Achmea Hypotheekbank N.V. annual report 2011

that instrument. A market is regarded as active if quoted prices are readily and regularly available and represent actual and
regularly occurring market transactions on an arm’s length basis.
If a market for a financial instrument is not active, Achmea Hypotheekbank calculates fair values using valuation techniques.
Valuation techniques include using recent arm’s length transactions between knowledgeable, willing parties (if available),
references to the current value of other instruments that are substantially the same and discounted cash flow analyses.
The chosen valuation technique makes maximum use of market inputs, relies as little as possible on estimates specific to
Achmea Hypotheekbank, incorporates all factors that market participants would consider in setting a price, and is consistent
with accepted economic methodologies for pricing financial instruments. Inputs to valuation techniques reasonably represent
market expectations and measures of the risk-return factors inherent in the financial instrument. Achmea Hypotheekbank
calibrates valuation techniques and validates them for validity using prices from observable current market transactions in the
same instrument or based on other available observable market data.
2.10 Financial assets and financial liabilities
Achmea Hypotheekbank divides its financial assets into the following categories: ‘loans and receivables’, ‘financial assets at
fair value through profit or loss’ and ‘available-for-sale financial assets’.
When Achmea Hypotheekbank becomes a party to the contractual provision of a financial instrument, Achmea Hypotheekbank
initially recognises the instrument at the fair value including transaction costs that are directly attributable to its acquisition
(unless it is classified as ‘at fair value through profit or loss’).
(a) Loans and receivables
Loans and receivables are financial instruments, other than derivatives, with fixed or determinable payments and not listed
on an active market. These receivables arise when Achmea Hypotheekbank lends funds or provides services directly to a
debtor without the intention to trade the receivables. The Loans and advances to customers, which fall into this category at
Achmea Hypotheekbank, consist entirely of loans granted in exchange for mortgage security. These mortgage loans are carried
at amortised cost measured using the effective-interest method. The portfolio of Interpolis BTL Hypotheken B.V., acquired in
2006, is carried at fair value. Loans and advances to banks and to public sector which fall into this category are measured at
amortised cost using the effective-interest method.
(b) Financial assets at fair value through profit or loss
This category comprises two subcategories, i.e. ‘financial assets held for trading’ and financial assets designated by the
management as ‘at fair value through profit or loss’ on initial recognition. A financial asset is classified in the first category if it
is acquired primarily for the purpose of being traded in the short term and it is classified in the second category if the asset is
designated as such by the management on initial recognition. Derivative financial instruments are classified as held for trading
unless they are recognised in a hedge relationship. Derivatives with a negative fair value are classified as financial liabilities
and are presented separately on the consolidated statement of financial position.
(c) Available-for-sale financial assets
Financial assets classified as ‘available for sale’ are investments that have been acquired in order to be held until its maturity but
which may be sold to meet liquidity requirements or because of fluctuations in the interest rate, exchange rates or share prices.
Purchases and sales of financial assets at fair value through profit or loss (b) and available-for-sale financial assets (c) are
recognised on the transaction date (the date on which Achmea Hypotheekbank commits to buy or sell the asset). Loans and
advances are recognised when funds are granted to borrowers.
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