Contents Management report Corporate governance Consolidated financial statements Financial statements Pillar 3
fora debtor applies to the sum of all exposures - including
derivatives, guarantees and the like - of the debtor group in
which the debtor has been classified. Debtor groups include
all debtors who form part of the economic entity in which
legal entities and companies are affiliated with the same
organisation. In addition, the majority shareholders also form
part of the economic entity. The 'one debtor' principle applies
across all entities; the exposures of the debtor group must be
included for all group divisions.
2.16 Goodwill and other intangible assets
Goodwill
Goodwill is the amount by which the acquisition price
paid for a subsidiary or associate exceeds the fair value on
the date Rabobank acquired its share of the net assets and
the contingent liabilities of the entity acquired. With each
acquisition, the other minority interests are recognised at
fair value or at the proportion of the identifiable assets and
liabilities of the acquired entity. Impairment tests are performed
annually or - if indications so dictate - more frequently to
determine whether impairment has occurred.
Software development costs
Costs related to the development or maintenance of software
are recognised as an expense at the time they are incurred.
Costs directly incurred in connection with identifiable and
unique software products over which Rabobank has control
and that will probably provide economic benefits exceeding
the costs for longer than a year are recognised as goodwill
and other intangible assets. Direct costs include employee
expenses of the software development team, financing and
an appropriate portion of the relevant overhead.
Expenditures that improve the performance of software
compared with their original specifications are added to the
original cost of the software. Software development costs
are recognised as assets and amortised on a linear basis over
a period not exceeding five years.
Other intangible assets
Other intangible assets are mainly those identified through
business combinations. They are amortised over their terms.
Rabobank performs an impairment test every year based on
expected future cash flows. An extraordinary impairment loss is
taken if the expected future profits do not justify the book value
of the asset.
Impairment losses on goodwill
During the fourth quarter of each financial year, or more
frequently if indications of impairment exist, goodwill is tested
for impairment by comparing the recoverable amount with
the carrying amount. The highest of value in use on the one
hand and fair value less selling costs on the other determines
the recoverable amount. The definition of cash flow generating
units depends on the type of company acquired.
The value of a cash flow generating unit is arrived at by
determining the present value of the expected future cash
flows of the cash flow generating unit in question at the interest
rate before tax.
The most important assumptions used in the cash flow model
depend on the input data which reflect different financial
and economic variables, such as the risk-free interest rate in
a country and a premium reflecting the inherent risk from the
entity concerned.The variables are determined subject to review
by management. Impairments of goodwill are included under
'Impairment losses on goodwill' in the statement of income.
Impairment losses on other intangible assets
On each reporting date, Rabobank assesses whether there
are indications of impairment of other intangible assets.
If such indications exist, impairment testing is carried out
to determine whether the carrying amount of the other
intangible assets is fully recoverable. An impairment loss is
recognised if the carrying amount exceeds the recoverable
amount. Goodwill and software under development are tested
for impairment each year on the reporting date or more
frequently if indications of impairment exist, to determine if any
extraordinary reduction has occurred in their value. Impairment
losses and reversed impairments of other intangible assets are
included in 'Other administrative expenses' in the profit and
loss account.
2.17 Property and equipment
Property and equipment for own use
Equipment (for own use) is recognised at historical cost net
of accumulated depreciation and impairments if applicable.
Property (for own use) represents mainly offices and is
also recognised at cost less accumulated depreciation and
impairments if applicable.
Each asset is depreciated to its residual value over its estimated
useful life:
- Land
Not depreciated
- Buildings
25 -40 years
Equipment, including
- Computer equipment
1 - 5 years
- Other equipment and vehicles
3 - 8 years
Rabobank every year assesses 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 immediately written down
187 Notes to the consolidated financial statements
