2.7 Financial Assets at Fair Value Through
Other Comprehensive Income
2.8 Repurchase Agreements and Reverse
Repurchase Agreements
2.9 Securitizations and (De)Recognition of
Financial Assets and Liabilities
About this
Report
Chairman's
Foreword
Corporate
Management Report Appendices Governance
Consolidated Financial Company Financial
Statements Statements
deferred and accounted for as 'Other liabilities' or 'Other assets'.
After initial recognition the deferred day one gain/ loss is
recognized as a gain/ loss to the extent it results from a change
in a factor (including time effects).
Debt instruments that are held for collection of contractual cash
flows and for selling the financial assets, where the assets' cash
flows represent solely payments of principal and interest, are
measured at fair value through other comprehensive income and
presented as 'Financial assets at fair value through other
comprehensive income'.
Financial assets at fair value through other comprehensive
income are initially recognized atfair 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.
Movements in the carrying amount are taken through OCI, except
for the recognition ofimpairmentgainsor losses, interest income
and foreign exchange gains and losses which are recognized in
profit or loss. When the financial asset is derecognized, the
cumulative gain or loss previously recognized in OCI is reclassified
from equity to profit or loss. Interest from these financial assets is
included in net interest income using the effective interest rate
method. Impairment losses are included in 'Impairment charges
on financial assets' in the statement of income.
Where Rabobank has elected to present fair value gains and losses
on equity investments in OCI, there is no subsequent
reclassification of fair value gains and losses to profit or loss
following the derecognition of the investment. Dividends from
such investments continue to be recognized in profit or loss as
other income when Rabobank's right to receive payments is
established.
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 'Financial assets at fair
value through other comprehensive income', as applicable. The
liability to the counterparty is included under 'Deposits from
credit institutions' or 'Deposits from customers', as applicable.
Financial assets acquired under reverse sale and reverse
repurchase agreements are recognized as 'Loans and advances
to credit institutions' or 'Loans and advances to customers', as
applicable. The difference between the sales and repurchasing
prices is recognized as interest income/expense overthe term of
the agreement using the effective interest method.
Recognition of Financial Assets and Liabilities
Purchases and sales of financial assets and liabilities classified as
fair value through profit or loss and financial assets at fair value
through profit or loss which are required to be delivered within a
regulatory-prescribed period or in accordance with market
conventions are recognized on the transaction date. Financial
instruments carried at amortized cost are recognized on the
settlement date.
Securitizations and Derecognition of Financial Assets and Liabilities
Rabobank securitizes, 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 derecognized 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 contractual obligation is assumed to transfer the cash flows
from the asset and substantially all the risks and rewards have
been transferred; or
Substantially all the risks and rewards are neither transferred
nor retained but where control over the asset is not retained.
A financial liability or a part thereof is derecognized if it ceases to
exist, i.e. after the contractual obligation has been fulfilled or
cancelled or has expired. Continuing involvement is recognized
if Rabobank neither retains nor transfers substantially all the risks
and rewards and control has retained. The asset is recognized to
the extent of Rabobanks continuing involvement in it.
Where a transaction does not meet these conditions for
derecognition, it is recognized as a loan for which security has
been provided. To the extent that the transfer of a financial asset
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