Inhoudsopgave Voorwoord Bestuursverslag Corporate governance Consolidated Financial Statements Company Financial Statements Pillar 3 In the current year the group engagement team visited the Netherlands, USA, the UK, Australia and Brazil at least once. During these visits the group engagement team met with the component teams and with local management. Where the work was performed by component auditors, we determined the level of involvement we needed to have in their audit work to be able to conclude whether sufficient appropriate audit evidence had been obtained as a basis for our opinion on the financial statements as a whole. The group consolidation, financial statement disclosures and a number of complex items are audited by the group engagement team at the head office. By performing the procedures above at components, combined with the additional procedures at group level, we have obtained sufficient and appropriate audit evidence regarding the financial information of the group.These procedures in totality provided a basis for our opinion on the consolidated financial statements. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance to the audit of the financial statements. We have communicated the key audit matters to the Supervisory Board, however these should not be regarded as a comprehensive reflection of all matters that were identified by our audit and that we discussed. We described the key audit matters and included a summary of the audit procedures we performed on those matters. The key audit matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon. We do not provide a separate opinion on these matters or on specific elements of the financial statements. Any comments we make on the results of our procedures should be read in this context. Key audit matter Impairment of loans and advances to customers Refer to note 2.15 'Loans and advances to customers and loans and advances to banks' and note 11 'Loans and advances to customers'. We focused on this area because management makes complex and subjective judgements over both timing of recognition and the estimation of the size of any such impairment. Within Rabobankthe impairment consists out of three different components being: Impairments for specifically identifiable individually impaired loans or advances ('specific allowance'); Model based impairments for Incurred But Not Reported losses (referred to by the Ban kas 'general allowance'); and Model based impairments to cover impairment risks in impaired loans with individually low exposures ('collective allowance'). The judgements and estimation uncertainty is primarily linked to the following: The identification and follow-up of impairment triggers and the underlying calculation of the allowances; Regarding the specific allowance the valuation of the future cash flows based on the appropriate use of key parameters and the assessment of the recoverable amount; The models that support the general and collective allowance; Post model adjustments that management applies because the models do not take into account the groups consolidated market-, sector- and industry risk as well as latest macro-economic trends so that the provisions reflect conditions at the balance sheet date. How our audit addressed the matter Internal controls We understood, evaluated and tested the operating effectiveness of key controls and focused on: Credit management including the identification of impairment triggers; The governance over impairment models, including the continuous reassessment of management that the impairment models are still calibrated in a way that addresses the impairment risk in accordance with the IFRS standards; The completeness and accuracy of transfer of data from the underlying source systems to the impairment models; and The review and approval process that management has in place for the outputs of the impairment models, and the adjustments that are applied to modelled outputs. We found that these key controls where designed and implemented. Most of these controls operated effectively. For certain controls remedial action was taken by management. Based on the testing of controls and additional testing of remedial actions we determined that we could place reliance on these controls for the purpose of our audit. Substantive audit procedures For a sample of individually impaired loans, we took note of the latest developments at the borrowers' and considered whether key judgements were appropriate. We challenged management's inputs including the future cash flows, the valuation of collateral and tested the key parameters. In addition we selected a sample of individual loans from the 'performing book' and the so called 'watch list'. Our procedures did not identify any material differences. We tested the impairment models for the general and collective allowance. We performed backtesting procedures on a sample of key model parameters and we challenged management and they provided us with reasonable explanations and evidence supporting the key model parameters, in line with market and industry practice. We challenged management on the post model adjustments to provide objective evidence that these adjustments were necessary to balance the Bank's sector, industry or macro economical exposure, and we found the provided support reasonable 248 Rabobank Jaarverslag 2016

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Jaarverslagen Rabobank | 2016 | | pagina 249