Contents Management report Corporate governance Consolidated financial statements Financial statements Pillar 3
to the recoverable amount. Impairment losses and reversed
impairments of property and equipment are included under
'Other administrative expenses' in the profit and loss account.
Gains and losses on the disposal of property and equipment are
determined in proportion to their carrying amounts and taken
into account when determining the operating result.
Repair and maintenance work is charged to the profit and
loss account at the time the relevant costs are incurred.
Expenditures on extending or increasing the benefits from
land and buildings compared with their original benefits are
capitalised and subsequently depreciated.
2.18 Investment properties
Investment properties, mainly office buildings, are held for their
long-term rental income and are not used by Rabobank or its
subsidiaries. Investment properties are recognised as long-term
investments and included in the statement of financial position
at cost, net of accumulated depreciation and impairment.
Investment properties are depreciated over a term of 40 years.
2.19 Other assets
Work in progress
Work in progress is included in 'Other assets'. Work in progress
relates to commercial real estate projects as well as sold and
unsold housing projects under construction or planned and
is carried at cost plus allocated interest, net of provisions as
necessary. Instalments invoiced to buyers and customers are
deducted from work in progress. If the balance for a project is
negative (the amount of the invoiced instalments exceeds the
capitalised costs), the balance of that project is recognised as
'Other liabilities'.
Gains and losses are recognised based on the percentage of
completion method given the continuous transfer of ownership
involved. As the construction work advances, Rabobank
transfers control and material risks and benefits of ownership of
the work in progress in its current state to the buyer.
Building sites
Building sites are valued at cost, including interest allocated
and additional costs relating to site acquisition and preparation.
No interest is allocated for land which has no specific
designation under a zoning plan, if there is no certainty that
the land will be developed.The price of land does not include
the conditional requirement which depends on the future
reclassification of the land in question. For losses expected
upon the sale of the land, the carrying amount of the site is
subject to impairment.
2.20 Leasing
Rabobank as lessee
Leases relating to property and equipment under which
virtually all risks and benefits of ownership are transferred to
Rabobank are classified as finance leases. Finance leases are
capitalised at the inception of the lease at the fair value of the
leased assets or at the present value of the minimum lease
payments if the present value is lower. Lease payments are
apportioned between the lease liability and the finance charges
so as to achieve a constant rate of interest on the remaining
balance of the liability. The corresponding lease liabilities are
included under 'Other liabilities'after the deduction of finance
charges. The interest components of the finance charges are
charged to the profit and loss account over the term of the
lease. A tangible fixed asset acquired under a lease agreement
is depreciated over the useful life of the asset or, if shorter, the
term ofthe lease.
Leases under which a considerable portion ofthe risks and
benefits of ownership ofthe assets are retained by the lessor are
classified as operating leases. Operating lease payments (less
any discounts by the lessor) are charged to the profit and loss
account on a linear basis over the term ofthe lease.
Rabobank as lessor
Finance leases
If assets are leased under a finance lease, the present value of
the lease payments is recognised as a receivable under 'Loans
and advances to banks' or 'Loans and advances to customers'.
The difference between the gross receivable and the present
value ofthe receivable is recognised as unearned finance
income. Lease income is recognised as interest income over
the term ofthe lease using the net investment method, which
results in a constant rate of return on the investment.
Operating leases
Assets leased under operating leases are included in the
statement of financial position under 'property and equipment'.
The assets are depreciated over their expected useful lives
in line with those of comparable items of property and
equipment. Rental income (less discounts granted to lessees
and write-downs) is recognised under 'Other results' on a linear
basis over the term ofthe lease.
2.21 Provisions
Provisions are recognised if Rabobank has a present obligation
(legal or constructive) as a result of a past event, if it is probable
that an outflow of resources will be required to settle the
obligation and if a reliable estimate can be made ofthe
amount ofthe obligation. If Rabobank expects a provision to
be reimbursed, for example under an insurance contract, the
188 Rabobank Annual Report 2015
