Contents Foreword Management report Corporate governance Consolidated Financial Statements Company Financial Statements Pillar 3
Changes in the fair value of derivatives that are designated as
fair value hedges and are effective in terms of the hedged risks
are recognised in the statement of income in 'Gains/ (losses) on
financial assets and liabilities at fair value through profit or loss',
together with the corresponding changes in the fair values of
the assets or liabilities hedged.
As and when the hedge no longer meets the criteria for
hedge accounting (applying the fair value hedge model), the
cumulative adjustment to the fair value of a hedged interest-
bearing financial instrument is amortised through profit and
loss over the relevant interest repricing period.
Hedges of net investments in foreign operations are measured
at fair value, with changes in the fair value (to the extent that
they are effective) being recognised in other comprehensive
income. Changes in the hedged equity instrument resulting
from exchange-rate fluctuations are also recognised in other
comprehensive income. Gains and losses accumulated in other
comprehensive income are reclassified to profit or losses when
the equity instrument is disposed of.
Changes in the fair value of derivatives that are designated (and
qualify) as cash flow hedges and that are effective in relation
to the hedged risks are recognised in the hedging reserve
included in other comprehensive income (see Section 10).
Ineffective elements of the changes in the fair value of
derivatives are recognised in the statement of income.
If a forecast transaction or a recognised liability results in the
recognition of a non-financial asset or liability, any deferred
profits or losses included in other comprehensive income are
transferred to the initial carrying amount (cost) of the asset or
liability. In all other cases, deferred amounts included in other
comprehensive income are taken to the statement of income
as income or expense in the periods in which the hedged
recognised liability or the forecast transaction was recognised in
the statement of income.
Although there are economic hedges under Rabobank's
managed risk positions, certain derivative contracts do not
qualify for hedge accounting under the specific IFRS rules and
are therefore treated as derivatives held for trading purposes.
Interest on derivatives held for economic hedging purposes are
shown under interest income, both the receive and pay leg of
the derivative. The fair value of derivatives held for trading and
hedging purposes is disclosed in Section 10.
2.4 Financial assets and liabilities 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 trading margins or they are financial
assets that form part of portfolios characterised by patterns
of short-term profit participation. Financial assets held for
trading are recognised at fair value based on listed bid prices
and all realised and unrealised results therefrom are recognised
under 'Gains/ (losses) on financial assets and liabilities at fair
value through profit or loss'. Interest earned on financial assets
is recognised as interest income. Dividends received from
financial assets held for trading are recognised as 'Gains/ (losses)
on financial assets and liabilities at fair value through profit
or loss'.
Financial liabilities held for trading 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 lending and
repurchasing agreements. Securities sold short are recognised
at fair value on the reporting date.
2.5 Other financial assets and liabilities designated
at fair value
On initial recognition, certain financial assets (including direct and
indirect investments in venture capital and excluding assets held
for trading) and certain liabilities are included as 'Financial assets
and liabilities at fair value through profit or loss' where any of the
following criteria are met:
This accounting 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;
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,
unless the embedded derivative does not significantly affect
the cash flows or if it is evident that separate recognition is
not required.
Interest earned and due on such assets and liabilities is
recognised as interest income and expense, respectively.
Other realised and unrealised gains and losses on the
revaluation of these financial instruments to fair value are
included under 'Gains/ (losses) on financial assets and liabilities
at fair value through profit or loss' except for fair value changes
due to own credit risk of financial liabilities designated at fair
value. These fair value changes after tax are presented in other
comprehensive income under line item 'Fair value changes due
to own credit risk on financial liabilities designated at fair value'.
179 Notes to the consolidated financial statements