BinckBank

Binck Bank


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4. Recognition and measurement of
After initial recognition of the development costs,
assets, equity and liabilities
the asset is carried at cost less any cumulative
amortisation and cumulative impairment losses.
Foreign currency translation
Any such capitalised costs are amortised over the
The consolidated financial statements are in euros,
period in which the expected future economic
this being BinckBank's functional as well as
benefits from the project concerned are to be
presentation currency. Items recognised in the
realised. The carrying amount of the development
financial statements of each entity are measured
costs is tested for impairment annually if the asset
on the basis of the relevant entity's functional
is not yet in use or if there are indications of
currency. Transactions in foreign currencies are
impairment during the year.
translated on initial recognition at the functional
currency's exchange rate on the transaction date.
Property, plant and equipment
Monetary assets and liabilities denominated in
This item comprises assets intended to be used in
foreign currencies are translated at the exchange
the performance of BinckBank's activities in the
rates prevailing on the balance sheet date.
long term. It includes fixtures, fittings and
Differences relating to movements in exchange
equipment in the company's premises and
rates are recognised in the income statement.
computer hardware. These assets are carried at cost
Non-monetary items in foreign currencies
less cumulative depreciation and any cumulative
measured against fair value, are translated at the
impairment losses. Depreciation is based on cost
exchange rate at the moment the fair value is
and calculated on a straight-line basis over the
determined. Currency translation differences on
useful life of the asset. Both the useful life and the
non-monetary items carried at fair value through
residual value of assets are reviewed annually.
profit or loss are likewise recognised in the income
statement.
Tax
Tax assets and liabilities
At the reporting date, the assets and liabilities of
Tax assets and liabilities for current and prior years
entities outside the eurozone are translated into
are carried at the amount expected to be claimed
BinckBank's functional currency (the euro) at the
from or paid to the tax authorities. The tax amount
exchange rate prevailing on the balance sheet date
is computed on the basis of enacted tax rates and
while the income statement is translated at the
applicable tax law.
weighted average exchange rate for the year.
Translation differences are recognised directly in a
Deferred tax
separate component of equity. If a non-eurozone
Deferred tax liabilities are recognised, based on the
entity is sold, the deferred cumulative amount
temporary differences at the balance sheet date
included in equity for the relevant company is
between the tax base of assets and liabilities and
recognised in the income statement.
their carrying amount in these financial
statements. Deferred tax liabilities are recognised
Financial assets and liabilities
for all taxable temporary differences except:
Initial recognition of financial assets in the
· where the deferred tax liability arises on the
balance sheet
initial recognition of goodwill or the initial
Financial assets and liabilities bought and sold in
recognition of an asset or a liability in a
accordance with standard market conventions are
transaction that is not a business combination
recognised at the transaction date of the relevant
and does not affect the operating profit before
purchase or sale. Other financial assets and
tax or the taxable profit;
liabilities are recognised in the balance sheet at the
· in the case of taxable temporary differences
time of acquisition.
connected with investments in subsidiaries and
associates, where BinckBank is able to control
On initial recognition, financial instruments may be
the timing of the reversal of the temporary
assigned to a specific category, their accounting
difference and it is probable that the temporary
treatment being decided at that time. Initial
difference will not reverse in the foreseeable
recognition of financial assets and liabilities is at
future.
fair value, including directly attributable
transaction costs, except for the category which is
Deferred tax assets are recognised for all deductible
carried at fair value through profit or loss, where
temporary differences, unused tax facilities and
the transaction costs are expensed.
unused tax loss carryforwards when it is probable
that taxable profits will be available against which
Derecognition of financial assets and liabilities
the deferred tax asset can be utilised, enabling the
A financial asset (or a component of a financial
deductible temporary differences, unused tax
asset or part of a group of similar financial assets)
facilities and unused tax loss carryforwards to be
is no longer shown in the balance sheet if:
used.
· BinckBank ceases to have a right to the cash
flows from the asset; or
The carrying amount of the deferred tax assets is
· BinckBank retains the right to receive the cash
assessed at the balance sheet date and reduced if it
flows from the asset but has entered into an
is not probable that sufficient taxable profits will
obligation to pay them to a third party in their
be available against which some or all of the
entirety and without significant delay under the
deferred tax asset can be utilised. Unrecognised
terms of a specific contract; or
deferred tax assets are reassessed at the balance
· BinckBank has transferred its rights to receive
sheet date and recognised to the extent that it is
the cash flows from the asset and has either (a)
probable that taxable profits will be available in
largely transferred all risks and rewards of
the future against which the deferred tax asset can
ownership of the asset or (b) not largely
be utilised. Deferred tax assets and liabilities are
transferred all risks and rewards of ownership of
carried at amounts measured at the tax rates
the asset, i.e. retains them, but has transferred
expected to be applicable to the period in which
control of the asset.
the asset is realised or the liability is settled, based
on enacted tax rates and applicable tax law. The tax
If BinckBank has transferred its rights to receive the
on items recognised directly in equity is accounted
cash flows from an asset but has not largely
for directly in equity instead of in the income
transferred all risks and rewards of ownership of
statement. Deferred tax assets and liabilities are
the asset, i.e. retains them, and has not transferred
presented as a net amount if there is a legally
control of the asset, that asset continues to be
enforceable right to set off deferred tax assets
recognised for as long as BinckBank remains
against deferred tax liabilities and the deferred tax
involved with the asset. Financial liabilities cease to
is related to the same taxable entity and the same
be shown in the balance sheet as soon as the
tax authority.
performance relating to the obligation has been
completed or the obligation has been removed or
Other assets
has expired.
Included in this item are other receivables and
Loans and receivables and the related impairment
other investments. The receivables included in this
losses are written off if there is no longer any real
item are carried at amortised cost less any
possibility of being able to recover the outstanding
impairment losses. Other investments are carried at
debt following execution of the collateral.
fair value. If the fair value cannot be measured
reliably, the assets are carried at cost. If reliable fair
Determination of fair value
value measurement cannot be achieved, the reason
The fair value of a financial instrument is based on
is disclosed, where possible along with the
the market price if there is an active market for
bandwidth within which estimates of the fair value
that instrument. Financial assets are carried at the
probably lie.
bid price, financial liabilities are carried at the offer
price and risk off-setting positions are carried at
Work in progress
the mid-price, excluding transaction costs.
Work in progress is carried at the cost of the work
performed, plus a proportion of the expected final
For certain financial assets and liabilities, a quoted
results based on progress and less invoiced
market price is not available. Various valuation
instalments, prepayments and provisions. For
methods are used to obtain a fair value for these
anticipated losses on work in progress, provisions
financial assets and liabilities, ranging from net
are recognised as soon as such losses are identified
present value calculations to valuation models
and are deducted from the cost, any already
taking into account relevant price factors, including
recognised profits also being reversed. The cost
market prices of the underlying instruments
comprises the direct project costs, made up of
referred to, market parameters (volatilities,
direct wage costs, materials, costs of subcontracted
correlations, credit risks) and client behaviour.
work, other direct costs and charges for the hire
BinckBank makes exclusive use of third-party
and maintenance of the equipment used. The
valuation models and does not make any estimates
progress of the project is measured on the basis of
of its own with regard to the inputs used. All the
the cost of the work performed in relation to the
valuation methods employed are internally
expected cost of the project as a whole. Profits are
evaluated and approved. The majority of the data
not recognised on work in progress before it is
used in these valuation methods is validated on a
possible to make a reliable estimate of the final
daily basis. Valuation methods are inherently
result. For each project, the balance of the value of
subjective. Measuring the fair value of certain
the work in progress less invoiced instalments and
financial assets and liabilities is accordingly largely
prepayments is measured. In the case of projects on
dependent on estimates. Valuation methods involve
which the invoiced instalments and prepayments
various assumptions with respect to price factors.
exceed the value of the work, this balance is
The use of other valuation methods and
included in current liabilities instead of current
assumptions might produce estimates of fair values
assets.
that are materially different.
Derivative positions held on behalf of clients
Offsetting of financial assets and liabilities
BinckBank executes derivatives transactions on
Financial assets and liabilities are set off against
behalf of its clients and holds the resultant
each other and the net amount is presented in the
positions in its own name but for the client's
balance sheet when there is a legally enforceable
account and at the client's risk. The positions are
right to set off the amounts and an intention to
recognised at fair value, measured according to the
settle on a net basis, or realise the asset and settle
quoted price at the balance sheet date. Financial
the liability simultaneously.
settlement with the clients concerned in respect of
such transactions and positions is effected
Accounting treatment after initial recognition
immediately. The clients have lodged adequate
The accounting treatment after initial recognition
collateral with BinckBank in the form of cash
depends on the categories described below.
balances, bank guarantees and securities to cover
the risks arising out of the derivative positions held.
Financial assets or financial liabilities at fair value
through profit or loss
Acquisitions and goodwill
An instrument is classified as carried at fair value
All acquisitions are accounted for using the
through profit or loss if it is held for trading
purchase method. The identifiable assets, equity
purposes or if it was designated as such on initial
and liabilities of the acquired company or activities
recognition for one of the following reasons:
are recognised at fair value.
· It eliminates or substantially reduces
inconsistencies in measurement and recognition
On initial recognition, goodwill acquired in a
which would otherwise arise on the recognition
business combination is measured as the difference
of assets or of income and expenses on a
between the cost of the business combination and
different basis.
BinckBank's share of the net fair value of the
· The performance of the financial asset
acquired company's identifiable assets, liabilities
concerned is assessed on the basis of its fair
and contingent liabilities, if positive. Subsequently,
value in accordance with a documented risk
goodwill is carried at cost less any cumulative
management or investment strategy. Reporting
impairment losses. A negative difference between
to management is on the basis of fair value.
cost and fair value is expensed immediately.
· The host contract of the financial instruments
contains one or more embedded derivatives and
Goodwill is tested for impairment annually, or more
the entire contract is recognised at fair value
frequently if events or changes in circumstances
through profit or loss. This is only permissible
indicate that the asset might be impaired. For this
provided:
impairment test, goodwill acquired in a business
the embedded derivative has a significant
combination is allocated to BinckBank's cash-
influence on the contractually agreed cash
generating units or groups of cash-generating units
flows or
that are expected to benefit from the synergy of
it is evident on initial recognition of the
the business combination.
financial instruments that separation of the
embedded derivative is not permissible (e.g.
An impairment loss is measured by assessing the
option of premature settlement at amortised
recoverable amount of the cash-generating unit to
cost).
which the goodwill relates. The recoverable amount
is the higher of an asset's net selling price and its
Derivatives not held on behalf of clients are
value in use. If the recoverable amount is lower
regarded as being held for trading purposes.
than the carrying amount, an impairment loss is
Derivatives are financial instruments requiring only
recognised. Impairment of goodwill is not reversed.
a limited net initial investment or none at all, with
future settlement dependent on the underlying
Necessary adjustments to the fair value of acquired
notional amount of the contract and movements in
assets, equity and liabilities measured at the time
certain rates or prices (e.g. an interest rate or the
of acquisition that are identified before the end of
price of a financial instrument). The financial
the first reporting period after the business
instruments are recognised at fair value. Both
combination result in an adjustment of the
unrealised and realised gains and losses are
goodwill. Necessary adjustments identified at a
recognised directly in the income statement in the
later date are recognised through profit or loss.
result on investments.
Gains and losses on the disposal of a company or
activity are measured as the difference between
Available-for-sale financial assets
the proceeds from disposal and the carrying
Available-for-sale financial assets are those
amount of the company or activity, including
financial assets that are designated as being
goodwill and currency translation reserve.
available for sale or are not included in one of the
above categories. After initial recognition,
Impairment of assets
available-for-sale financial assets are measured at
The carrying amount of BinckBank's assets is tested
fair value. Any gain or loss is shown, net of tax, as a
at each balance sheet date in order to determine
separate component of equity until the investment
whether there are indications of impairment. If so,
is derecognised or determined to be impaired. At
the recoverable amount of the asset is estimated.
such time, the cumulative gain or loss previously
The recoverable amount is the higher of an asset's
shown in equity is recognised in the income
net selling price and its value in use. An impairment
statement in the result on investments.
loss is recognised if the carrying amount of an asset
or cash-generating unit exceeds the recoverable
Loans and receivables
amount.
Loans and receivables are financial assets with
fixed or determinable payments that are not
Customer deposits
quoted in an active market. After initial recognition
Savings comprise the balances on savings accounts
of personal banking customers. Savings are
they will be valued at amortised cost, using the
measured at fair value on initial recognition,
effective interest method. Gains and losses are
including transaction costs incurred. Savings are
recognised in the income statement when the
subsequently carried at amortised cost. Any
loans and receivables are derecognised or impaired.
difference between the net amount deposited and
the amount repayable, calculated using the
Held-to-maturity financial assets
effective interest method, is recognised in the
Financial assets with fixed or determinable
income statement under the heading of interest
payments and a fixed maturity date are designated
expense over the term to maturity of the accounts
as investments to be held to maturity if BinckBank
concerned.
specifically intends to hold them until maturity and
is in a position to do so. Held-to-maturity
Demand deposits relate to non-subordinated
investments are recognised at amortised cost,
liabilities to non-banks that are not embodied in
measured using the effective interest method, less
debt securities. These liabilities are measured at
any impairment losses.
fair value on initial recognition, including
transaction costs incurred. They are subsequently
Impairment of financial assets
carried at amortised cost. Any difference between
On a regular basis and at each balance sheet date,
the net amount deposited and the amount
BinckBank assesses whether there is objective
repayable, calculated using the effective interest
evidence, provided by one or more events, of
method, is recognised in the income statement
impairment of financial assets individually or
under the heading of interest expense over the
groups of financial assets collectively. Impairment
term to maturity of these liabilities to clients.
losses are only recognised when there is an adverse
effect on the future cash flows. If impairment is
Provisions
indicated, the amount of any impairment loss is
A provision is recognised if (I) BinckBank has a
determined as follows for available-for-sale
present obligation (legal or constructive) as a result
financial assets, loans and receivables and held-to-
of a past event; (II) it is probable that an outflow of
maturity financial assets.
resources embodying economic benefits will be
required to settle the obligation and (III) a reliable
Available-for-sale financial assets
estimate can be made of the amount of the
In assessing whether there has been any
obligation. If BinckBank expects some or all of a
impairment of available-for-sale financial
provision to be reimbursed, the reimbursement is
instruments, account is taken of any significant or
recognised as a separate asset only when
prolonged drop in the fair value to below cost. If
reimbursement is virtually certain. The expense
there is evidence of such a situation, the cumulative
relating to any provision is presented in the income
net loss previously recognised directly in equity is
statement net of any reimbursement. If the effect
transferred from equity to the income statement in
of the time value of money is material, provisions
impairment losses. Reversals of impairment losses
are discounted at a rate, before tax, that reflects,
relating to investments in shares classified as
where appropriate, the risks specific to the liability.
available for sale are not recognised through profit
Where discounting is used, the increase in the
or loss but directly in equity. Reversals of
provision due to the passage of time is recognised
impairment losses relating to fixed income
as a borrowing cost.
securities are reversed through the income
statement if the increase in the fair value of the
Pensions
instrument can be objectively related to an event
BinckBank has pension arrangements for members
occurring after the previous impairment loss was
of its Management Board and staff based on a
recognised in the income statement.
defined contribution plan, under which a
Loans and receivables
percentage of employees' fixed salary is paid to a
BinckBank assesses whether there is objective
pension insurer. The percentage payable is age-
evidence of impairment of the lending portfolio
related. The pension contributions are recognised in
(including any related facilities and guarantees).
the year to which they relate.
Evidence that a loan or receivable is impaired is
obtained via the group's lending assessment
Through its subsidiary Syntel Beheer B.V., BinckBank
process. This involves assessment of clients'
has a defined benefit pension plan which is also
creditworthiness as well as assessment of the
insured with a pension provider. The costs of the
nature of clients' investment transactions and
defined benefit plan are individually determined on
monitoring of client transactions and balances.
an actuarial basis using the projected unit credit
method. Actuarial gains and losses are recognised
The amount of any impairment loss is measured as
as income or expense if the net cumulative
the difference between the asset's carrying amount
unrecognised actuarial gains and losses at the end
and the present value of estimated future cash
of the preceding year for each plan separately
flows discounted at the original effective interest
amount to more than 10% of the greater of the
rate of the asset. The loss is presented in the
defined benefit obligation and the fair value of the
income statement in impairment losses. In
plan assets at that date. These gains or losses are
computing the present value of the estimated
divided over the expected average remaining
future cash flows from a financial asset for which
working lives the employees participating in the
collateral security has been provided, account is
separate plans. If the benefits under a pension plan
taken of the cash flows which will probably arise on
are amended, that portion of the cost of the
execution of the collateral security less the costs
amended benefit obligation which relates to past
which will necessarily be incurred in obtaining and
service is recognised as an expense in the income
selling the assets provided by way of security.
statement on a straight-line basis over the average
period until the benefits become vested. To the
In the event of impairment, the impairment
extent that the benefits are already vested, the
provision is increased by the amount of the
past service cost is expensed immediately.
impairment loss. The affected assets are only
written down when all the necessary procedures
The net obligation under the defined benefit plan is
have been completed and the amount of the loss
the total of the present value of the defined benefit
has been determined. If, in a subsequent period, the
obligation and the unrecognised actuarial gains
amount of an impairment loss decreases and the
and losses less the as yet unrecognised amended
decrease can be objectively related to an event
benefits and the fair value of the plan assets out of
occurring after the initial write-down, the
which the obligations have to be directly settled.
previously recognised impairment loss is reversed.
The defined benefit pension scheme for Syntel
Reversal of an impairment loss is recognised in the
emplyees was ended at year-end 2008, at which
provision and in the income statement, provided
time final settlement took place and the
the carrying amount of the asset does not exceed
accumulated benefit entitlements remained with
the amortised cost at the reversal date. Amounts
the insurer. With effect from 1 January 2009, all
subsequently collected after having been written
Syntel staff have been transferred to the BinckBank
off are credited to the income statement in
N.V. defined contribution plan. This decision was
impairment losses.
taken and communicated to the pension scheme
The methodology and the assumptions used in
members before 31 December 2008. The effects
estimating future cash flows are regularly
have been accounted for in the 2008 financial year.
evaluated in order to reduce variances between
estimated and actual losses.
Other liabilities
All loans are carried on initial recognition at the fair
Interest income following impairment is recognised
value of the consideration received less directly
on the basis of the original effective interest rate.
attributable transaction costs. After initial
recognition, interest-bearing loans are
Held-to-maturity financial assets
subsequently carried at amortised cost calculated
Held-to-maturity investments are individually
using the effective interest method.
assessed and the amount of any impairment loss is
measured using the same method as has been
Shareholders' equity
explained for loans and receivables.
The costs associated with the issue of new shares
are charged to the share premium account.
BinckBank does not regard possible future events
as objective indicators and such forecasts are
Repurchase of own shares
accordingly not used as evidence of impairment of
Equity instruments which are reacquired (treasury
a financial asset or a portfolio of financial assets.
shares) are deducted from equity. Gains or losses on
Losses based on future events are not recognised,
the purchase, sale, issue or withdrawal of
regardless of probability.
BinckBank's own equity instruments are not
recognised in the income statement.
Loans and receivables under renewed contracts
In the case of existing loans and receivables, it is
Share-based payments
possible for renewed contracts to be concluded
Members of BinckBank's Management Board and a
with clients. Such assets are no longer treated as
group of BinckBank staff receive remuneration in
overdue. The new contracts are, however,
the form of share-based payments. These payments
periodically assessed for compliance and to
are settled either by issuing equity instruments of
determine whether future payment is probable.
the company or by cash payment.
These loans and receivables are periodically tested
Equity-settled
for impairment on an individual basis, using the
The cost of equity-settled transactions with
original effective interest rate.
employees is measured by reference to the fair
value at the date on which they are granted. The
Cash and cash equivalents
cost of equity-settled transactions is recognised,
The balance sheet heading of cash comprises cash
together with a corresponding increase in equity,
at banks and in hand and short-term deposits (call
over the period in which the performance and/or
money) with original maturities of three months or
service conditions are fulfilled, ending on the date
less that are readily convertible into known
on which the relevant employees become fully
amounts of cash and on which there is a negligible
entitled to the award (i.e. the date on which these
impairment risk.
rights become unconditional). The cumulative
expense recognised for equity-settled transactions
Investments in associates
at each reporting date reflects the extent to which
Associates are entities in which BinckBank
the vesting period has expired and BinckBank's best
generally holds between 20% and 50% of the voting
estimate of the number of equity instruments that
rights or in which BinckBank is able to exercise
will ultimately be vested. The expense charged to
significant influence in some other way but over
the income statement for a period reflects the
which BinckBank does not have control.
movement in cumulative expense recognised at the
Investments in associates are accounted for using
beginning and end of that period.
the equity method. The item includes goodwill paid
on acquisition, less any cumulative impairment
Cash-settled
losses. With equity accounting, BinckBank's share in
A liability is recognised in respect of cash-settled
the results of an associate is recognised in the
share-based payments. The fair value of the
income statement as share in profits of associates.
cash-settled share-based payments is determined
BinckBank's share in changes in an associate's
at each balance sheet date.
reserves is recognised directly in BinckBank's equity.
The carrying amount of the investment is adjusted
Leasing
for the reported results and changes in reserves. If
In the case of operating leases where BinckBank is
the carrying amount of the investment in an
lessee, the lease payments are charged to the
associate falls to nil, no further losses are
income statement on a straight-line basis over the
recognised unless BinckBank has accepted
lease period.
liabilities on behalf of the associate concerned or
has already made payments on behalf of the
Liabilities not shown on the face of the balance
associate. Where necessary, the accounting policies
sheet
of associates are amended to ensure consistency
Contingent liabilities are liabilities that are not
with those of BinckBank.
recognised in the balance sheet because their
existence will be confirmed only by the occurrence
Intangible assets
or non-occurrence of one or more uncertain future
Intangible assets acquired separately are measured
events not wholly within BinckBank's control. The
on initial recognition at cost. The cost of intangible
maximum potential credit risk associated with
assets acquired in a business combination is their
these contingent liabilities faced by BinckBank is
fair value at the date of acquisition. Subsequently,
disclosed in the notes. In estimating the maximum
intangible assets are carried at cost less cumulative
potential credit risk, it is assumed that all
amortisation and any cumulative impairment
counterparties default on their contractual
losses.
obligations and all assets provided by way of
Intangible assets are determined as having either a
collateral security are worthless.
definite or an indefinite useful life. Intangible
assets with a definite useful life are amortised over
Earnings per ordinary share
the useful life and tested for impairment if there
The earnings per ordinary share are calculated by
are indications that an asset may be impaired. The
dividing the profit attributable to ordinary
useful lives of the intangible assets are assessed
shareholders for the period by the weighted
annually and adjusted if there has been a change.
average number of shares in issue during the
Amortisation of intangible assets with a definite
period. The diluted earnings per ordinary share are
useful life is presented in the income statement in
calculated by dividing the profit attributable to
depreciation and amortisation.
ordinary shareholders by the weighted average
number of shares during the period, adjusted for
Intangible assets with an indefinite useful life are
possible dilution resulting for example from
subjected to an annual impairment test, either
outstanding option rights.
individually or at the level of the cash-generating
unit. These intangible assets are not amortised. The
Cash flow statement
useful life of an intangible asset with an indefinite
The cash flow statement has been prepared using
useful life is reassessed annually, including an
the indirect method. This statement provides an
assessment of whether the indefinite useful life is
insight into the source of the funds and the way in
still justifiable.
which these funds have been applied. The cash
flows are analysed according to operating,
The activities relating to research and development
investing and financing activities. Cash includes the
of software are recognised and measured as
cash in hand together with freely available
follows:
balances on deposit with central banks and other
· completion of this intangible asset is technically
financial instruments with maturities of less than
feasible, so that it will be available for use or for
three months from the date of acquisition. Where
sale;
material, movements associated with currency
·
it is BinckBank's intention to complete the
translation differences are eliminated. The cash
intangible asset and use or sell it;
flow statement includes the cash flows from the
· BinckBank is capable of using or selling the
assets and liabilities held for sale.
intangible asset;
· future economic benefits are achievable;
· adequate technical, financial and other resources
are available to complete the development of
the intangible asset and for its use or sale; and
· it is possible to measure the costs incurred
during development reliably.