Contents Management report Corporate governance Consolidated financial statements Financial statements Pillar 3
2.7 Available-for-sale financial assets
Management determines the classification of financial assets
on the date of acquisition, depending on the purpose for which
the investments are acquired.
Financial assets that are intended to be held indefinitely and
that could be sold for liquidity purposes or in response to
changes in interest rates, exchange rates or share prices are
classified as available for sale.
Available-for-sale financial assets are initially recognised at
fair value, including transaction costs, based on quoted bid
prices or values derived from cash flow models.The fair values
of unlisted equity instruments are estimated on the basis of
appropriate price/earnings ratios, adjusted to reflect the specific
circumstances of the respective issuer. Any unrealised gains
and losses from changes in the fair value of available-for-sale
financial assets are recognised in equity unless they relate to
amortised interest of exchange rate differences of monetary
assets. If such financial assets are disposed of, the adjustments
to fair value are recognised in the profit and loss account.
Debt instruments are impaired if there are objective indications
that the fair value has decreased to such a degree that no
reasonable assumptions can be made that the value will
recover to the carrying amount in the foreseeable future.
On each reporting date, management assesses whether there
are objective indications on the impairment of available-for-sale
assets. Examples of objective evidence for value adjustments are:
significant financial difficulties on the part of the issuer;
default in making interest or redemption payments;
the disappearance of active markets for the financial asset
caused by financial difficulties.
In the event of impairment, the cumulative loss is determined
by the difference between the cost and the current fair value,
less any previously recognised impairment.This is transferred
from the revaluation reserves in equity to the profit and loss
account. If the impairment of a debt instrument diminishes in
a subsequent period and the diminution can be objectively
attributed to an event that occurred after the impairment, the
impairment is reversed through the profit and loss account.
Equity instruments are impaired if their cost permanently
exceeds their recoverable value. In other words, their fair value
is significantly lower than their cost or lower than their cost
forthe long term. The recoverable amount of investments in
unlisted equity instruments is determined using approved
valuation methods. The recoverable amount of listed financial
assets is determined on the basis of market value. Impairment
of equity instruments is never subsequently reversed through
the profit and loss account.
All purchases and sales made in accordance with standard
market conventions for available-for-sale financial assets are
recognised on the transaction date. All other purchases and
sales are recognised on the settlement date.
2.8 Repurchase agreements and reverse repurchase
agreements
Financial assets that are sold subject to related sale and
repurchase agreements are included in the financial statements
under 'Financial assets held for trading'and 'Available-for-sale
financial assets'. The liability to the counterparty is included
under 'Due to banks' or 'Due to customers', subject to relevance.
Financial assets acquired under reverse sale and reverse
repurchase agreements are recognised as 'Loans and advances
to banks', or 'Loans and advances to customers', subject to
relevance. The difference between the selling price and
repurchasing price is recognised as interest income or interest
expense over the term of the agreement on the basis of the
effective interest method.
2.9 Securitisations and other de-recognition
constructions
Rabobank securitises, sells and carries various financial assets,
which may involve a sale of these assets to special purpose
entities (SPEs), which then issue securities to investors.
Rabobank has the option of retaining an interest in sold
securitised financial assets in the form of subordinated interest-
only strips, subordinated securities, spread accounts, servicing
rights, guarantees, put options and call options, and other
constructions.
A financial asset (or a portion of thereof) is de-recognised if:
the rights to the cash flows from the asset expire;
the rights to the cash flows from the asset and a substantial
portion of the risks and benefits of ownership of the asset are
transferred;
a commitment to transfer the cash flows from the asset is
presumed and a substantial portion of the risks and benefits
are transferred;
not all the economic risks and benefits are retained or
transferred, but the control over the asset is transferred.
A financial liability or a part thereof is de-recognised if it ceases
to exist i.e. after the contractual obligation has been fulfilled,
cancelled, or has expired.
If Rabobank retains control over the asset but does not retain
a substantial portion of the risks and benefits, the asset is
recognised in proportion to the continued involvement of
Rabobank. A related liability is also recognised to the extent
of the continued involvement of Rabobank.The recognition
184 Rabobank Annual Report 2015
