Annual Report - EFG Bank Group

Notes to the Consolidated Financial Statements (continued)
areas of financial instruments and risk
management reporting.
(b) Consolidation
The Group is subject to full consolidation and
global regulatory supervision by the Swiss
Federal Banking Commission.
EFG Bank European Financial Group, (the
“Company”) is the sole holding company at the
head of the Group. The shareholders’ equity of
the Group is owned by both Latsis family
interests, through their shareholding in EFG Bank
European Financial Group and through their
shareholding of a related trust in an intermediate
holding company, and by minority interests.
Subsidiary undertakings are all entities over
which the Group, directly or indirectly, has the
power to exercise control over financial and
operating policies. The existence and effect of
potential voting rights that are currently
exercisable or convertible are considered when
assessing whether the Group controls another
entity. Subsidiaries are fully consolidated from
the date on which control is transferred to the
Group and are no longer consolidated from the
date that control ceases.
The purchase method of accounting is used to
account for the acquisition of subsidiaries by the
Group. The cost of an acquisition is measured at
the fair value of the assets given up, equity
instruments issued or liabilities undertaken at the
date of acquisition, plus costs directly
attributable to the acquisition. Identifiable assets
acquired and liabilities and contingent liabilities
assumed in a business combination are measured
initially at their fair values at the acquisition date
irrespective of the extent of any minority interest.
The excess of the cost of acquisition over fair
value of the identifiable net assets of the
subsidiary acquired (attributable to the Group) is
recorded as goodwill. If the cost of acquisition is
less than the fair value of the net assets of the
subsidiary acquired, the difference is recognised
directly in the statement of income. Increases of
the Group’s ownership interest in subsidiaries are
recorded as equity transactions and any
difference between the consideration given and
Annual Report 2006
the share of the new net assets acquired is
recorded directly in equity.
Gains or losses arising from disposals of
ownership interest that do not result in loss of
control by the Group are also recorded directly in
equity.
Intercompany transactions, balances and
unrealised gains on transactions between Group
companies are eliminated. Unrealised losses are
also eliminated but considered an impairment
indicator of the asset transferred.
The Group sponsors the formation of special
purpose entities, which may or may not be
directly owned subsidiaries for the purpose of
issuing short to medium term debt or asset
securitisation (see accounting policy (ab) below).
The entities may acquire assets directly from
Groups’ subsidiaries. These companies are
bankruptcy-remote entities and are consolidated
in the Group’s Financial Statements when the
substance of the relationship between the Group
and the entity indicates that the entity is
controlled by the Group.
Where necessary, accounting policies for
subsidiaries have been changed to ensure
consistency with the policies adopted by the
Group.
A listing of the Group’s principal subsidiaries is
set out in note 24.
(c) Associated undertakings
Investments in associated undertakings are
recognised initially at cost and subsequently
accounted for by the equity method of
accounting in the consolidated financial
statements. These are undertakings over which
the Group exercises significant influence but
which are not controlled, generally
accompanying a shareholding of between 20%
and 50% of the voting rights.
Equity accounting involves recognising, in the
statement of income, the Group’s share of the
associate’s post acquisition profit or loss for the
year. The Group’s interest in the associate is
carried on the balance sheet at an amount that
reflects its share of the net assets of the associate
Group
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