Annual Financial Statements 2010 of Bank Austria

Consolidated Financial Statements in accordance with IFRSs
A – Accounting policies (CoNTINuED)
Equity
Equity is composed of paid-in capital, i.e., capital made available to the company by shareholders (subscribed capital plus capital reserves), and
earned capital (retained earnings, foreign currency translation reserves, IAS 39 reserves, actuarial gains/losses, profit carried forward from the
previous year, and net profit). The IAS 39 reserves include gains and losses on available-for-sale financial assets (available-for-sale reserve), which are
not recognised in income, and those components of hedge accounting in accordance with IAS 39 which are not included in income (cash flow hedge
reserve), after adjustment for deferred taxes. Since 1 January 2005, minority interests have been included in equity.
Treasury shares held are deducted from equity. The difference between the price on a later sale of treasury shares and the related post-tax repurchase
cost is recognised directly in equity.
Net interest margin
Interest income and interest expense is accrued and recognised as long as such interest is expected to be recoverable. Income mainly received as
payment for the use of capital (usually calculated, like interest, on the basis of a specific term or on the amount receivable) is included in income
similar to interest. This item also includes income and expenses from the trading portfolio arising from interest, accrued interest on debt instruments
and funding costs relating to the trading portfolio. The net interest margin also includes interest income and interest expense from hedging activities
and from derivatives.
Net fees and commissions
Net fees and commissions comprise income from services provided on a fee and commission basis, including trading-induced commission components,
as well as expenses incurred for services provided by third parties and related to fee-earning business.
Fees and commissions are recognised on an accrual basis. Securities trading commission is recognised at the time the service is rendered. Investment
portfolio management fees, advisory fees and investment fund management fees are recognised on a pro-rata time basis. Fees included in amortised
cost used to calculate effective interest rates are not included under fees and commissions; they are part of interest expense.
Dividend income
Dividends are recognised in the income statement in the financial year in which their payment was approved.
Gains and losses on financial assets and liabilities held for trading
This item shows the realised and unrealised results from measuring all financial instruments of the trading portfolio at fair value through profit or loss
using the mark-to-market method. Income and expenses from derivatives relating to the trading portfolio are not included. Such income and expenses
are partly included in the net interest margin and partly in the net change in financial assets and liabilities at fair value through profit or loss.
Gains and losses on disposals of financial instruments
This item shows the results from disposals of loans and receivables, available-for-sale financial assets, held-to-maturity investments and financial
liabilities. Gains and losses on disposal of financial assets held for trading and on financial instruments at fair value through profit or loss are not
included.
Gains and losses on financial assets/liabilities at fair value through profit or loss
This item includes gains and losses on financial assets and financial liabilities as well as the results from the measurement of these items at their fair
values.
Impairment losses on loans/Impairment losses on other financial transactions
These items include writedowns of loans, write-offs and additions to provisions for guarantees and commitments, and income from writebacks as well
as recoveries of loans previously written off.
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