Contents Introduction Management report Appendices Corporate governance Consolidated Financial Statements Company Financial Statements
financial assets', as applicable. The liability to the counterparty
is included under'Deposits from banks'or'Deposits from
customers', as applicable.
Financial assets acquired under reverse sale and reverse
repurchase agreements are recognised as 'Loans and advances
to banks'or'Loans and advances to customers', as applicable.
The difference between the sales and repurchasing prices is
recognised as interest income/expense over the term of the
agreement using the effective interest method.
2.9 Securitisations and (de)recognition of financial
assets and liabilities
Recognition of financial assets and liabilities
Purchases and sales of financial assets and liabilities classified as
fair value through profit or loss and available-for-sale financial
assets which are required to be delivered within a regulatory-
prescribed period or in accordance with market conventions
are recognised on the transaction date. Financial instruments
carried at amortised cost are recognised on the settlement date.
Securitisations and derecognition of financial assets and
liabilities
Rabobank securitises, sells and carries various financial assets.
Those assets are sometimes sold to a special purpose entity
(SPE) which then issues securities to investors. Rabobank has
the option of retaining an interest in these assets in the form
of subordinated interest-only strips, subordinated securities,
spread accounts, servicing rights, guarantees, put and call
options or other constructions.
A financial asset (or a portion thereof) is derecognised where:
The rights to the cash flows from the asset expire;
The rights to the cash flows from the asset and substantially
all the risks and rewards of ownership of the asset are
transferred;
A commitment has been made to transfer the cash flows
from the asset and a substantial portion of the risks and
rewards have been transferred; or
Not substantially all the risks and rewards are transferred
but where control over the asset is not retained.
A financial liability or a part thereof is derecognised if it ceases
to exist, i.e. after the contractual obligation has been fulfilled or
cancelled or has expired. Continuing involvement is recognised
if Rabobank neither retains nor transfers substantially all the risks
and rewards and control has retained.The asset is recognised to
the extent of Rabobanks continuing involvement in it.
Where a transaction does not meet these conditions for
derecognition, it is recognised as a loan for which security has
been provided. To the extent that the transfer of a financial
asset does not qualify for derecognition, Rabobank's contractual
rights are not separately recognised as derivatives if recognition
of these instruments and the transferred asset, or the
liability arising from the transfer, were to result in the double
recognition of the same rights and obligations.
Profits and losses on securitisations and sale transactions
depend partly on the carrying amounts of the assets
transferred. The carrying amounts of these assets are allocated
to the interests sold and retained using the relative fair values of
these interests on the date of sale. Any gains and losses are
recognised through profit and loss atthe time of transfer. The fair
value of the interests sold and retained is determined on the
basis of listed market prices or as the present value of the future
expected cash flows based on pricing models that involve a
number of assumptions regarding, for Instance, credit losses,
discount rates, yield curves, payment frequency and otherfactors.
2.10 Cash and cash equivalents
Cash equivalents are highly liquid short-term assets held at
central banks to meet current cash obligations rather than
for investment or other purposes.These assets have terms of
less than 90 days from inception. Cash equivalents are readily
convertible to known amounts of cash and are subject to
insignificant risk of changes in value.
2.11 Offsetting financial assets and liabilities
Where there is legal right to offset recognised amounts and it is
intended to settle the expected future cash flows on a net basis
or to realise the asset and settle the liability simultaneously,
financial assets and liabilities are offset and the net amount
is recognised in the statement of financial position.This
relates predominantly to derivatives and reverse repurchase
agreements.The offsetting oftaxes is addressed in section 2.24.
2.12 Foreign currency
Foreign entities
Transactions and balances included in the financial statements
of individual entities within Rabobank Group are reported in the
currency that best reflects the economic reality of the individual
entity's underlying operating environment (the functional
currency).
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