Contents Foreword Management report Corporate governance
is evidenced. Rabobank applies certain practices to evidence
that the requirement of 'intention to settle net' is met. In April
2016, an Agenda Rejection Notice was published by the IFRS
Interpretations Committee ('IFRIC') on balance sheet offsetting
of notional cash pooling products. The issue relates to the
question whether certain cash pooling arrangements would
meet the requirements for offsetting under IAS 32. The IFRIC
provided further clarification that the transfer of balances
into a netting account should occur at the period end to
demonstrate an intention to settle on a net basis. As a result
of the Agenda Rejection Note, the comparable figures have
been adjusted by reversing the netting that took place in
2015. The Loans and advances to customers and Deposits
from customers have been increased by EUR 5,466 million per
December 2015. In the second half 2016 Rabobank re-assessed
its cashpooling contracts also in light of the IFRIC clarification
and the IFRS requirements around unit of accounts. This analysis
showed that the contracts qualify for unit of accounts
accounting. The amount involved as per 31 December 2016 is
EUR 4,989 million.
Structured inventory products have been reclassified from
other assets to loans to customers as per 31 December 2015
for an amount of 418. This change results in a better alignment
with the extent to which the risks and rewards of the underlying
commodities are transferred.
As per 1 January 2016, it is no longer allowed to draw up the
statement of income for OOBs (organisaties van openbaar
belang) in accordance with Section 402, Book 2 of the Dutch
Civil Code.
Going concern
The Executive Board considers it appropriate to adopt the
going concern basis of accounting in preparing these financial
statements.
Judgements and estimates
In preparing these financial statements management applied
judgement with respect to estimates and assumptions that
affect the amounts reported for assets and liabilities, the
reporting of contingent assets and liabilities on the date of the
consolidated financial statements, and the amounts reported
for income and expenses during the reporting period.
The accounting principles listed below require critical estimates
that are based on assessments and assumptions. Although
management estimates are based on the most careful
assessment of current circumstances and activities on the basis
of available financial data and information, the actual results
may deviate from these estimates.
Consolidated Financial Statements Company Financial Statements Pillar 3
Loan impairment allowance
Rabobank assesses at each reporting period whether
an impairment loss should be recorded in the income
statement. The impairment methodology for loans and
advances results in the recognition of:
Specific allowances for individual impaired loans;
Collective allowances for:
- Retail exposures if it is not economically justified to
recognise the loss on an individual basis;
- Incurred but not reported losses.
The detailed approach for each category is further explained
in section 2.15 'Loans and advances to customers and banks'.
Loan impairment allowances are recognised where there
is objective evidence that not all amounts due under the
original terms of the contract may be recoverable. Determining
an allowance requires a significant degree of judgement, based
on management's evaluation of the risks in the loan portfolio,
the current economic circumstances, credit losses in previous
years, and developments in financial credits, business sectors,
business concentrations and geopolitical factors. Changes in
management judgement formulation and further analyses
may lead to changes in the magnitude of loan impairment
allowances over time. Uncertainty is inherent in determining
objective evidence of reduced creditworthiness and in
determining the magnitude of the recoverable amounts and
these involve assessing a variety of assumptions and factors
regarding the creditworthiness of borrowers, the expected
future cash flows and the value of collateral.
See section 7 'Loans and advances to banks' and section 11
'Loans and advances to customers' of the consolidated financial
statements for an analysis of the loan impairment allowances
on loans to customers and banks.
Fair value of financial assets and liabilities
Information regarding the determination of the fair value
of financial assets and liabilities is included in paragraph 4.9
'Fair value of financial assets and liabilities' and paragraph 10
'Derivatives' of the consolidated financial statements.
Impairment of goodwill, other intangible assets and
investments in associates and joint ventures
Goodwill and other intangible assets are assessed for
impairment - at least once a year - by comparing the
recoverable value to the carrying amount, while investments
in associates and joint ventures are tested for impairment
when specific triggers are identified. The determination of the
recoverable amount in an impairment assessment of these
assets requires estimates based on quoted market prices,
prices of comparable businesses, present value or other
valuation techniques, or a combination thereof, necessitating
259 Notes to the company financial statements