Contents Introduction Management report Appendices Corporate governance Consolidated Financial Statements Company Financial Statements
2.5 Other financial assets and liabilities designated
at fair value
On initial recognition, certain financial assets (including direct
and indirect investments in venture capital and excluding assets
held for trading) and certain liabilities are included as'Financial
assets and liabilities designated at fair value'where any of the
following criteria are met:
This accounting eliminates or substantially reduces any
inconsistent treatment that would otherwise have arisen upon
measurement of the assets or liabilities or recognition of
profits or losses on the basis of different accounting policies;
The assets and liabilities belong to a group of financial assets
and/or financial liabilities that are managed and assessed on
the basis of their fair value in accordance with a documented
risk management or investment strategy; or
The financial instrument contains an embedded derivative,
unless the embedded derivative does not significantly affect
the cash flows or if it is evident that separate recognition is
not required.
Interest earned and due on such assets and liabilities is
recognised as interest income and expense, respectively.
Other realised and unrealised gains and losses on the
revaluation of these financial instruments to fair value are
included under'Gains/ (losses) on financial assets and liabilities
at fair value through profit or loss'except for fair value changes
due to own credit risk of financial liabilities designated at fair
value. These fair value changes aftertax are presented in other
comprehensive income under line item 'Fair value changes due
to own credit risk on financial liabilities designated at fair value'.
2.6 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 gain') is accounted
for immediately under'Gains/ (losses) on financial assets and
liabilities at fair value through profit or loss'where the valuation
method is based on observable inputs from active markets. In
all other cases, the entire day 1 gain is deferred and accounted
for as 'Other liabilities'. 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).
2.7 Available-for-sale financial assets
Financial assets are classified on the date of acquisition, with
the classification dependent on the purpose for which the
investments are acquired. Financial assets are classified as available
for sale if they are intended to be held for an indefinite period of
time and could be sold for liquidity purposes or in response to
changes in interest rates, exchange rates or share prices.
Available-for-sale financial assets are initially recognised at fair
value, including transaction costs, based on quoted bid prices
or at values derived from cash flow models.The fair values
of unlisted equity instruments are estimated on the basis of
appropriate price/earnings ratios, adjusted to reflect the specific
circumstances of the respective issuer. Any unrealised gains
and losses from changes in the fair value of available-for-sale
financial assets are recognised in other comprehensive income
unless they relate to amortised interest or exchange rate
differences on monetary assets, in which case they are taken
through profit and loss. As and when such financial assets are
disposed of, the adjustments to fair value are transferred to the
statement of Income.
Debt instruments are impaired if there are objective
indications that the fair value has fallen to such a degree
that it is reasonable to assume that the value will not recover
to the carrying amount in the foreseeable future. On each
reporting date, management determines whether there are
objective indications of impairment of available-for-sale assets.
Examples of objective evidence of impairment are:
Significant financial difficulties on the part of the issuer;
Default in making interest or redemption payments;
Disappearance of active markets for the financial asset due
to financial difficulties.
In the event of impairment, the cumulative loss is determined
as the difference between cost and current fair value, reduced
by any previously recognised impairment.This is transferred
from the revaluation reserves in other comprehensive
income to the statement ofincome. If the impairment ofa
debt instrument subsequently reverses and the reversal can
objectively be attributed to an event after the impairment,
the impairment is reversed through the statement ofincome.
Equity instruments are impaired if the cost price (initial
recognition) is unlikely to be recovered in the long term or
if there is a significant or prolonged decline in the fair value
below its cost. The recoverable amount and/or fair value of
investments in unlisted equity instruments are determined
using generally accepted valuation methods.The recoverable
amount of listed financial assets is determined on the basis
of market value. Impairment of equity instruments is never
subsequently reversed through the statement ofincome.
2.8 Repurchase agreements and reverse repurchase
agreements
Financial assets that are sold subject to related sale and
repurchase agreements are included in the financial statements
under'Financial assets held for trading'or'Available-for-sale
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