Annual Report LRP 2007 - Rheinland Pfalz Bank

88 LRP 2007 CONSOLIDATED FINANCIAL STATEMENTS
HGB generally requires leased assets held under both
finance and operating lease to be carried under tangible
assets (“Property and equipment”). Depreciation
charges are recognized as administrative expenses.
(31) Equity
Differences between IFRSs and HGB arise from the different
classifications of equity and debt, the presentation
of outstanding participations and the income-neutral
recognition of difference amounts between acquisition
costs and fair value measurement in the income
and expense recognized directly in equity.
The recognition and measurement differences resulting
from first-time adoption of IFRSs are reported under
“Retained earnings” in the opening balance sheet.
(32) Investment Securities
Investment securities are measured differently, depending
on the IAS 39 category to which they are assigned,
i.e. either at fair value or at amortized cost. The
HGB requires companies in which an equity interest is
held and shares in affiliated companies to be measured
at acquisition costs or at the lower-of-cost-or-market
principle. Fixed-income securities that were acquired
to be held long-term and have been assigned upper investment
grade rating by third parties are measured
using the mitigated lower-of-cost-or-market principle.
(33) Trading Portfolios and Derivative Hedging
Instruments
IFRSs require loans held for trading/trading liabilities
to be generally carried under “Trading assets” or “Trading
liabilities” and to be measured at fair value. Changes
in the fair value of the trading assets/liabilities are
recognized directly in profit or loss for the period.
HGB currently does not contain any specific provisions
for measuring derivative financial instruments, which
is why the general valuation principles of §§ 252et seq.
of the HGB are used. Derivative financial instruments of
the trading portfolio are measured at market prices if
they are traded on active markets, while financial instruments
for which market prices are not available are
measured at prices determined by using valuation
models. A risk-adjusted mark-to-market valuation is
used to measure trading portfolios. This method reduces
the mark-to-market result of these portfolios by
the value at risk (VaR) determined for these portfolios
in line with regulatory requirements.
By contrast, HGB does not generally allow valuation results
to be recognized in the measurement of hedging
derivatives. Under German accounting principles, the
hedged item and the hedging instrument are accounted
for as a hedging relationship. The hedged item is carried
at amortized cost on the balance sheet. The hedging
instrument, on the other hand, is not generally recognized
on the balance sheet.
Under the HGB, banking book interest rate derivatives
are generally not recognized either.
(34) Liabilities
Under IFRSs, both deferred interest and discounts/premiums
are recognized directly under the corresponding
balance sheet items in which the liabilities are carried.
Own bonds contained in the LRP Group’s portfolio are
set off against securitized liabilities and recognized in
income pursuant to IFRSs.
The application of the fair value option in IAS 39 gives
rise to measurement principles that differ from those of
HGB.