2.2 Consolidated Financial Statements
About this
Report
Chairman's
Foreword
Corporate
Management Report Appendices Governance
Consolidated Financial Company Financial
Statements Statements
different regions. Important variables are gross domestic
product growth, unemployment rates and interest rates. These
forward-looking macroeconomic forecasts require judgment
and are partly based on internal Rabobank research.
Measurement of expected credit losses: The probability of
default (PD) x loss given default (LGD) x exposure at default
(EAD) inputs are used to estimate expected credit losses. These
inputs require estimates in the following way:
PD -The probability of default is an estimate of the
likelihood of default over a given time horizon.
EAD - The exposure at default is an estimate of the
exposure at a future default date, taking into account
expected changes in the exposure after reporting date.
LGD -The loss given default is an estimate of the loss arising
in the case where a default occurs at a given time. It is based
on the difference between the contractual cash flows due
and those that Rabobank would expect to receive,
including cash flows expected from collateral and other
credit enhancements.
Measurement of individually assessed financial asset: For
credit-impaired financial assets that are assessed on an
individual basis, a discounted cash flow calculation is
performed. In many cases, judgment is required for the
estimation of the expected future cash flows and the
weighting of the three scenarios.
Fair Value of Financial Assets and Liabilities
Information regarding the determination of the fair value of
financial assets and liabilities is included in Section 4.9 'Fair value
of financial assets and liabilities' and Section 11 'Derivatives'.
Impairment of Goodwill, Other Intangible Assets and Investments in
Associates and Joint Ventures
Goodwill and other intangible assets are assessed for impairment
- at least once a year - by com paring the recoverable val ue to the
carrying amount, while investments in associates and joint
ventures are tested for impairment when specific triggers are
identified. The determination of the recoverable amount in an
impairment assessment of these assets requires estimates based
on quoted market prices, prices of comparable businesses,
present value or other valuation techniques, or a combination
thereof, necessitating management to make subjective
judgments and assumptions. Because these estimates and
assumptions could result in significant differences to the
amounts reported if underlying circumstances were to change,
these estimates are considered to be critical. The important
assumptions for determining recoverable value of goodwill are
set out in Section 15 and for investments in associates and joint
ventures these are set out in Section 14.
Taxation
Estimates are used when determining the income tax charge and
the related current and deferred tax assets and liabilities. Tax
treatment of transactions is not always clear or certain and, in a
numberof countries, prioryeartax returns often remain open and
subject to tax authority approval for lengthy periods. The tax
assets and liabilities reported are based on the best available
information, and where applicable, on external advice.
Differences between the final outcome and the estimates
originally made are accounted for in the current and deferred tax
assets and liabilities in the period in which reasonable certainty
is obtained.
Other Provisions
In applying IAS 37judgement is involved in determining whether
a present obligation exists and in estimating the probability,
timing and amount of any outflows. More information on
jugements regarding the provision for SME derivatives and the
restructuring provision is included in Section 26 Provisions.
Structured Entities
The consolidation of structured entities is a critical estimate that
requires judgment and is described in Section 53 Structured
entities.
2.2.1 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 overthe 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 unrealized gains and losses on
transactions between and among Rabobank Group and its
subsidiaries are eliminated on consolidation.
Cross-guarantee System
Following approval by the Dutch Central Bank, the cross-
guarantee system (a remnant of the previous cooperative
structure of Rabobank Group) was terminated on December 11,
2018. There are no outstanding, residual and/or contingent
liabilities.
Annual Report 2018 - Consolidated Financial Statements
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