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Contents Foreword Management report Corporate governance
Consolidated Financial Statements
Company Financial Statements
Pillar 3
The amount in total gains or losses recognised in the income
statement for the period relating to the assets and liabilities
held in Level 3 until the end of the reporting period is given in
the following table.
Fair value changes for financial instruments in level 3
recognised in profit or loss
in millions of euros
Instruments
held at the end
of reporting
period
Instruments
not held
anymore at
the end of
reporting
period
Total
On 31 December 2016
Assets
Financial assets held for trading
(10)
(1)
(11)
Financial assets designated
at fair value
(37)
17
(20)
Derivatives
229
191
420
Available-for-sale financial assets
(1)
19
18
Liabilities
Derivatives
238
289
527
Financial liabilities designated at
fair value
(1)
(1)
On 31 December 2015
Assets
Financial assets held for trading
1
(1)
Financial assets designated at
fair value
168
12
180
Derivatives
95
345
440
Available-for-sale financial assets
28
115
143
Liabilities
Derivatives
119
351
470
Financial liabilities designated at
fair value
3
(1)
2
Recognition of Day 1 gains
When using fair value accounting at the inception of a financial
instrument, any positive difference between the transaction
price and the fair value (referred to as 'day 1 gains') is accounted
for in the statement of income where the valuation method
is based on observable inputs from active markets. In all
other cases, the entire day 1 gain is deferred and after initial
recognition the deferred day 1 gain is recognised as a gain
to the extent it results from a change in a factor (including
time effects). The table below summarises the changes of the
deferred day 1 gains during the year:
Provision for Day 1 gains
In millions of euros
2016
2015
Opening balance
3
6
Additions - -
Amortisation
(3)
(2)
Changes
(1)
Closing balance
3
4.10 Legal and arbitration proceedings
Rabobank Group is active in a legal and regulatory environment
that exposes it to substantial risk of litigation. As a result,
Rabobank Group is involved in legal cases, arbitrations and
regulatory proceedings in the Netherlands and in other
countries, including the United States. The most relevant legal
and regulatory claims which could give rise to liability on the
part of Rabobank Group are described below. If it appears
necessary on the basis of the applicable reporting criteria,
provisions are made based on current information; similar types
of case are grouped together and some cases may also consist
of a number of claims. The estimated loss for each individual
case (for which it is possible to make a realistic estimate) is not
reported, because Rabobank Group feels that information of
this type could be detrimental to the outcome of individual
cases.
When determining which of the claims is more likely than
not (i.e., with a likelihood of over fifty percent) to lead to
an outflow of funds, Rabobank Group takes several factors
into account. These include (but are not limited to) the type
of claim and the underlying facts; the procedural process and
history of each case; rulings from legal and arbitration bodies;
Rabobank Group's experience and that of third parties in
similar cases (if known); previous settlement discussions; third-
party settlements in similar cases (where known); available
indemnities; and the advice and opinions of legal advisers and
other experts.
The estimated potential losses, and the existing provisions,
are based on the information available at the time and are
for the main part subject to judgements and a number of
different assumptions, variables and known and unknown
uncertainties. These uncertainties may include the inaccuracy
or incompleteness of the information available to Rabobank
Group (especially in the early stages of a case). In addition,
assumptions made by Rabobank Group about the future
rulings of legal or other instances or the likely actions or
attitudes of supervisory bodies or the parties opposing
Rabobank Group may turn out to be incorrect. Furthermore,
estimates of potential losses relating to the legal disputes
are often impossible to process using statistical or other
quantitative analysis instruments that are generally used to
make judgements and estimates. They are then subject to a still
greater level of uncertainly than many other areas where the
group needs to make judgements and estimates.
The group of cases for which Rabobank Group determines
that the risk of future outflows of funds is higher than fifty
percent varies over time, as do the number of cases for which
the bank can estimate the potential loss. In practice the end
results could turn out considerably higher or lower than the
estimates of potential losses in those cases where an estimate
was made. Rabobank Group can also sustain losses from legal
204 Rabobank Annual Report 2016