About this Report Chairman's Foreword Corporate Management Report Appendices Governance Consolidated Financial Company Financial Statements Statements will be amortized over the length of the lease and the financial liability will be measured at amortized cost. Lessor accounting remains substantially the same as it was under IAS 17. Rabobank has finished its IFRS 16 program to collect all lease contracts of Rabobank and to ensure implementation of IFRS 16 calculations. Rabobank will apply the modified retrospective approach which retains the prior period figures as reported under the previous standard and recognizes the cumulative effect of IFRS 16 as an increase to the opening balance of equity as per January 1, 2019. The introduction of IFRS 16 does not have an impact on equity of Rabobank and will lead to an increase of assets and liabilities as per January 1, 2019 for an amount of approximately EUR 610 million. Other Amendments to IFRS Minor amendments have been made to IAS 28, IAS 19, IFRS 9, IFRIC 23, and the issue of the Annual Improvements to IFRS Standards 2015-2017 Cycle. Although these new requirements are currently being analyzed and their impact is not yet known, Rabobank does not expect that the implementation of these amendments will significantly affect profit or equity. New Standards Issued by the International Accounting Standards Board (IASB) But Not Yet Endorsed by the European Union IFRS 17 Insurance Contracts In May 2017, the IASB issued 'IFRS 17 Insurance Contracts' with an effective date of annual periods beginning on or after January 1,2021IFRS 17 establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts within the scope of the standard. The objective of IFRS 17 is to ensure that an entity provides relevant information that faithfully represents those contracts. This information gives a basis for users of financial statements to assess the effect that insurance contracts have on the entity's financial position, financial performance and cash flows. Rabobank is currently assessing the impact of this standard. Changes in Accounting Principles and Presentation Classification From January 12018, Rabobank classifies its financial assets in the following measurement categories: those to be measured subsequently at fair value (either through OCI, or through profit or loss), and those to be measured at amortized cost The classification depends on: 1. Business model assessment; Rabobank assesses its business models at a level that reflects how financial assets are managed seen from a strategic point of view. Rabobank considers all relevant evidence available at the assessment date, such as how the performance of the business model and the financial assets held in that model is evaluated and reported and how the risks affecting the performance of the business model are managed. This assessment results in the following business models: FHold to collect: where the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; or Flold to collect and sell: where the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; or Other business model. 2. Contractual cash flow assessment; Rabobank assesses whether the cash flows of the financial assets are solely payment of principal and interest on the principal amount outstanding (SPPI test) and, hence, consistent with basic lending arrangements. In basic lending arrangements, the consideration for the time value of money and credit risk are typically the most significant elements of interest. Flowever in such arrangements, interest may also include consideration for other basic lending risks (such as liquidity risk) and costs (such as administrative costs) associated with holding financial assets for a particular period oftime. Additionally, interest may include a profit margin consistent with a basic lending arrangement. Measurement At initial recognition, Rabobank measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets measured at fair value through profit or loss are expensed in profit or loss. Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest. Derivative financial instruments are initially recognized and subsequently measured at fair value through profit or loss. Impairment Allowances on Financial Assets The rules included in IFRS 9 governing impairments apply to financial assets at amortized cost and financial assets at fair value through OCI, as well as to lease receivables, contract assets, trade receivables, certain loan commitments and financial guarantees. At initial recognition, an allowance is recognized for the amount of the expected credit losses from possible defaults in the coming 12 months ('12-months expected credit loss' (ECL)). If credit risk Annual Report 2018 - Consolidated Financial Statements 132

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Annual Reports Rabobank | 2018 | | pagina 134