement.

Gain and losses on disposals are determined by comparing proceeds with the carrying amount.

The Goodwill resulting from the acquisition of subsidiaries, associates or joint ventures account for the excess between:

Goodwill is included in the intangible assets item in the consolidated financial statement.

Goodwill is not amortized. The Group evaluates annually, or when there are signs of impairment, the recoverability of goodwill based on discounted future cash flows plus other information available at the date of preparation of the consolidated financial statements. Impairment losses are not reverted once recorded. Earnings and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is assigned to cash-generating units so as to run recoverability tests. The assignment is carried out among those cash-generating units (or groups of units), which are identified in accordance to the operating segment criterion and benefit from the combination of businesses from which such goodwill stemmed.

Brands and licenses acquired separately are initially valued at historical cost, while those acquired through a business combinations are recognized at their estimated fair value at the acquisition date.

Intangible assets with a finite useful life are subsequently carried at cost less accumulated depreciation and / impairment losses, if any. These assets are tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired.

The trademarks acquired by the Group have been classified as intangible assets with an indefinite useful life. The main factors considered for this classification include the years in which they have been in service and their recognition among industry customers.

Intangible assets with an indefinite useful life are those that arise from contracts or other legal rights that can be renewed without a significant cost and for which, based on an analysis of all the relevant factors, there is no foreseeable limit of the period over which the asset is expected to generate net cash flows for the Group. These intangible assets are not amortized, but are subject, annually or whenever there are indications of devaluation, to annual assessment for impairment, either individually or at the level of the cash generating unit. The categorization of the indefinite useful life is reviewed annually to confirm if it is still sustainable.

Impairment losses are recognized when the book value exceeds its recoverable value. The recoverable value of the assets corresponds to the higher of the recoverable value of the asset or its value in use. For purposes of the impairment test, the assets are grouped at the lowest level in which they generate identifiable cash flows (cash-generating units). The devaluations of these non-financial assets - other than goodwill - are reviewed at each reporting date to verify possible reversals.

Notes to Consolidated Financial Statements

As of December 31, 2019 presented in comparative basis

(Expressed in thousands of pesos)

Costs related to software maintenance are recognized as expenses when incurred. Development, acquisition or implementation costs which are directly attributable to identifiable and single software design and tests controlled by the Group are recognized as assets.

Development, acquisition or implementation costs recognized initially as period expenses, are not recognized as intangible asset cost. Costs incurred in the development, acquisition or implementation of software, recognized as intangible assets are amortized through the application of straight-line method during their estimated useful lives, over a term not exceeding five years.

Goodwill are assigned to the Group's cash generating units on the basis of the operating segments.

The recoverable amount of a cash generating unit is determined on the basis of its value in use. These method uses cash flow projections based on approved financial budgets covering a period of five years.

The key assumptions are related to marginal contribution margins. These were determined on the basis of historic performances, other external sources of information and the expectations of market development.

The discount rates used are the respective average cost of capital ("WACC"), which is considered a good indicator of the cost of capital. For each cash generating unit, where the assets are assigned, a specific WACC was determined considering the industry, the country and the size of the business.

The main macroeconomic premises used are detailed below:

Goodwill recorded as of December 31, 2019 and 2018, have been tested for impairment. No adjustments have been determined over these assets as a result of the tests performed.

Inventories are valued at the lower value between cost and net realizable value. The cost includes the acquisition costs (net of discounts, refunds and similar), as well as other costs that have been incurred to give the inventories their location and conditions to be commercialized. The net realization value is the estimated sale price in the ordinary course of business minus the selling expenses.

The Group carries out an evaluation of the net realizable value of the inventories at the end of each fiscal year, allocating the corresponding value correction to the income statement to the extent that the book value exceeds the net realizable value. When the circumstances that previously caused the value correction will cease to exist, or when there is clear evidence of an increase in the net value.

Notes to Consolidated Financial Statements

As of December 31, 2019 presented in comparative basis

(Expressed in thousands of pesos)

The Group establishes a forecast for obsolete or low turnover products relative to the inventory at the end of each year. This forecast is established based on an anti-aging analysis of the products carried out by management.

The inventories have been valued at their replacement cost at the end of the year.

The assets, or groups of assets, possibly with some directly associated liabilities, classified as held for sale in accordance with the provisions of IFRS 5 "Non-current assets held for sale and discontinued operations" will be disclosed separately from the rest of the assets.

An asset may be classified as held for sale (includes loss of control of a subsidiary ) if its carrying amount will be recovered primarily through a sale transaction, rather than through its continued use, and a sale is considered highly probable., within 12 months after the last year-end closing .

To apply the above classification, an asset must meet the following conditions:

Sometimes an entity has a group of assets (including goodwill, if applicable), possibly with some directly associated liabilities, jointly and in a single transaction.

The assets, or groups of assets, possibly with some directly associated liabilities, classified as held for sale in accordance with the provisions of IFRS 5 "Non-current assets held for sale and discontinued operations", are measured at the lower of their carrying amount and fair value less costs to sell.

The Group will not depreciate the asset while classified as held for sale, or while it is part of a group of assets for disposal classified as held for sale. However, both interest and other expenses attributable to the liabilities of a group of assets for disposal that has been classified as held for sale will continue to be recognized.

The balances of financial instruments, deferred taxes and investment properties classified as held for sale are not subject to the valuation methods detailed above.

The liabilities directly associated with the groups of assets to be disposed of will be reclassified and disclosed separately in the Group's Statement of Financial Position.

Assets with an indefinite useful life are not subject to amortization but are tested annually for impairment or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable or, at least, on an annual basis.

Impairment losses are recognized when the carrying amount exceeds its recoverable amount. The recoverable amount of an asset is the higher of an asset’s fair value less costs of disposal and value in use. For purposes of assessing impairment, assets are grouped at the lowest level for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or group of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.

Notes to Consolidated Financial Statements

As of December 31, 2019 presented in comparative basis

(Expressed in thousands of pesos)

Assets held by the Group in its Trustee role, are not included in the Consolidated Financial Statements. Commissions and fees earned from trust activities are included in Service fee income.

Financial assets and liabilities are set off through the inclusion of the net amount in the consolidated financial statement only upon the existence of both a legally eligible right to compensate recognized amounts and the intention to liquidate in net terms or make the assets effective and liquidate the responsibility simultaneously.

Debts with other financial entities are recorded when the capital is paid in advance to the economic group by the banking entity. Non-derivative financial liabilities are measured at amortized cost. In the case that the Group repurchases its own debt, it is eliminated from the consolidated financial statements and the difference between the residual value of the financial liability and the amount paid is recognized as financial income or expense.

Pursuant to provisions issued by the Argentine Central Bank, an Entity shall hold provisions in the following cases:

An Entity will be considered to hold an implicit obligation if (a) as a result of previous economic or public policies practices, the Group has taken over certain responsibilities and (b) therefore, expectations regarding the compliance of such obligations have been produced.

The Group recognizes the following provisions:

For labor, civil and commercial lawsuits: provisions are defined based on both reports provided by lawyers regarding any lawsuit status and the forecast resulting from potential losses to be afforded by the Group, and past experience on this type of claims.

For miscellaneous risks: provisions are aimed at affording contingent situations that may result in obligations for the Group. The calculation of amounts includes the effectiveness likelihood based on the opinion provided by legal advisors and other professionals of the Group.

The Group does not record positive contingencies, except from deferred tax positive contingencies and those contingencies of virtually secure effectiveness.

As of the issuance of these Consolidated Financial Statements, the Group´s Board considers that there have been no elements that show the existence of other contingencies that may become effective and produce a negative impact on these Consolidated Financial Statements other than those defined in Note 13.

Non-financial payable accounts are accrued once the counterparty has served its obligations pursuant to the contract and are valued at amortized cost.

The Group approved a retirement plan based on incentives for members of senior management and the Board of Directors, who will be entitled to receive cash payments over time if certain performance objectives are met.

Notes to Consolidated Financial Statements

As of December 31, 2019 presented in comparative basis

(Expressed in thousands of pesos)

Provisions related to pre-retirement plans and benefits related to seniority rewards are set up. Liabilities related to such plans and benefits are expected to be settled within the following 12 months. Therefore, such liabilities are measured at current value of future fund flows expected to be recorded regarding services set for employees until the end of the fiscal year through the utilization of a credit unit method. Salary levels, experience and lay-offs and service years are taken into account. Expected future payments are discounted through the utilization of market rate at the end of fiscal year for national bonds under terms and currency coinciding expected flows. Re-measurements resulting from experience and changes in actuary standards are recognized as results.

Provisions are measured at the present value of the disbursements that are expected to be required to settle the obligation using a pre-tax interest rate that reflects the current market conditions on the value of the money and the specific risks for that obligation. The increase in the provision for the passage of time is recognized in the line of net financial results of the consolidated statement of comprehensive income.

Benefits for termination are enforceable upon labor relation termination prior to retirement date; or when the employee accepts a voluntary retirement in exchange for such benefit. The Group recognizes termination benefits on the date that: (a) the Group cannot withdraw the offer of such benefits made to the employee; and (b) when the Group recognizes re-structuring costs within IAC 37 scope and includes the payment of termination benefits. Upon an offer for voluntary retirement, the termination benefit is measured in accordance with the number of employees expected to accept such offer. Benefits expected to apply over a period of more than 12 months as of reporting date are discounted at current value.

1.27.       Negotiable Obligations Issued

Negotiable Obligations issued by the Group are measured at Amortized Cost. If the Group purchases own negotiable obligations, such obligations are removed from the consolidated financial statements and the difference between the residual value of the financial liabilities and the relevant payment is included in the Statement of Comprehensive Income as income from advance settlement of a debt.

The Group applies IFRS 4 “Insurance Contracts” in order to recognize and measure the assets and liabilities derived from insurance contracts.

Assets derived from insurance contracts

An insurance contract is a contract under which the Group (the insurer) accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder.

Once a contract has been classified as an insurance contract, it remains an insurance contract for the rest of its useful life, even if the insurance risk is significantly reduced during this period, unless all rights and obligations are extinguish or expire.

The insurance contracts offered by the Group include property insurance that covers combined family insurance, theft and similar risks, property damage, personal accidents, among other risks. They also include temporary life insurance contracts.

Total premiums are recognized on the date of issuance of the policy as an account receivable. At the same time, a reserve for unearned premiums representing premiums for risks that have not yet expired is recorded in the liability. Unearned premiums are recognized as income during the contract period, which is also the coverage and risk period. The book value of insurance accounts receivable is reviewed for impairment whenever events or circumstances indicate that the book value may not be recoverable. The impairment loss is recorded in the income statement.

Liabilities derived from insurance contracts

Debt with insured

The insurance claims reserves represent debts with insured people for claims reported to the company and an estimate of the claims that have already been incurred but that have not yet been reported to the company (IBNR). The reported claims are adjusted on the basis of technical reports received from independent appraisers.

Notes to Consolidated Financial Statements

As of December 31, 2019 presented in comparative basis

(Expressed in thousands of pesos)

Debts with reinsurers and co-insurers

The Group mitigates the risk for some of its insurance businesses through co-insurance or reinsurance contracts in other companies. In the case of co-insurance, the Group associates with another company to cover a risk assuming only a percentage of it and also the premium. In reinsurance, the risk is transferred to another insurance company both proportionally (as a percentage of the risk) and not proportionally (excess loss is covered above a certain limit). The reinsurance agreements assigned do not exempt the Group from its obligations to the insured.

Coinsurance and reinsurance liabilities represent balances owed under the same conditions and the amounts payable are estimated in a manner consistent with the contract that gave rise to them.

Debts with producers

They represent liabilities with instinctive agents originated in the commissions for the insurance operations that they originate for the Group companies. The balances of the current accounts with these entities are also included.

Technical commitments

The current risk reserve regularizes the premiums to be collected based on the accepted risk not taken.

Accounts included in this item are expressed in the currency that has not considered changes in price indexes as from February 2003, except from the item “Capital Stock”, which has been held at nominal value

Ordinary shares are classified in the shareholders´ equity and are held at nominal value.

Pursuant to the regulations established by the B.C.R.A., it is appropriate to assign to legal reserve 20% of the profits for the year net of any adjustments from previous years, if applicable. Notwithstanding the aforementioned, for distribution of earnings and pursuant to Amended Text on Distribution of Income issued by the Argentine Central Bank, Financial Entities shall be previously authorized by the Superintendence of Financial and Exchange Entities, and shall meet all requirements set out in Note 16.6.

The distribution of dividends to the shareholders of the Group and its subsidiaries is recognized as a liability in the consolidated financial statements in the year in which the dividends are approved by the Shareholders' Meeting.

Financial income and expenses are recorded for all assets and liability measured in accordance with the effective rate method; for which ends all positive and negative results included as an integral part of the effective rate of the operation.

Results included in the effective rate include expenses and income related to the setting-up or acquisition of financial assets or liabilities, such as compensations received from the assessment of the client´s financial condition, negotiation of the terms of an instrument, the preparation and processing of necessary documents for the effectiveness of the transaction and compensations received from the granting of loans to be utilized by the client. The Group records all of its non-derivative financial liabilities at amortized cost, except those included in the caption "liabilities at fair value with changes in results", which are measured at fair value.

It should be noted that the fees that the Group receives for the origination of syndicated loans are not part of the effective rate of the product, and are recognized in the Income Statement at the time the service is provided, as long as the group does not retain part of it or it is maintained in the same conditions as the rest of the participants. Neither are the fees received by the Group due to negotiations in the transactions of a third party, which are recognized at the time they are perfected.

IFRS 15 establishes the principles that an entity must apply to account for income and cash flows from contracts for the sale of goods or services to its customers.

Notes to Consolidated Financial Statements

As of December 31, 2019 presented in comparative basis

(Expressed in thousands of pesos)

The amount to be recognized will be that which reflects the payment to which one expects to be entitled for the services rendered.

Revenues from the Group's services are recognized in the income statement in accordance with compliance with performance obligations, thus deferring those revenues related to customer loyalty programs, which are provisioned based on the fair value of the item and its redemption rate, until they are exchanged by the client and can be recognized in the results of the year.

A summary of the main fees charged by the Bank is detailed below:

Income from the rental of investment properties is recognized in the consolidated statement of comprehensive income on the basis of the straight-line method over the term of the lease.

Income Tax

Tax expense for the year comprises the charge for tax currently payable and deferred income. The income tax is recognized in the statements of income, except to the extent that it relates to items recognized in other comprehensive income or directly in equity, in which case, the tax is also recognized in other comprehensive income or directly in equity, respectively.

Current income tax charge is calculated on the basis of the tax laws enacted or substantially enacted at the date of the Statements of Financial Position in the countries where the Company and its subsidiaries operate and generate taxable income. The Group periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. The Group establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is recognized, using the deferred tax liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Consolidated Financial Statements. However, deferred tax liabilities are not recognized if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the date of the Statements of Financial Position and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.

Deferred tax assets are only recognized to the extent that it is probable that future tax benefits will occur against which the temporary differences can be used.

The Group recognizes a deferred tax liability in the case of taxable temporary differences related to investments in subsidiaries and affiliates, except that the following two conditions are met:

(i) the Group controls the timing of the reversal of temporary differences;

(ii) it is probable that this temporary difference will not be reversed at a foreseeable time in the future.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

Notes to Consolidated Financial Statements

As of December 31, 2019 presented in comparative basis

(Expressed in thousands of pesos)

Minimum presumed income tax

The Group determines the minimum presumed income tax by applying the current 1% rate on assets computable as of each closing date. This tax is complementary to the income tax. The tax liability of the Group will coincide with the higher of both taxes. However, if the minimum presumed income tax exceeds the income tax in a fiscal year, said excess may be computed as a payment on account of the income tax that may occur in any of the following ten years.

The credit for minimum presumed income tax exposed under other non-current credits is the portion that the Group estimates may be offset by income tax in excess of the minimum presumed income tax to be generated within the next months ten fiscal years.

The result per basic share is determined by the quotient between the result of the year attributable to the holders of ordinary shares of the Group by the average number of ordinary shares outstanding during the current fiscal year.

Since the Group has not issued financial instruments that have a dilutive effect on earnings per share, basic and diluted earnings per share are equal.

The Group determines operating segments based on performance reports which are reviewed by the Board and key personnel of the Senior Management and updated upon changes.

The Group considers the business for the type of products and services offered, identifying the following operating segments:

Operating results of the different operating segments of the Group are reviewed individually with the purpose of taking decisions over the allocation of resources and the performance appraisal of each segment. The performance of such segments will be evaluated based on operating earnings and losses and is measured consistently with operating earnings and losses of the consolidated earnings and losses statement.

When a transaction is carried out between operating segments, they are taken in an independent and equitative manner, as in cases of transactions with third parties. Later, income, expenses and results from transfers between operating segments are removed from the consolidation.

The Group does not present information by geographical segments because there are no operating segments in economic environments with risks and returns that are significantly different.

Notes to Consolidated Financial Statements

As of December 31, 2019 presented in comparative basis

(Expressed in thousands of pesos)

The following chart includes information by segment as of December 31, 2019 and 2018: