Contents Foreword Management report Corporate governance
period of the year in which the employee's services are received
and the remaining three years of the vesting period (i.e.
over four years). The liability is recognised in 'Other liabilities'.
The accounting treatment of payments based on equity
instruments is disclosed in Paragraph 2.23.
2.23 Equity instrument-based payments
For certain identified staff, remuneration for services
rendered is settled in the form of cash payments based on
equity instruments that are similar to, and have the same
characteristics as, Rabobank Certificates. The costs of the
services received are based on the fair value of the equity
instruments on the award date and are restated annually to
fair value at the time. The costs related to the award of equity
instruments during the period of the employee's contract are
included in staff costs in the statement of income over the
period of the year of award and the remaining three years of the
vesting period of the equity instruments (i.e. over four years).
The liability is recognised in other liabilities.
2.24 Tax
Current tax receivables and payables are offset where there is
a legally enforceable right to offset and where simultaneous
treatment or settlement is intended. Deferred tax assets and
liabilities are offset where there is a legally enforceable right to
offset and where they relate to the same tax authority and arise
within the same taxable entity.
Provisions are made, using the liability method, for deferred
tax liabilities arising on temporary differences between the tax
bases of assets and liabilities and their carrying amounts for
financial reporting purposes. These temporary differences arise
primarily on depreciation of tangible fixed assets, revaluation
of certain financial assets and liabilities (including derivatives),
provisions for pensions and other post-employment benefits,
provisions for loan losses and other impairment, tax losses
and fair value adjustments to net assets acquired in business
combinations. Deferred income tax assets and liabilities
are measured at the tax rates that have been enacted or
substantively enacted as at the reporting date.
Deferred tax assets are recognised to the extent that it is
probable that future taxable profits will be available against
which the losses can be utilised.
Provisions are made in respect of taxable temporary differences
associated with investments in subsidiaries, associates and
interests in joint ventures, unless the timing of the reversal of
the temporary differences is within Rabobank's control and it is
probable that the temporary differences will not reverse in the
foreseeable future.
Consolidated Financial Statements Company Financial Statements Pillar 3
Taxes on profit are calculated in accordance with the tax
legislation of the relevant jurisdictions in which Rabobank
operates and are recognised as an expense in the period in
which the profit is realised. The tax effects of loss carry forwards
are recognised as an asset if it is probable that future taxable
profits will be available against which the losses can be utilised.
Deferred tax assets and liabilities are recognised on the
revaluation of available-for-sale financial assets and cash flow
hedges that are taken directly to other comprehensive income.
When realised, they are recognised in the income statement
at the same time as the respective deferred gain or loss
is recognised.
2.25 Deposits from banks, deposits from customers
and debt securities in issue
These borrowings are initially recognised at fair value, being
the issue price less directly allocable and non-recurring
transaction costs, and thereafter at amortised cost including
transaction costs.
Own debt instruments that are repurchased are derecognised,
with the difference between the carrying amount and the
consideration paid being recognised in the income statement.
2.26 Rabobank Certificates
The proceeds of the issue of Rabobank Certificates are available
to Rabobank in perpetuity and are subordinate to all liabilities
and to the Trust Preferred Securities and the Capital Securities.
As the payment of distributions is wholly discretionary, the
proceeds received and dividends paid on them are recognised
in equity.
2.27 Capital Securities
As there is no formal obligation to (re)pay the principal or to pay
a dividend, the Capital Securities are recognised as 'Equity' and
dividends paid on these instruments are recognised directly
in equity.
2.28 Financial guarantees
Financial guarantee contracts require the issuer to compensate
the holder for losses incurred when the debtor fails to meet
its obligations under the terms of the related debt instrument.
The guarantees are initially recognised at fair value and
subsequently measured at the higher of the discounted best
estimate of the obligation under the guarantee and the amount
initially recognised less cumulative amortisation.
268 Rabobank Annual Report 2016