Achmea Hypotheekbank N.V. annual report 2011

After their initial recognition, available-for-sale financial assets (c) and financial assets at fair value through profit or loss
(b) are carried at fair value. Gains and losses on the financial assets at fair value through profit or loss are recognised in the
statement of comprehensive income in the period in which these changes occur. Gains and losses on the ‘available-for-sale
assets’ are recognised directly in shareholders’ equity (line item fair value reserve) until a financial asset is derecognised or
suffers impairment. At that moment, the cumulative gain or loss is transferred from shareholders’ equity to the statement
of comprehensive income. The interest income, calculated using the effective-interest method, is recognised directly in
the statement of comprehensive income. Dividends on equity instruments that are available for sale are recognised in the
statement of comprehensive income from the moment at which the entity acquires the right to receive payment.
Financial liabilities are initially recognised at fair value. Subsequently financial liabilities are valued at amortised cost using
the effective-interest method. Achmea Hypotheekbank initially recognises debt securities issued and subordinated liabilities
on the date that they are originated. All other financial liabilities (including liabilities designated at fair value through profit
or loss) are recognised initially on the trade date, which is the date that Achmea Hypotheekbank becomes a party to the
contractual provisions of the instrument. Achmea Hypotheekbank derecognises a financial liability when its contractual
obligations are discharged, cancelled or when they expire.
2.11 Impairment of financial assets measured at amortised cost
General
Achmea Hypotheekbank distinguishes between specific impairment losses and impairment relating to incurred but not
reported losses (IBNR).
Under IFRS, recognition of an impairment loss is required if it is probable that Achmea Hypotheekbank will not be able to
collect the principal amount and the interest in accordance with a loan agreement. The impairment is determined item by item
for loans that are individually material. This is referred to as specific impairment.
Specific impairment
Achmea Hypotheekbank conducts regular assessments to establish whether there is any objective evidence of impairment of
a financial asset or group of financial assets. A financial asset is impaired and is treated accordingly if, and only if, there are
objective indications of impairment. This is the case when:
• a ‘loss’ event has occurred after initial recognition of the asset (loss event);
• this loss event has a negative impact on the estimated future cash flows of the financial asset;
• these cash flows can be reliably estimated.
If there is objective evidence that assets measured at amortised cost have been subject to impairment, the loss is calculated
as the difference between the carrying amount of the asset and the present value of the estimated future cash flows (excluding
future loan losses that have not yet been incurred), discounted at the original effective interest rate of the financial asset.
If the asset has a variable interest rate, the discount rate used to measure an impairment loss is the current effective interest
rate determined under the contract. The impairment loss is recognised in the statement of comprehensive income. The amount
of the recognised impairment takes account of the fact that the payment arrears on accounts placed in default management
may ultimately be settled, either in whole or in part. This ‘recovery ratio’ was adjusted at the end of 2011 based on updated
historical recovery data.
Incurred but not reported (IBNR)
IFRS also requires any losses resulting from events that have occurred before the balance sheet date, but which have not yet
manifested themselves, to be taken into account as well. These are known as IBNR losses.
Achmea Hypotheekbank N.V. | 2011
33