SEC Form 20-F - Deutsche Bank Annual Report 2012

Deutsche Bank Notes to the Consolidated Financial Statements F-31
Annual Report 2010 on Form 20-F 01 – Significant Accounting Policies
Certain intangible assets have an indefinite useful life; these are primarily investment management agreements
related to retail mutual funds. These indefinite life intangibles are not amortized but are tested for impairment at
least annually or more frequently if events or changes in circumstances indicate that impairment may have
occurred.
Costs related to software developed or obtained for internal use are capitalized if it is probable that future
economic benefits will flow to the Group, and the cost can be measured reliably. Capitalized costs are amortized
using the straight-line method over the asset’s useful life which is deemed to be either three years, five years
or ten years. Eligible costs include external direct costs for materials and services, as well as payroll and
payroll-related costs for employees directly associated with an internal-use software project. Overhead costs,
as well as costs incurred during the research phase or after software is ready for use, are expensed as
incurred.
On acquisition of insurance businesses, the excess of the purchase price over the acquirer’s interest in the net
fair value of the identifiable assets, liabilities and contingent liabilities is accounted for as an intangible asset.
This intangible asset represents the present value of future cash flows over the reported liability at the date of
acquisition. This is known as value of business acquired (“VOBA”).
The VOBA is amortized at a rate determined by considering the profile of the business acquired and the expected
depletion in its value. The VOBA acquired is reviewed regularly for any impairment in value and any reductions
are charged as an expense to the consolidated statement of income.
Financial Guarantees
Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse
the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with
the terms of a debt instrument. Such financial guarantees are given to banks, financial institutions and other
parties on behalf of customers to secure loans, overdrafts and other banking facilities.
The Group has chosen to apply the fair value option to certain written financial guarantees that are managed
on a fair value basis. Financial guarantees that the Group has not designated at fair value are recognized
initially in the financial statements at fair value on the date the guarantee is given. Subsequent to initial
recognition, the Group’s liabilities under such guarantees are measured at the higher of the amount initially
recognized, less cumulative amortization, and the best estimate of the expenditure required to settle any
financial obligation as of the balance sheet date. These estimates are determined based on experience with
similar transactions and history of past losses, and management’s determination of the best estimate.
Any increase in the liability relating to guarantees is recorded in the consolidated statement of income in
provision for credit losses.