NOTES Major differences in accounting, measurement and consolidation methods: IAS/IFRS compared with HGB In terms of their character, securities in the availablefor-sale portfolio are held as part of the liquidity reserve according to HGB and have thus to be classified as current assets. Under HGB rules, the strict lower-of-cost-or-mar- The objective of financial statements based on IAS/IFRS is ket principle applies in the measurement of such securi- to provide information on the group’s asset and financial ties portfolios. In accordance with German accounting position and its earnings performance and also changes rules, claims not originated by the Bank have to be recog- in these over time. By contrast, financial statements based nized at amortized cost, less write-downs. on HGB are primarily geared to investor protection and are also influenced by tax-law provisions due to their Hedge accounting authoritative character for the balance sheet prepared for Pursuant to IAS 39, hedges may be created between a tax purposes. Given these different objectives, the follow- hedged item and a derivative financial instrument for ing major differences in accounting and measurement hedge accounting purposes. Hedged items may be finan- methods arise between IAS/IFRS and HGB: cial assets (e.g. claims or securities) and financial commitments (e.g. liabilities or bonds issued). Both for fair value Provision for possible loan losses hedges and for cash flow hedges, detailed rules exist Provision for possible loan losses is shown as a charge on which call for the fair value of a derivative hedging instru- the assets side. Hidden reserves pursuant to Art. 340f, ment to be shown in gross form. Under German account- HGB may not be formed in IAS/IFRS financial statements. ing principles, however, hedging transactions are taken account of by means of the lower-of-cost-or-market prin- Trading portfolios and derivative financial instruments ciple, applied in measuring the hedged items. In accordance with IAS 39, financial assets held for dealing purposes (Assets held for dealing purposes) and cer- Intangible assets developed in-house and goodwill tain financial liabilities (Liabilities from dealing activities) Whereas intangible assets developed in-house may not as well as derivative financial instruments not held for be recognized under HGB rules, IAS/IFRS requires this, if trading purposes (hedging derivatives) always have to be certain conditions are fulfilled. Goodwill, resulting from measured at fair value. Depending on how these financial full consolidation, which in accordance with HGB provi- instruments are classified, all gains and losses are either sions may be set off directly against retained earnings in shown in the income statement or under Equity with no the consolidated financial statements, has to be recog- effect on net profit, regardless of whether they are real- nized as an asset and amortized under IAS rules. ized or not. Under HGB rules, however, unrealized gains may not be recognized. Pension commitments In accordance with IAS, pension commitments are calcu- Investments and securities portfolio lated using the projected-unit-credit method. The calcu- Investments and securities as well as available-for-sale lation takes account of future commitments, reflecting claims not originated by the Bank are measured at fair future increases in pay and pensions and also inflation. value in accordance with IAS 39 or, insofar as this cannot The discount factor under IAS/IFRS rules is related to the be reliably ascertained, they are shown at cost. The result long-term interest rate. By contrast, HGB accounting is of measurement has no effect on income and is shown in regularly geared to the respective valid income-tax regu- the Revaluation reserve. Under German accounting prin- lations, in particular the normal entry-age method. ciples, investments are part of fixed assets and have to be shown at cost. If their value is likely to be permanently impaired, they have to be written down at their lower value. 105 106 NOTES Other provisions applied, changes attributable to the investments and In accordance with IAS/IFRS, provisions may only be securities portfolio and also effective portions of the gains formed if they relate to an external commitment. Provi- and losses on cash flow hedges have to be shown in sions for expenses, possible under HGB, for the purpose equity with no effect on net income. This type of income- of recognizing future outlays as expenses in the past neutral accounting is not found in German accounting financial year are not permitted. IAS/IFRS rules require rules. Under IAS/IFRS rules, treasury shares held on the more concrete details than HGB as regards the formation balance-sheet date are deducted from equity; the gains of provisions for restructuring, covering among other and losses attributable to treasury shares are set off things the development, adoption and announcement of a against reserves with no effect on income. Pursuant to detailed plan. HGB rules, a reserve for treasury shares has to be formed equivalent in amount to the treasury shares shown on the Deferred tax assets and liabilities assets side of the balance sheet, while measurement and Under IAS/IFRS rules, deferred tax assets and liabilities trading results are reflected in the income statement. are calculated with reference to the balance sheet. Advantages deriving from tax loss carry-forwards have to be Trust business capitalized if it can be assumed that they will be used at a Trust business, which appears in the balance sheet in HGB later date. The income-tax rates employed to measure the accounting, does not appear there under IAS/IFRS rules. differences between the values assigned in the balance sheet and those for tax purposes are future-oriented. No Tax valuation netting occurs. By contrast, the HGB approach to recog- In line with the so-called reverse authority principle, valu- nizing deferred tax assets and liabilities is geared to the ation principles are applied under HGB rules that comply income statement and currently valid income-tax rates with tax-law provisions. Financial statements prepared are applied. The differences in approach tend to make under IAS/IFRS rules may not contain special depreciation deferred taxes more significant under IAS/IFRS rules. and valuation principles that are permissible under tax regulations insofar as they deviate from valuations Equity required by IAS/IFRS rules. As from the 2003 financial In IAS financial statements, minority interests appear as a year, this ban also applies to consolidated financial state- separate balance-sheet item. In accordance with Art. 307, ments prepared pursuant to HGB, due to the legal HGB, interests held by other shareholders have to be changes produced by the German legislation on trans- shown separately within equity. With the rules of IAS 39 parency and publications.
