Annual Report - EFG Bank Group

Notes to the Consolidated Financial Statements (continued)
51. Swiss banking law requirements (continued)
(b) Fair value option
Under IFRS, the Group has two sub-categories of financial assets, those held for trading and those designated as fairvalue-through-profit-or-loss
at inception. A financial asset is classified in this category if acquired principally for the
purpose of selling it in the short-term or if so designated by management.
Under Swiss law, the fair value option is not available.
(c) Derivative financial instruments
Under the specific rules of IAS 39, the majority of the Group's derivative financial instruments are classified as trading
and reflected on the balance sheet at fair values. Changes in fair values are reflected in net trading income.
Under Swiss law, the majority of the Group's derivative financial instruments qualify for hedge accounting and are
recorded on balance sheet at their fair values (gross positive and negative replacement values). Changes in fair values
are accounted for in accordance with the accounting treatment of the item being hedged.
(d) Goodwill and intangible assets
Under both IFRS and under Swiss law, goodwill and intangibles resulting from acquisitions and mergers are
capitalized in the balance sheet.
Under IFRS, goodwill is not amortized but is tested for impairment at least annually and is carried at cost less
accumulated impairment losses. Intangible assets are amortized on a systematic basis over their useful lives. In
addition, intangible assets are tested for impairment when there is any indication that the asset may be impaired.
Intangible assets are carried at cost less amortization and accumulated impairment losses.
Under Swiss law, goodwill and intangibles are amortized over six, seven or ten years on the straight-line basis. The
net carrying value of intangibles is, in addition, reappraised annually, with any reduction to the net carrying value
taken immediately as an expense in the statement of income.
(e) Extraordinary income and expense
Under IFRS, items of income and expense can only be classified as extraordinary if they are clearly distinct from the
ordinary activities and their occurrence is expected to be rare.
Under Swiss law, income and expense items related to other accounting periods, as long as they are attributable to
corrections or mistakes from previous periods, and/or not directly related with the core business activities of the
enterprise (e.g. realised gains on sale of investments in associated undertakings or property, plant and equipment) are
recorded as extraordinary income or expense.
In 2006, there were no material reclassifications with respect to extraordinary income and expense items.
(f) Investment properties
The Group applies the fair value model of IAS 40 for its investment properties. Such investments are hence remeasured
to fair value with changes recognised in the income statement in the period in which they arise.
Under Swiss Law, investment properties are carried out under the cost model.
Annual Report 2006
Group
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