Landeskreditbank Baden-Württemberg - L-Bank

Notes to the annual financial statements for
the financial year ended December 31, 2004
General principles
Landeskreditbank Baden-Württemberg – Förderbank (L-Bank) was established by legislation passed on
November 11, 1998, which came into effect on December 1, 1998. In accordance with § 2 para. 1 subpara. 1 of
the L-Bank Act, the share capital of the Bank is EUR 250 million.
The financial statements for L-Bank have been drawn up in accordance with the provisions of the German
Commercial Code (Handelsgesetzbuch [HGB]) and the Regulation on the Accounting Principles Applied to
Credit Institutions (Verordnung über die Rechnungslegung für Kreditinstitute [RechKredV]).
Headings and items on the balance sheet and statement of income are classified in accordance with the financial
statement forms that appear in RechKredV. In the process, L-Bank has added an extra item to the expenses side
of the statement of income, “Allocation to reserves for interest rate reductions” (§ 265 para. 5 HGB).
The majority interests declared in the financial statements are of minor significance overall. For this reason the
Bank did not prepare consolidated financial statements for the period (§ 296 para. 2 HGB).
Foreign currency translation principles
Foreign currency amounts have been translated in accordance with the provisions set out in § 340h HGB and
declaration BFA 3/95. Assets and liabilities denominated in foreign currencies, together with unprocessed spot
exchange transactions, have been translated at the middle spot rate on December 30, 2004, being the last day of
the year on which there was a liquid foreign exchange market.
For purposes of currency translation, currency items have been calculated by offsetting claims and
obligations arising from on-balance-sheet and off-balance-sheet transactions in the respective currencies. These
transactions were classified and valued using the special cover option in the respective currencies. Accordingly,
all expenses and earnings arising from currency translation are shown in the income statement as required by §
340h para. 2 subparas. 1 and 2 HGB; there was no requirement to show any such income under a separate
heading as the items outstanding on the balance sheet date fall within the same timeframe.
Methods of accounting and valuation
Assets, liabilities and pending transactions have been valued in accordance with the general provisions of §§ 252
ff. HGB, taking into account the special rules applying to credit institutions (§§ 340e ff. HGB).
Receivables from credit institutions and customers are generally shown at par value, liabilities to credit
institutions and customers at redemption value. Any interest-based differences (premiums or discounts) relating
to receivables and liabilities are shown under deferrals and pre-payments and written back pro rata temporis.
Service charges are entered immediately. Low-interest or non-interest-bearing receivables are discounted.
Reserves for interest rate subsidies are set up to cover loans made under the auspices of development programs.
Zero bonds and similar securities issued are shown at the issue price plus interest calculated up to the balance
sheet date pro rata temporis.
All recognized individual risks and country risks arising out of the Bank’s lending business were
appropriately provided for, either by accumulated amortization for losses on individual loan accounts or by
reserves. Lump-sum reserves have been established to cover latent credit risks, and the Bank maintains
prudential reserves to cover general banking risks. Individual provisions and lump-sum reserves have been
deducted from the assets or liabilities side as appropriate, as has the reserve for general banking risks set up in
compliance with § 340f HGB.
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