Contents Introduction Management report Appendices Corporate governance Consolidated Financial Statements Company Financial Statements
2.2 Consolidated financial statements
2.2.7 Subsidiaries
The participating interests over which Rabobank has control
are its subsidiaries (including structured entities) and these
are consolidated. Control is exercised over a participating
interest if the investor is entitled to receive variable returns
from its involvement in the participating interest and has the
ability to influence these returns through its control over the
participating interest. The assets, liabilities and profit and loss
of these companies are fully consolidated.
Subsidiaries are consolidated as from the date on which
Rabobank acquires effective control and subsidiaries are
de-consolidated as of the date on which this control is ceded.
Transactions, balances and unrealised gains and losses on
transactions between and among Rabobank Group and its
subsidiaries are eliminated on consolidation.
Internal liability (cross-guarantee system)
Various legal entities belonging to Rabobank Group are
internally liable under an intragroup mutual keep well system.
Under this system the participating entities are bound, in the
event of a lack of funds of a participating entity to satisfy its
creditors, to provide the funds necessary to allow the deficient
participant to satisfy its creditors.The system is a remnant of
Rabobank's previous cooperative structure that was in effect
until 31 December 2015, when the Coöperatieve Centrale
Raiffeisen-Boerenleenbank B.A. and the local member banks
merged into a single legal entity: Coöperatieve Rabobank U.A.
Therefore, it is intended that the system will be terminated in
the course of 2018.
As on 31 December 2017, the remaining participants are:
Coöperatieve Rabobank U.A
Rabohypotheekbank N.V.
De Lage Landen International B.V.
Rabo Factoring B.V. (previously named De Lage Landen Trade
Finance B.V.)
Rabo Lease B.V. (previously named De Lage Landen Financial
Services B.V.)
Rabo Direct Financiering B.V (previously named De Lage
Landen Financiering B.V.)
2.2.2 Investments in associates and joint ventures
Investments in associates and joint ventures are initially
recognised at cost and subsequently accounted for using the
equity method of accounting. Its share of post-acquisition
profits and losses are recognised in the income statement
and its share of post-acquisition movements in reserves
are recognised directly in other comprehensive income.
The cumulative post-acquisition movements are included in
the carrying amount of the investment.
Associates are entities over which Rabobank can exercise
significant influence and in which it generally holds between
20% and 50% of the voting rights but does not have control.
A joint venture is an agreement between one or more parties
under which the parties jointly have control and are jointly
entitled to the net assets under the agreement. Unrealised
profits on transactions between Rabobank and its associates
and joint ventures are eliminated in proportion to Rabobank's
interest in the respective associates and joint ventures.
Unrealised losses are also eliminated unless the transaction
indicates that an impairment loss should be recognised on
the asset(s) underlying the transaction.
Investments in associates include the goodwill acquired.
Where the share of an associate's losses is equal to or exceeds
its interest in the associate, losses are recognised only where
Rabobank has given undertakings to, or made payments on
behalf of, the associate.
2.3 Derivatives and hedging
General
Derivatives generally comprise foreign exchange contracts,
currency and interest rate futures, forward rate agreements,
currency and interest rate swaps and currency and interest rate
options (written or acquired). Derivatives are recognised at fair
value (excluding transaction costs) determined on the basis of
listed market prices (with mid-prices being used for EUR, USD
and GBP derivatives that have a bid-ask range), prices offered
by traders, discounted cash flow models and option valuation
models based on current market prices and contract prices for
the underlying instruments and reflecting the time value of
money, yield curves and the volatility of the underlying assets
and liabilities. Derivatives are included under assets if their
fair value is positive and under liabilities if their fair value is
negative. If their risks and characteristics are not closely related
to those of the underlying non-derivative host contract and
the contract is not classified as at fair value, derivatives that are
embedded in other financial instruments are bifurcated and
measured separately with unrealised profits and losses being
recognised in profit and loss in'Gains/ (losses) on financial
assets and liabilities at fair value through profit or loss'.
Instruments not used for hedging
Realised and unrealised gains and losses on derivatives for
trading purposes are recognised at fair value in 'Gains/ (losses) on
financial assets and liabilities at fair value through profit or loss'.
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