Contents Management report Corporate governance Consolidated financial statements Financial statements Pillar 3
to the hedged risks are recognised in the hedging reserve
included under Equity (see Section 10).The ineffective portion
of the changes in the fair value of derivatives are recognised in
the profit and loss account.
If the forecast transaction or the non-current liability results
in the recognition of a non-financial asset or a non-financial
liability, any deferred profits or losses included in equity are
restated at the initial carrying amount (cost) of the asset or the
liability. In all other cases, deferred amounts included in equity
are taken to the statement of income and are classified as
income or expenses in the periods in which the hedged non-
current liability or the forecast transaction had an effect on the
profit and loss account.
Certain derivative contracts, although they are economic
hedges in relation to the managed risk positions taken by
Rabobank, do not qualify for hedge accounting under the
specific IFRS rules and are therefore treated as derivatives held
for trading purposes.
The fair value of derivatives held for trading and hedging
purposes is disclosed in Section 10.
Trade liabilities
Trade liabilities are mainly negative fair values of derivatives and
delivery obligations that arise on the short selling of securities.
Securities are sold short to realise gains from short-term price
fluctuations.The securities needed to settle short sales are
acquired through securities leasing and securities repurchasing
agreements. Securities sold short are recognised at fair value on
the reporting date.
2.4 Financial assets held for trading
Financial assets held for trading are financial assets acquired
with the objective of generating profit from short-term
fluctuations in prices or traders' margins, or financial assets that
form part of portfolios characterised by patterns of short-term
profit participation.
Financial assets held for trading are measured at fair value
based on listed bid prices. All related comprehensive income is
included under 'Net income from financial assets and liabilities
at fair value through profit or loss'. Interest earned on financial
assets is recognised as interest income.
Dividends received on financial assets held for trading are
recognised as 'Net income from financial assets and liabilities at
fair value through profit or loss'.
All acquisitions and sales of financial assets held for trading
which require delivery within a time limit prescribed under
the regula-tions or in accordance with market conventions are
accounted for on the transaction date.
2.5 Other financial assets and liabilities designated
at fair value
Rabobank makes use of the option to include certain financial
assets (other than those held for trading) and certain liabilities
at fair value through profit or loss. Financial assets, including
venture capital, and liabilities have been placed in this category
by management upon initial recognition, if (any or all) of the
following criteria are met:
such a designation eliminates or substantially reduces any
inconsistent treatment that would otherwise have arisen
upon measurement of the assets or liabilities or recognition
of profits or losses on the basis of different accounting
policies; or
the assets and liabilities belong to a group of financial assets
and/or financial liabilities that are managed and assessed on
the basis of their fair value in accordance with a documented
risk management or investment strategy; or
the financial instrument contains an embedded derivative
financial instrument, unless the embedded derivative
financial instrument does not significantly affect the
cash flows or if it is evident that separate recognition is
not required.
Interest earned on assets with this classification is recognised
as interest income and interest due on liabilities with this
classification is recognised as interest expense. Any other
realised and unrealised gains and losses on the revaluation
of these financial instruments at fair value are included under
'Income from other financial assets and liabilities at fair value
through profit or loss'. All purchases and sales of other financial
assets and liabilities designated at fair value and which have
to be delivered within a period prescribed by regulations or
market convention are recognised on the transaction date.
2.6 Day 1 profit
If, at the time a financial instrument is entered into, valuation
methods are used at fair value, a discrepancy may arise between
the transaction price and the fair value. Such a discrepancy is
referred to as 'day 1 profit'. Rabobank immediately accounts
for this profit under 'Net income from financial assets and
liabilities at fair value through profit or loss', if the valuation
method is based on observable inputs (of active markets).
If non-observable inputs are used, the day 1 profit is amortised
over the term of the transaction and accounted for as 'Other
liabilities'. Profit is taken at a subsequent stage if the financial
instrument concerned has been sold or the inputs become
visible at a later stage.
183 Notes to the consolidated financial statements
