COMMERZBANK AKTIENGESELLSCHAFT

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Group Financial Statements 272 216 Commerzbank Annual Report 2011 There are no restrictions on the ability of special purpose entities to transfer financial resources such as cash dividends on equity instruments or payments of interest and principal on debt instruments to Commerzbank. This applies on the one hand to special purpose entities where Commerzbank holds voting shares by virtue of company law which enable it to control all operating decisions including the transfer of financial resources. On the other hand there are also no restrictions with regard to special purpose entities where Commerzbank does not hold shares by virtue of company law but has a right to financial transfers on the basis of debt contracts with the special purpose entities. All receivables and liabilities as well as income and expenses based on intra-group business relationships are eliminated when liabilities and income and expenses are consolidated. Intragroup profits or losses are eliminated unless they are of minor importance. (5) Financial instruments: recognition and measurement (IAS 39) In accordance with IAS 39 all financial investments and liabilities – which also include derivative financial instruments – must be recognised in the balance sheet. A financial instrument is a contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another. On initial recognition financial instruments are measured at fair value; as a rule, this is the transaction price at the time they are acquired. Depending on their respective category, financial instruments are recognised in the balance sheet subsequently either at (amortised) cost or fair value. Fair value is the amount at which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction on the balance sheet date. Fair value is determined by the price established for the financial instrument in an active market (mark to market principle; fair value hierarchy level I). If no market prices are available, valuation is based on quoted prices for similar instruments in active markets. In cases where no quoted prices are available for identical or similar financial instruments, fair value is established with the aid of valuation models which use market parameters to the maximum extent possible (mark to model; fair value hierarchy level II). If insufficient recent observable market data is available to establish fair value, parameters which are not observable on the market will be used in the valuation models. These parameters may include data derived by approximation from historical data or similar methods (fair value hierarchy level III). Please refer to Note 81 for a detailed explanation of the fair value hierarchies. The following section provides an overview of how the rules of IAS 39, in their latest version, have been applied within the Group: a) Recognition and derecognition of financial instruments A financial asset or a financial liability is generally recognised in the balance sheet when the Group becomes a party to the contractual provisions of the financial instrument. For regular way purchases or sales of financial assets in the cash market the trading and settlement dates normally differ. These regular way cash market purchases and sales may be recognised using either trade date or settlement date accounting. The Group uses trade date accounting for all regular way purchases and sales of financial assets both on recognition and derecognition. The derecognition rules of IAS 39 are based both on the concept of risks and rewards and on the concept of control. However, when deciding whether an asset qualifies for derecognition, the evaluation of the transfer of the risks and rewards of ownership takes precedence over the evaluation of the transfer of control. If the risks and rewards are transferred only partially and control over the asset is retained, the continuing involvement approach is used. The financial asset continues to be recognised to the extent of the Group’s continuing involvement and special accounting policies apply. The extent of the continuing involvement is the extent to which the Group is exposed to changes in the value of the transferred asset. A financial liability (or part of a financial liability) is derecognised when it is extinguished, i.e. when the obligations arising from the contract are discharged or cancelled or expire. The repurchase of own debt instruments is also a transfer of financial liabilities that qualifies for derecognition. Any differences between the carrying value of the liability (including discounts and premiums) and the purchase price are recognised in profit or loss; if the asset is sold again at a later date a new financial liability is recognised at cost equal to the price at which the asset was sold. Differences between this cost and the repayment amount are allocated over the term of the debt instrument using the effective interest rate method.
To our Shareholders Corporate Responsibility Management Report Risk Report Group Financial Statements Further Information 217 273 258 202 Statement of comprehensive income 260 204 Balance sheet 262 206 Statement of changes in equity 264 208 Cash flow statement 266 210 Notes 409 353 Auditors’ report b) Classification of financial assets and liabilities and their measurement Below we set out an overview of the categories defined in IAS 39. These are: loans and receivables, held-to-maturity financial assets, financial assets or liabilities at fair value through profit or loss, available-for-sale financial assets and other financial liabilities. • Loans and receivables: Non-derivative financial instruments with fixed or determinable payments that are not quoted in an active market are assigned to this category. This holds true regardless of whether they were originated by the Bank or acquired in the secondary market. An active market exists if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency and those prices represent actual and regularly occurring market transactions on an arm’s length basis. Measurement of these assets is at amortised cost. If there is impairment, this is recognised in profit or loss when determining the amortised cost. Premiums and discounts are recognised in net interest income over the life of the asset. In the case of reclassified securities contained in the loans and receivables category the fair value at the date of reclassification is taken as the new carrying amount. The revaluation reserve net of deferred taxes existing at this point remains in the other reserves within equity and is amortised over the remaining term of the reclassified securities. For financial assets classified as loans and receivables impairments are recognised in the same way as for lending business (see Note 9). Impairment of these financial instruments is included in net investment income and deducted directly from the financial investments. If the indicators for impairment of particular securities cease to apply or no longer suggest an impairment, the impairment of the securities must be reversed through profit or loss, but to no more than the level of amortised cost. Similarly, an improved risk environment can lead to the reversal of an impairment that was previously recognised at the portfolio level. • Held-to-maturity financial assets Non-derivative financial assets with fixed or determinable payments and fixed maturity may be included in this category if the entity has the positive intention and ability to hold them to maturity. Measurement of these assets is at amortised cost. If there is impairment, this is recognised in profit or loss when determining the amortised cost. Premiums and discounts are recognised in net interest income over the life of the asset. In the 2011 financial year Commerzbank Group again made no use of the held-tomaturity financial assets category. • Financial assets or financial liabilities at fair value through profit or loss; this category comprises two sub-categories: – Financial assets or liabilities held for trading: This sub-category includes financial assets and financial liabilities held for trading purposes (trading assets and trading liabilities). Derivative financial instruments used for hedging purposes are only reported under trading assets or trading liabilities if they do not meet the conditions for the application of hedge accounting (see below in this note). Otherwise, they are shown as fair values from derivative hedging instruments. Trading assets and trading liabilities are measured at their fair value on each balance sheet date. If the fair value cannot be established on an active market, items are measured by means of comparable prices, indicative prices of pricing service providers or other banks (lead managers) or internal valuation models (net present value or option pricing models). Interest-rate and interest-rate currency derivatives are measured in accordance with standard market practice taking account of the respective fixing frequency for variable payments. In the case of derivative positions costs may be incurred in closing positions in the event of counterparty default if a positive market value remains after offsetting and collateral agreements have been taken into account. Group Financial Statements
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Fourth Supplement dated April 13, 2
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Financial Statements and Management
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Corporate Responsibility One bank.
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Environment As a financial services
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In a joint initiative by the overal
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Performance-related remuneration Th
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The members of the Board of Managin
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The monthly amount of the retiremen
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tion for the remainder of his term
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Loans to members of the Board of Ma
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Other details D&O liability insuran
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Details pursuant to Art. 289 of the
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up to five years effective from the
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The Supervisory Board oversees fina
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• Statements on presentation in t
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Since summer 2011, the environment
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At the beginning of December, Comme
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The changes in the individual earni
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As with the change in other assets
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Report on events after the reportin
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We assume that Germany will fare be
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the resulting impact on financial i
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The Asset Based Finance segment was
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Risk report Risk reporting takes pl
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Risk strategy and risk management T
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Macroeconomic stress tests are also
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Overview of management instruments
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The “reduction” area comprises
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Corporates & Markets This segment c
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Public Finance Commerzbank’s Asse
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Portfolio by region as at 31.12.201
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and Europe (CLOs). The exposure in
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In 2011, provisions in Central & Ea
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of the overdraft starts on the firs
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The year 2011 was mainly affected b
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The adjoining diagram documents the
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Available net liquidity in the comb
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OpRisk events by segment | €m 201
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Reputational risk Reputational risk
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Provisions for pensions are calcula
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Notes to the income statement (5) B
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(12) Securities At December 31, 201
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(16) Fiduciary transactions Financi
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(23) Other liabilities Financial St
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(27) Equity Financial Statements an
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c) Retained earnings € Financial
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(30) Non-distributable amounts Fina
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Other notes (33) Off-balance-sheet
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(34) Forward transactions Financial
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(36) Remuneration and loans to boar
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€1,000 LTP Number of participatin
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Name Registered office Share of cap
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) Associated companies Name Registe
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Foreign-exchange rates for €1 as
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Members of the Supervisory Board of
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(41) Boards of Commerzbank Aktienge
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Independent Auditor’s Report 1 To
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Significant subsidiaries and associ
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Annual Report 2011 of the Commerzba
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To our Shareholders Corporate Respo
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Group Risk Report In the Group Risk
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Recent developments Optimisation of
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COMMERZBANK AKTIENGESELLSCHAFT Fran
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Jahresabschluss und Lagebericht 201
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COMMERZBANK AKTIENGESELLSCHAFT

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