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identified as impaired within the bank's risk systems (IBNR;
incurred but not reported). Basel II parameters, adjusted to
the IFRS guidelines and to current developments, are used
to determine the provision, together with what is known as
the Loss Identification Period (LIP), the period between the
occurrence of a loss event and the recording of the event in the
bank's risk systems.The LIP is expressed in months and varies
between portfolios.
Exposures classified as corporate exposures under Capital
Requirements Directive CRD IV are measured in accordance
with the 'one debtor' principle. This principle requires that the
approved limit for a debtor applies to the sum of all exposures
(including derivatives, guarantees and the like) of the debtor
group into which the debtor has been classified. Debtor
groups include all debtors that are part of the economic entity
with which the borrower is affiliated, including any majority
shareholders ofthe economic entity.The 'one debtor' principle
applies across all entities and group divisions.
2.16 Goodwill and other intangible assets
Goodwill
Goodwill is the amount by which the acquisition price paid
for a subsidiary exceeds the fair value on the date on which
the share of net assets and contingent liabilities ofthe entity
was acquired. With each acquisition, the other non-controlling
interests are recognised at fair value or at its share ofthe
identifiable assets and liabilities ofthe acquired entity.Tests are
performed annually, or more frequently if indications so dictate,
to determine whether there has been impairment.
Other intangible assets, including software
development costs
Costs directly incurred in connection with identifiable and
unique software products over which Rabobank has control and
that will likely provide economic benefits exceeding the costs
for longer than one year are recognised as other intangible
assets. Direct costs include the personnel costs ofthe software
development team, financing costs and an appropriate portion
ofthe relevant overhead.
Expenditures that improve the performance of software as
compared with their original specifications are added to the
original cost ofthe software. Software development costs are
recognised as other intangible assets and amortised on a linear
basis over a period not exceeding five years. Costs related to the
maintenance of software are recognised as an expense at the
time they are incurred.
Other intangible assets also include those identified through
business combinations, and they are amortised over their
expected useful lives.
Consolidated Financial Statements Company Financial Statements Pillar 3
Impairment losses on goodwill
Goodwill is allocated to cash-generating units for the purpose
of impairment testing, which is undertaken at the lowest level
of assets that generate largely independent cash inflows.
During the fourth quarter of each financial year, or more
frequently if there are indications of impairment, goodwill is
tested for impairment and any excess of carrying amount over
recoverable amount is provided.The recoverable amount is the
higher ofthe value in use and the fair value less selling costs.
The value in use of a cash flow generating unit is determined as
the present value ofthe expected future pre-tax cash flows of
the cash flow generating unit in question. The key assumptions
used in the cash flow model depend on the input data and they
reflect various judgemental financial and economic variables,
such as risk-free interest rates and premiums reflecting the
risk inherent in the entity concerned. Impairments of goodwill
are included under 'Impairment losses on goodwill' in the
statement of income.
Impairment losses on other intangible assets
At each reporting date, an assessment is made as to whether
there are indications of impairment of other intangible assets.
If there are such indications, impairment testing is carried out to
determine whether the carrying amount ofthe other intangible
assets is fully recoverable.The recoverable amount shall be
estimated for the individual asset. If it is not possible to estimate
the recoverable amount ofthe individual asset, the recoverable
amount ofthe cash generating unit to which the asset belongs
is determined. An impairment loss is recognised if the carrying
amount exceeds the recoverable amount. Impairment losses
and impairment reversals are included in 'Other administrative
expenses'in the statement of income.
2.17 Property and equipment
Property and equipment for own use
Property for own use consists mainly of office buildings
and is recognised at cost less accumulated depreciation
and impairment, as is equipment for own use. Assets are
depreciated to their residual values over the following
estimated useful lives:
Property
- Land
Not depreciated
- Buildings
25 -40 years
Equipment
- Computer equipment
1 - 5 years
- Other equipment and vehicles
3 - 8 years
An annual assessment is made as to whether there are
indications of impairment of property and equipment.
If the carrying amount of an asset exceeds its estimated
recoverable amount, the carrying amount is written down to
187 Notes to the consolidated financial statements