Annual Report & Accounts 2009 - Anglo Irish Bank

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Notes to the financial statements continued 1. General information and accounting policies continued 1.21 Assets classified as held for sale Loans which are due to be transferred from the Group to NAMA are classified as held for sale. These assets meet the definition of a disposal group under IFRS 5 as their carrying amount is expected to be recovered principally through a sale transaction and the sale is highly probable within one year. These loans continue to be carried at amortised cost less provisions for impairment. Derivatives associated with loans classified as held for sale continue to be carried at fair value. See note 23. Other assets are classified as held for sale if they are primarily acquired for the purpose of selling in the near term and where a sale is highly probable and is expected to occur within one year. These assets are stated at the lower of their carrying amount and fair value less costs to sell. Gains and losses arising from changes in fair value are recognised in profit or loss. 1.22 Foreign currency translation Functional and presentation currency The consolidated financial statements are presented in euro, which is the Bank's functional and presentation currency. Each entity in the Group determines its own functional currency which is the currency of the primary economic environment in which the entity operates. Items included in the financial statements of each entity are measured using that functional currency. Transactions and balances Transactions in foreign currencies are initially recorded at the functional currency rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the end of the reporting period. Foreign exchange gains and losses resulting from the settlement of such transactions and from the retranslation at period end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss except when deferred in equity as qualifying cash flow hedges or qualifying net investment hedges. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Foreign operations The results and financial position of all Group entities that have a non-euro functional currency are translated into euro as follows: a) assets and liabilities and goodwill arising on acquisition of foreign operations are translated at the closing rate at the end of the reporting period; b) income and expenses are translated into euro at the average rates of exchange during the period where these are a reasonable approximation of the exchange rates at the dates of these transactions; and c) all resulting exchange differences are included as a separate component of equity. On consolidation, exchange differences arising from the translation of the net investment in foreign entities and of funding designated as hedges of such investments are included as a separate component of equity. When a foreign entity is sold, the cumulative exchange differences deferred as a separate component of equity are recognised in profit or loss as part of the gain or loss on disposal. 1.23 Provisions Provisions are recognised in respect of present legal or constructive obligations arising from past events where it is probable that outflows of resources will be required to settle the obligations and they can be reliably estimated. Contingent liabilities are possible obligations whose existence depends on the outcome of uncertain future events or those present obligations where the outflows of resources are uncertain or cannot be measured reliably. Contingent liabilities are not recognised in the financial statements but are disclosed unless they are remote. 1.24 Taxation (current and deferred) Current tax is the expected tax payable (shown as a liability) or the expected tax receivable (shown as an asset) on the taxable income for the period adjusted for changes to previous years and is calculated based on the applicable tax law in each jurisdiction in which the Group operates. Deferred tax is provided using the liability method on temporary differences arising between the tax bases of assets and liabilities for taxation purposes and their carrying amounts in the financial statements. Current and deferred taxes are determined using tax rates based on legislation enacted or substantively enacted at the end of the reporting period and expected to apply when the related tax asset is realised or the related tax liability is settled. Deferred tax assets are recognised where it is probable that future taxable profits will be available against which temporary differences will be utilised. Deferred tax is provided on temporary differences arising from investments in subsidiaries and joint ventures, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the difference will not reverse in the foreseeable future. Deferred tax is not provided on goodwill. Current and deferred taxes are recognised in profit or loss in the period in which the profits or losses arise except to the extent that they relate to items recognised directly in equity, in which case the taxes are also recognised in equity. Deferred and current tax assets and liabilities are only offset when they arise in the same reporting group for tax purposes and where there is both the legal right and intention to settle on a net basis or to realise the asset and settle the liability simultaneously. 54
1.25 Leases Group as lessor Leasing and instalment credit agreements with customers are classified as finance leases if the agreements transfer substantially all the risks and rewards of ownership of an asset, with or without ultimate legal title. An asset classified as a finance lease is recorded within loans and advances to customers as a receivable based on the present value of the lease payments, discounted at the rate of interest implicit in the lease, less any provisions for bad and doubtful rentals. The difference between the total payments receivable under the lease and the present value of the receivable is recognised as unearned finance income, which is allocated to accounting periods under the pre-tax net investment method to reflect a constant periodic rate of return. Assets leased to customers are classified as operating leases if the lease agreements do not transfer substantially all the risks and rewards of ownership. Where leased assets are included within investment property held on own account in the Group's statement of financial position, depreciation is provided on the depreciable amount of these assets on a systematic basis over their estimated useful lives. Rental income from investment property held on own account and related lease incentives granted are recognised on a straight-line basis over the non-cancellable term of the lease. Investment contract accounting applies where leased assets are included within investment property held in respect of linked liabilities to customers. Group as lessee Operating lease rentals payable and related lease incentives receivable are recognised in profit or loss on a straight-line basis over the non-cancellable term of the lease. 1.26 Interests in joint ventures and associates Joint ventures are contractual arrangements whereby two or more parties undertake an economic activity that is subject to joint control. An associate is an entity in which the Group has significant influence, but not control, holding between 20% and 50% of the voting rights. The determination of significant influence includes a consideration of the Group’s ability to participate in the financial and operating policies of the entity. The Group's interests in joint ventures and associates are recognised using the equity method of accounting and are initially recognised at cost, with the exception of interests in joint ventures or associates held under investment contracts which are designated at fair value through profit or loss. Under the equity method, the Group's share of the post-acquisition profits or losses after taxation of joint ventures and associates is recognised in profit or loss and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Where the Group’s share of losses in an associate or joint venture equals or exceeds its interest in the associate or joint venture the Group does not recognise further losses unless it has incurred obligations or made payments on behalf of the associate or joint venture. Unrealised gains on transactions between the Group and its associates or joint ventures are eliminated to the extent of the Group’s interest in the associate or joint venture. Unrealised losses are also eliminated to the extent of the Group’s interest in the associate or joint venture unless they provide evidence of impairment of the Group’s interest in the associate or joint venture. The calculation of the share of the results of joint ventures and associates is adjusted where necessary to ensure consistency with the Group's accounting policies. 1.27 Venture capital and other investments Equity shares and similar instruments held on own account as part of a venture capital portfolio are carried at fair value with gains and losses taken to net trading income as they arise. All other equity shares and similar instruments held on own account are classified as available-for-sale. They are held in the statement of financial position at fair value with unrealised gains or losses being recognised directly through reserves except for impairment losses, which are recognised immediately through profit or loss. Income on these equity instruments is credited to other operating income. 1.28 Sale and repurchase agreements Debt securities sold subject to a commitment to repurchase them are retained in the statement of financial position when substantially all the risks and rewards of ownership remain with the Group. The liability to the counterparty is included separately in the statement of financial position in deposits from banks or customer accounts as appropriate. When securities are purchased subject to a commitment to resell, but the Group does not acquire the risks and rewards of ownership, the transaction is treated as a collateralised loan and recorded within loans and advances to banks or customers as appropriate. The securities are not included in the statement of financial position. The difference between the sale and repurchase price is treated as interest and is accrued over the life of the agreement using the effective interest rate method. Securities lent to counterparties are retained in the financial statements. Securities borrowed are not recognised in the financial statements. 1.29 Share capital On 21 January 2009, under the terms of the Anglo Irish Bank Corporation Act, 2009, all of the Bank's ordinary and preference share capital was transferred to the Minister for Finance. Share issue costs Incremental costs directly attributable to the issue of new shares are shown in equity, net of tax, as a deduction from the proceeds. Anglo Irish Bank Annual Report & Accounts 2009 55
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Annual Report & Accounts 2009
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Contents Page Chairman’s statemen
Page 5 and 6: Legacy matters The Bank is continui
Page 7 and 8: Jim Brydie was appointed Head of Gr
Page 9 and 10: Business review This business revie
Page 11 and 12: Divisional lending balances by sect
Page 13 and 14: holdings, reduced investment cash f
Page 15 and 16: 30 September 2008. Average total cu
Page 17 and 18: Income statement - treasury impairm
Page 19 and 20: to acquire these assets they are in
Page 21 and 22: Board of Directors Donal O’Connor
Page 23 and 24: In keeping with our environmental p
Page 25 and 26: Principal risks and uncertainties T
Page 27 and 28: Credit risk Credit risk is the risk
Page 30 and 31: Report of the Directors The Directo
Page 32 and 33: Corporate governance statement On 1
Page 34 and 35: Corporate governance statement cont
Page 36 and 37: Independent Auditors' report to the
Page 38 and 39: Consolidated income statement For t
Page 40 and 41: Consolidated statement of financial
Page 42 and 43: Consolidated statement of changes i
Page 44 and 45: Statement of cash flows For the 15
Page 46 and 47: Notes to the financial statements I
Page 48 and 49: Notes to the financial statements c
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Notes to the financial statements c
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Supplementary information Consolida
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Annual Report & Accounts 2009 - Anglo Irish Bank

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