SEC Form 20-F - Deutsche Bank Annual Report 2012

Deutsche Bank Notes to the Consolidated Financial Statements F-43
Annual Report 2010 on Form 20-F 02 – Critical Accounting Estimates
Reclassification of Financial Assets
The Group classifies financial assets into the following categories: financial assets at fair value through profit or
loss, financial assets AFS or loans. The appropriate classification of financial assets is determined at the time
of initial recognition. In addition, under the amendments to IAS 39 and IFRS 7, “Reclassification of Financial
Assets” which were approved by the IASB and endorsed by the EU in October 2008, it is permissible to reclassify
certain financial assets out of financial assets at fair value through profit or loss (trading assets) and the AFS
classifications into the loans classification. For assets to be reclassified there must be a clear change in management
intent with respect to the assets since initial recognition and the financial asset must meet the definition of
a loan at the reclassification date. Additionally, there must be an intent and ability to hold the asset for the
foreseeable future at the reclassification date. There is no ability for subsequent reclassification back to the
trading or AFS classifications. Refer to Note 13 “Amendments to IAS 39 and IFRS 7, ‘Reclassification of
Financial Assets’” for further information on the assets reclassified by the Group.
Significant management judgment and assumptions are required to identify assets eligible under the amendments
for which expected repayment exceeds estimated fair value. Significant management judgment and assumptions
are also required to estimate the fair value of the assets identified (as described in “Fair Value Estimates”) at
the date of reclassification, which becomes the amortized cost base under the loan classification. The task
facing management in both these matters can be particularly challenging in the highly volatile and uncertain
economic and financial market conditions such as those which existed in the third and fourth quarters of 2008.
The change of intent to hold for the foreseeable future is another matter requiring significant management
judgment. The change in intent is not simply determined because of an absence of attractive prices nor is
foreseeable future defined as the period until the return of attractive prices. Refer to Note 01 “Significant
Accounting Policies – Reclassification of Financial Assets” for the Group’s minimum requirements for what
constitutes foreseeable future.
Impairment of Loans and Provision for Off-Balance Sheet Positions
The accounting estimates and judgments related to the impairment of loans and provision for off-balance sheet
positions is a critical accounting estimate for the Corporate Banking & Securities and Private & Business Clients
corporate divisions because the underlying assumptions used for both the individually and collectively assessed
impairment can change from period to period and may significantly affect the Group’s results of operations.
In assessing assets for impairment, management judgment is required, particularly in circumstances of economic
and financial uncertainty, such as those of the recent financial crisis, when developments and changes to
expected cash flows can occur both with greater rapidity and less predictability.