Contents Foreword Management report Corporate governance
review. For finished properties, the net realisable value is
generally equal to the direct realisable value, which is mostly
determined by means of an internal or external appraisal.
A downward value adjustment is recognised if the carrying
value exceeds the expected direct realisable value, to the extent
that the difference must be borne by Rabobank.
2.20 Leasing
Rabobank as lessee
Leases relating to property and equipment under which
virtually all risks and rewards of ownership vest with Rabobank
are classified as finance leases. Finance leases are capitalised
at the inception of the lease at the lower of the fair value of
the leased assets and the present value of the minimum lease
payments. 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
statement of income over the term of the lease. A tangible fixed
asset acquired under a lease agreement is depreciated over the
shorter of the useful life of the asset and the term of the lease.
Leases under which a considerable portion of the risks and
rewards of ownership are retained by the lessor are classified as
operating leases. Operating lease payments (less any discounts
granted by the lessor) are charged to the statement of income
on a linear basis over the term of the lease.
Rabobank as lessor
Finance leases
A finance lease is recognised as a receivable under 'Loans and
advances to banks' or 'Loans and advances to customers', as
applicable, at an amount equal to the net investment in the
lease. The net investment in the lease is the present value of
the nominal minimum lease payments and the unguaranteed
residual value. The difference between the gross investment
and the net investment in the lease is recognised as unearned
finance income. Lease income is recognised as interest income
over the term of the 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 write-downs and discounts
granted to lessees) is recognised under 'Other net operating
income' on a linear basis over the term of the lease.
Consolidated Financial Statements Company Financial Statements Pillar 3
2.21 Provisions
Provisions are recognised for obligations (both legal and
constructive) arising as a result of a past event where it is
probable that an outflow of resources will be required to
settle the obligation and a reliable estimate can be made of
the amount of the obligation. If Rabobank expects a provision
to be reimbursed, for example under an insurance policy, the
reimbursement is recognised as a separate asset but only if the
reimbursement is virtually certain. The provisions are carried
at the discounted value of the expected future cash flows.
The additions to and releases of provisions are recognised in the
statement of income under 'Other administrative expenses'.
Restructuring
Restructuring provisions comprise payments under redundancy
schemes and other costs directly attributable to restructuring
programmes. These costs are recognised during the period in
which the legal or actual payment obligation arises, a detailed
plan has been prepared for redundancy pay and there are
realistic expectations among the parties concerned that the
reorganisation will be implemented.
Tax and legal issues
The provision for tax and legal issues is based on the best
estimates available at the end of the reporting period, taking
into account legal and tax advice. The timing of the cash
outflow of these provisions is uncertain because the outcome
of the disputes and the time involved are unpredictable.
Other provisions
Other provisions include provisions for onerous contracts, credit
guarantees and obligations under the terms of the deposit
guarantee scheme.
2.22 Employee benefits
Rabobank has various pension plans in place based on the local
conditions and practices of the countries in which it operates.
In general, the plans are financed by payments to insurance
companies or to trustee administered funds determined by
periodic actuarial calculations. A defined benefit pension plan is
one that incorporates an obligation to pay an agreed amount of
pension benefit, which is usually based on several factors such
as age, number of years' service and remuneration. A defined
contribution plan is one in which fixed contributions are paid
to a separate entity (a pension fund) with no further legal or
constructive obligation on the part of the employer should
the fund have insufficient assets to settle its obligations to
employee-members of the plan.
185 Notes to the consolidated financial statements
