entire - Deutsche Bank Annual Report 2012

Deutsche Bank 02 – Consolidated Financial Statements 219
Financial Report 2010 Notes to the Consolidated Financial Statements
05 – Business Segments and Related Information
Measurement of Segment Profit or Loss
Segment reporting requires a presentation of the segment results based on management reporting methods,
including a reconciliation between the results of the business segments and the consolidated financial statements,
which is presented in the “Reconciliation of Segmental Results of Operations to Consolidated Results of
Operations” section of this note. The information provided about each segment is based on the internal reports
about segment profit or loss, assets and other information which are regularly reviewed by the chief operating
decision-maker.
Management reporting for the Group is generally based on IFRS. Non-IFRS compliant accounting methods are
rarely used and represent either valuation or classification differences. The largest valuation differences relate to
mark-to-market accounting in management reporting versus accrual accounting under IFRS (for example, for
certain financial instruments in the Group’s treasury books in CB&S and PBC) and to the recognition of trading
results from own shares in revenues in management reporting (mainly in CB&S) and in equity under IFRS. The
major classification difference relates to noncontrolling interest, which represents the net share of minority
shareholders in revenues, provision for credit losses, noninterest expenses and income tax expenses.
Noncontrolling interest is reported as a component of pre-tax income for the businesses in management reporting
(with a reversal in Consolidation & Adjustments, or C&A) and a component of net income appropriation under
IFRS.
Revenues from transactions between the business segments are allocated on a mutually-agreed basis. Internal
service providers, which operate on a nonprofit basis, allocate their noninterest expenses to the recipient of the
service. The allocation criteria are generally based on service level agreements and are either determined
based upon “price per unit”, “fixed price” or “agreed percentages”. Since the Group’s business activities are
diverse in nature and its operations are integrated, certain estimates and judgments have been made to apportion
revenue and expense items among the business segments.
The management reporting systems follow a “matched transfer pricing concept” in which the Group’s external
net interest income is allocated to the business segments based on the assumption that all positions are funded
or invested via the wholesale money and capital markets. Therefore, to create comparability with those
competitors who have legally independent units with their own equity funding, the Group allocates the net
notional interest credit on its consolidated capital (after deduction of certain related charges such as hedging of
net investments in certain foreign operations) to the business segments, in proportion to each business
segment’s allocated average active equity.
The Group reviewed its internal funding systems as a reaction to the significant changes of funding costs
during the financial crisis, and adopted in 2009 a refinement of internal funding rates used to more adequately
reflect risk of certain assets and the value of liquidity provided by unsecured funding sources.