Contents Management report Corporate governance Consolidated financial statements Financial statements Pillar 3
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
of changes in the value of the liability corresponds to the
recognition of changes in the value of the asset.
If a transaction does not meet the above conditions for
de-recognition, it is recognised as a loan for which security has
been provided.
To the extent that the transfer of a financial asset does not qualify
for de-recognition, the transfer does not result in the contractual
rights of Rabobank being separately recognised as derivatives
if recognition of these instruments and the transferred asset, or
the liability arising from the transfer, were to result in the double
recognition of the same rights or obligations.
Profits and losses on securitisations and sale transactions partly
depend on the previous carrying amounts of the financial assets
transferred. These are allocated to the sold and retained interests
on the basis of the relative fair values of these interests on the
date of sale. Any gains and losses are recognised through profit
or loss at the time of transfer.
The fair value of the sold and retained interests is based on
quoted market prices or calculated as the present value of
the future expected cash flows on the basis of pricing models
that take into account various assumptions such as credit
losses, discount rates, yield curves, payment frequency and
other factors.
Rabobank decides whether the SPE should be included in the
consolidated financial statement. For this purpose, it performs
an assessment of the SPE by taking a number of factors into
consideration, including the activities, decision making powers
and the allocation of the benefits and risks associated with the
activities of the SPE.
2.10 Cash and balances at central banks
Cash equivalents are highly liquid short-term assets held to
meet current obligations in cash, rather than for investments
or other purposes. Such investments have remaining terms
of less than 90 days from inception. Cash equivalents are
readily convertible to known amounts of cash and subject to
an insignificant risk of changes in value.
2.11 Offsetting financial assets and liabilities
Financial assets and liabilities are offset and the net amount is
transferred to the statement of financial position if a legal right
to offset the recognised amounts exists and it is intended to
settle the expected future cash flows on a net basis, or to realise
the asset and settle the liability simultaneously.This mainly
concerns offsetting current account balances and derivatives.
The offsetting of taxes is discussed in Paragraph 2.23.
2.12 Foreign currency
Foreign entities
Items included in the financial statements of each entity
in Rabobank Group are carried in the currency that best
reflects the economic reality of the underlying events and
circumstances that are relevant for the entity (the functional
currency).
The consolidated financial statements are presented in euros,
which is the parent company's functional currency.
The profit and loss accounts and cash flows of foreign entities
are translated into the presentation currency of Rabobank
at the exchange rates valid on the transaction dates, which
is approximately equal to the average exchange rates on
31 December.Translation differences arising on the net
investments in foreign entities and on loans and other currency
instruments designated as hedges of these investments
are recognised in equity. If a foreign entity is sold, any such
translation differences are recognised in the profit and loss
account as part of the profit or loss on the sale.
Goodwill and fair value adjustments arising from the acquisition
of a foreign entity are recognised as the assets and liabilities of
the foreign entity and are translated at the closing rate.
Foreign-currency transactions
Transactions in foreign currencies are translated into the
functional currency at the exchange rates valid on the
transaction dates. Translation differences arising on the
settlement of such transactions or on the translation of
monetary assets and liabilities denominated in foreign
currencies are recognised in the profit and loss account.
Translation differences that qualify as net investment hedges
are recognised in equity.
Translation differences on debt securities and other monetary
financial assets carried at fair value are included under foreign
exchange gains and losses.Translation differences on non
monetary items such as equity instruments held for trading are
recognised as part of the fair value gains or losses. Translation
differences on available-for-sale non-monetary items are
included in the revaluation reserves reported under'Equity'.
2.13 Interest
Interest income and expenses for all interest-bearing
instruments is recognised in the profit and loss account on
an accrual basis, whereby the effective interest method is
applied. Interest income includes coupons relating to fixed
interest financial assets and financial assets held for trading, as
well as the cumulative premiums and discounts on government
treasury securities and other cash equivalent instruments.
263 Notes to the financial statements of Rabobank
