Annual report 2006 - Dexia.com

More documents

Recommendations

Info

RAPPORT DE GESTION CONSOLIDATED FINANCIAL STATEMENTS COMPTES SOCIAUX carried at fair value, the exchange differences follow the same accounting treatment as for fair value adjustments. 1.6. TRADE DATE AND SETTLEMENT DATE ACCOUNTING All “regular way” purchases and sales of financial instruments are recognized and derecognized on the settlement date, which is the date of delivery to or by Dexia. However, financial instruments held for trading are recognized and derecognized at trade date. For financial assets and liabilities measured at initial recognition at fair value through P&L, Dexia recognizes from the trade date any unrealized gains or losses arising from revaluing the contract to fair value at the reporting date. These unrealized gains and losses are recognized in the statement of income unless the transactions have been assigned to cash-flow hedge relationships or are related to an available-for-sale asset. 1.7. REALIZED GAINS AND LOSSES ON SALES OF FINANCIAL ASSETS For financial assets not revalued through the statement of income, realized gains or losses on disposals is the difference between the proceeds received (net of transaction costs) and the cost or amortized cost of the investment. 1.8. IMPAIRMENTS ON FINANCIAL ASSETS Dexia records allowances for impairment losses when there is objective evidence that a financial asset or group of financial assets is impaired, in accordance with IAS 39 § 58-70. The impairments represent the management’s best estimates of losses at each balance-sheet date. An interest bearing financial asset is impaired if its carrying amount is greater than its estimated recoverable amount. The amount of the impairment loss for assets carried at amortized cost is calculated as the difference between the asset’s carrying amount and the present value of expected future cash flows discounted at the financial instrument’s original effective interest rate or current effective interest rate determined under the contract for variable-rate instruments. The recoverable amount of an instrument measured at fair value is the present value of expected future cash flows discounted at the current market rate of interest for a similar financial asset. Allowances for impairment losses are recorded on assets within “Due from banks”, and “Loans and advances to customers”, in the following way: • Specific impairments – The amount of the impairment on specifically identified assets is the difference between the carrying amount and the recoverable amount, being the present value of expected cash flows, including amounts recoverable from guarantees and collateral, discounted using the effective interest rate at the time of impairment. Assets with small balances (including retail loans) that share similar risk characteristics are generally aggregated in this measurement. • Collective impairments – Loss impairments cover incurred losses where there is no specific impairment but objective evidence that losses are present in segments of the portfolio or other lending related commitments at the balance-sheet date. These have been estimated based upon historical patterns of losses in each segment, the credit ratings allocated to the borrowers and reflecting the current economic environment in which the borrowers operate. Dexia develops for that purpose credit risk models using an approach that combines appropriate default probabilities and loss given defaults that are subject to regular back testing and are based on Basel II data and risk models. • Country risk component – Included within specific and collective impairment. When an asset is determined by management as being uncollectable, it is written off against its related impairment; subsequent recoveries are against to the “Impairment on loans and provisions for credit commitments” in the statement of income, in the heading “Impairment on loans and provisions for credit commitments”. If the amount of the impairment subsequently decreases due to an event occurring after the write-down of the initial impairment, the release of the impairment is credited to the “Impairment on loans and provisions for credit commitments”. “Available for sale” (AFS) assets are only subject to specific impairment. “Available for sale” quoted equities are measured at fair value through “Gain and losses on securities not recognized in the statement of income” or within the statement of income in the case of impairment. Dexia analyses all equities that have declined by more than 25% of their quoted price over a quarter or when a risk is identified by management and takes the decision to impair and assess whether there is an objective evidence of impairment according to IAS 39. A prolonged decline in the fair value below its cost is also objective evidence of impairment. Impairments on equity securities cannot be reversed in the statement of income due to later recovery of quoted prices. Reversal impairment on debt securities is addressed on a caseby-case basis in accordance with the standard. When AFS securities are impaired, the related accumulated fair value adjustments are included in the statement of income as “Net income on investments”. Impairments on loans included in AFS are reported in the heading “Impairments on loans and provisions for credit commitment”. 1.9. INTEREST INCOME AND EXPENSE Interest income and expense are recognized in the statement of income for all interest bearing instruments on an accrual basis using the effective interest rate method based on the purchase price (including transaction costs). Transaction costs are incremental costs that are directly attributable to the acquisition of a financial asset or liability and are included the calculation of the effective interest rate. An incremental cost is one that would not have been incurred if the entity had not acquired the financial instrument. Accrued interest is reported in the same line as the related financial asset or liability in the balance sheet. 122 | Dexia / Annual Report 2006
Once an interest bearing financial asset has been written down to its estimated recoverable amount, interest income is thereafter recognized based on the rate of interest that was used to discount the future cash flows for measuring the recoverable amount. 1.10. COMMISSION INCOME AND EXPENSE Commissions and fees are recognized in accordance with IAS 18. According to this standard, most of the commissions arising from Dexia’s activities are recognized on an accrual basis over the life of the underlying transaction. For significant acts such as commissions and fees arising from negotiating, or participating in the negotiation of a transaction for a third party, such as the arrangement of the acquisition of loans, equity securities or other securities or the purchase or sale of businesses, are recognized based on the stage of completion of the underlying transaction, when the underlying transaction has been completed. For asset management operations, revenue consists principally of unit trust and mutual fund management and administration fees. Revenue from asset management is recognized as earned when the service is provided. Performance fees are recognized when they are definitively acquired, i.e. when all underlying conditions are met. Loan commitment fees are recognized as part of the effective interest rate if the loan is granted, and recorded as revenue on expiry if no loan is granted. 1.11. INSURANCE AND REINSURANCE ACTIVITIES 1.11.1. Insurance Dexia is mainly active in banking products. Some insurance products sold by insurance companies have been requalified as financial instruments as they do not meet the requirements of insurance products under IFRS 4. IFRS 4 allows the possibility to continue to account for its insurance products under local GAAP if they qualify as such under IFRS 4. Hence, Dexia has decided to use the local accounting policies to measure the technical provisions for contracts that fall under IFRS 4 and investment contracts with discretionary participation features (DPF). A contract that complies with the conditions of an insurance contract remains an insurance contract until all rights and obligations cease to exist or expire. An insurance contract is a contract under which one party (the insurer) accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder. A contract can start as an investment contract and become an insurance contract when containing significant insurance components as time passes. Life and nonlife claims and changes in technical reserves are also recorded in the “Technical margin of insurance activities”, whereas losses and changes in provisions for credit enhancement activities, which are similar to banking activities, are reported under “Impairment on loans and provision for credit commitments”. All items arising from insurance activities are classified according to their nature in the balance sheet, except for technical provisions, which are identified on a separate heading. Insurance activities of Dexia are mainly performed by Dexia Insurance Services (DIS) for life and nonlife products and by Financial Security Assurance (FSA) in the USA for credit enhancement of municipal and corporate bonds. DIS activities: life and nonlife Insurance products of DIS are recorded under local GAAP. This group is mainly constituted by Belgian entities, for which Belgian GAAP (Royal Decree of November 17, 1994) are applicable, if they are qualified as such under IFRS 4. However, provisions for catastrophe and equalizations are reversed. The Life insurance portfolio features: • Insurance contracts including reinsurance contracts and the accepted reinsurance treaties with exception of the in-house defined employee benefit plans • Financial instruments issued with a discretionary profit sharing (discretionary participation feature (DPF)) • Unit-linked (UL) contracts stipulating that the policyholder can switch at all times, without costs, to an investment product with guaranteed interest rate and a probable profit sharing. Classification Classification is done policy by policy, whereas for group insurances, classification is done on the employer’s level. Life insurance products are classified following Belgian GAAP into the hereunder categories: • Type 1: branch 21: guaranteed insurance products with or without DPF • Type 2: branch 21: investment products with profit sharing • Type 3: branch 21: investment products without profit sharing • Type 4: branch 23: investment products with risk-UL products • Type 5: branch 23: investment products without risk • Type 6: branch 23: investment products convertible to a branch 21 investment product with risk (class 23) • Type 7: branch 23: investment products convertible to a branch 21 investment product with profit sharing The nonlife insurance portfolio features includes only insurance contracts that contain a significant insurance risk. Shadow accounting An insurer is permitted, but not required, to change its accounting policies so that a recognized but unrealized gain or loss on an asset affects those measurements in the same way that a realized gain or loss does. The related adjustment to the insurance liability (or deferred acquisition costs or intangible assets) shall be recognized in equity if, and only if, the unrealized gains or losses are recognized directly in equity. Dexia Group decided to apply shadow accounting, “if under legal and/or contract conditions the realization of gains on an insurer’s assets have a direct effect on the measurement of some or all of its insurance contracts and investment contracts with discretionary participation features (DPF).” RAPPORT DE GESTION CONSOLIDATED FINANCIAL STATEMENTS COMPTES SOCIAUX Dexia / Annual Report 2006 | 123
Page 1:
no achievement without commitment
Page 4 and 5:
FINANCIAL HIGHLIGHTS 4 MESSAGE FROM
Page 6 and 7:
FINANCIAL HIGHLIGHTS FINANCIAL HIGH
Page 8 and 9:
MESSAGE FROM THE CHAIRMEN MESSAGE F
Page 10 and 11:
MESSAGE FROM THE CHAIRMEN MESSAGE F
Page 12 and 13:
GROUP PRESENTATION GROUP PRESENTATI
Page 14 and 15:
GROUP PRESENTATION HISTORY OF THE G
Page 16 and 17:
GROUP PRESENTATION MANAGEMENT REPOR
Page 18 and 19:
GROUP PRESENTATION MANAGEMENT REPOR
Page 20 and 21:
GROUP PRESENTATION GROUP ORGANIZATI
Page 22 and 23:
GROUP PRESENTATION Group Executive
Page 24 and 25:
GROUP PRESENTATION MAIN ACTIVITIES
Page 26 and 27:
GROUP PRESENTATION December Opening
Page 28 and 29:
CORPORATE GOVERNANCE Dexia’s comp
Page 30 and 31:
CORPORATE GOVERNANCE MANAGEMENT REP
Page 32 and 33:
CORPORATE GOVERNANCE NAME SPECIALIZ
Page 34 and 35:
CORPORATE GOVERNANCE NAME SPECIALIZ
Page 36 and 37:
Page 38 and 39:
Page 40 and 41:
Page 42 and 43:
CORPORATE GOVERNANCE DIRECTORS’ A
Page 44 and 45:
Page 46 and 47:
CORPORATE GOVERNANCE THE MANAGEMEN
Page 48 and 49:
CORPORATE GOVERNANCE The maximum am
Page 50 and 51:
Page 52 and 53:
Page 54 and 55:
THE DEXIA SHARE MANAGEMENT REPORT C
Page 56 and 57:
THE DEXIA SHARE MAIN SHAREHOLDERS O
Page 58 and 59:
HUMAN RESOURCES HUMAN RESOURCES Dex
Page 60 and 61:
HUMAN RESOURCES MANAGEMENT REPORT C
Page 62 and 63:
HUMAN RESOURCES INITIATING AND CAS
Page 64 and 65:
SUSTAINABLE DEVELOPMENT SUSTAINABLE
Page 66 and 67:
RISK MANAGEMENT MANAGEMENT REPORT C
Page 68 and 69:
Page 70 and 71:
Page 72 and 73:
FINANCIAL RESULTS MANAGEMENT REPORT
Page 74 and 75: FINANCIAL RESULTS to business devel
Page 76 and 77: FINANCIAL RESULTS ANALYSIS OF THE
Page 78 and 79: PUBLIC/PROJECT FINANCE MANAGEMENT R
Page 80 and 81: PUBLIC/PROJECT FINANCE WORLD LEADE
Page 88 and 89: PERSONAL FINANCIAL SERVICES MANAGEM
Page 90 and 91: ASSET MANAGEMENT MANAGEMENT REPORT
Page 92 and 93: INSURANCE SERVICES INSURANCE SERVIC
Page 94 and 95: INSURANCE SERVICES MANAGEMENT REPOR
Page 96 and 97: INVESTOR SERVICES MANAGEMENT REPORT
Page 98 and 99: TREASURY AND FINANCIAL MARKETS MANA
Page 100 and 101: GENERAL INFORMATION MANAGEMENT REPO
Page 112 and 113: CONSOLIDATED BALANCE SHEET 112 CONS
Page 114 and 115: CONSOLIDATED BALANCE SHEET ASSETS (
Page 116 and 117: CONSOLIDATED STATEMENT OF INCOME (i
Page 118 and 119: MINORITY INTERESTS Core Gains and l
Page 120 and 121: CONSOLIDATED CASH FLOW STATEMENT (i
Page 122 and 123: RAPPORT DE GESTION CONSOLIDATED FIN
Page 136 and 137: 4.1.3. Currency risk 4.2. CREDIT RI
Page 140 and 141: Name Head Office % of Consolidation
Page 142 and 143: GEOGRAPHIC Eurozone (1) Rest of USA
Page 144 and 145: PORTFOLIO Number Loan Collateral Ex
Page 148 and 149: 7. NOTES ON THE ASSETS OF THE CONSO
Page 150 and 151: B. Analysis of quality See note 7.1
Page 152 and 153: C. Treasury bills and other eligibl
Page 154 and 155: 7.8. SECURITIES HELD TO MATURITY De
Page 156 and 157: 7.10. TANGIBLE FIXED ASSETS A. Net
Page 158 and 159: 7.11. INTANGIBLE ASSETS AND GOODWIL
Page 160 and 161: A. Other assets Analysis by nature
Page 162 and 163: Present value of finance lease liab
Page 164 and 165: 8. NOTES ON THE LIABILITIES OF THE
Page 166 and 167: B. Analysis by maturity and interes
Page 168 and 169: Convertible non-subordinated debt D
Page 170 and 171: D. Provisions for pensions and othe
Page 172 and 173: H. Range of assumptions to determin
Page 174 and 175:
9. OTHER NOTES ON THE CONSOLIDATED
Page 176 and 177:
Deferred tax coming from assets of
Page 178 and 179:
2. Change in profit sharing reserve
Page 180 and 181:
B. Nonlife contracts B.1. Income an
Page 182 and 183:
9.4. RELATED PARTIES TRANSACTIONS A
Page 184 and 185:
RAPPORT DE GESTION CONSOLIDATED FIN
Page 186 and 187:
The assets and liabilities disposed
Page 188 and 189:
9.8. SHARE-BASED PAYMENTS STOCK OPT
Page 190 and 191:
9.9. MINORITY INTERESTS - CORE EQUI
Page 192 and 193:
Dec. 31, 2005 Dec. 31, 2006 Banking
Page 194 and 195:
10. NOTES ON THE CONSOLIDATED OFF-B
Page 196 and 197:
11.3. NET INCOME FROM ASSOCIATES De
Page 198 and 199:
11.6. COMMISSION INCOME AND EXPENSE
Page 200 and 201:
(AVERAGE FTE) France Belgium Luxemb
Page 202 and 203:
11.14. IMPAIRMENT ON GOODWILL Nil.
Page 204 and 205:
12. NOTES ON RISK EXPOSURE (IN MILL
Page 206 and 207:
12.2. CREDIT RISKS EXPOSURE A. Anal
Page 208 and 209:
12.3. INTEREST RATE REPRICING RISK:
Page 210 and 211:
RAPPORT DE GESTION CONSOLIDATED FIN
Page 212 and 213:
12.6. LIQUIDITY RISK: BREAKDOWN BY
Page 214 and 215:
12.7. CURRENCY RISK As of Dec. 31,
Page 216 and 217:
BALANCE SHEET 216 OFF-BALANCE SHEET
Page 218 and 219:
BALANCE SHEET (before income approp
Page 220 and 221:
STATEMENT OF INCOME (in thousands o
Page 222 and 223:
3.2.5. Amounts receivable after mor
Page 224 and 225:
4.2.6. Amounts receivable within on
Page 226 and 227:
RAPPORT DE GESTION COMPTES CONSOLID
Page 228 and 229:
Page 230 and 231:
4.6. STATEMENT OF FORMATION EXPENSE
Page 232 and 233:
4.10. SHARE IN THE CAPITAL AND OTHE
Page 234 and 235:
D. Commitments to issue shares Amou
Page 236 and 237:
4.19. OTHER TAXES AND TAXES BORNE B
Page 238 and 239:
6. SOCIAL REPORT 6.1. STATEMENT OF
Page 240 and 241:
6.3. STATEMENT CONCERNING THE IMPLE
Page 242 and 243:
• there have been no transactions
Page 244 and 245:
DEXIA IN THE WORLD RAPPORT DE GESTI
Page 246 and 247:
Page 248 and 249:
RAPPORT DE GESTION Kommunalkredit D
Page 250 and 251:
Dexia’s Annual Report 2006 has be
Page 252:
SDXI 0109-5 03-07
show all

Annual report 2006 - Dexia.com

Create successful ePaper yourself

Delete template?

Save as template?