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.
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