Annual report 2010 - Dexia.com

Notes to the consolidated financial statements1.19. OTHER ASSETSOther assets mainly include accrued income (non-interestrelated), prepayments, operational taxes and other accountsreceivable as well as insurance products (reinsurance, insurancepremiums receivables, etc.), construction contracts, inventories,plan assets relating to employee benefit obligations. Theseother assets are measured in accordance with the applicablestandard less any allowance for impairment if applicable orfollowing the applicable standard. Plan assets are recognisedin accordance with IAS 19 requirements.1.20. LEASESA finance lease is one that transfers substantially all the risksand rewards incidental to ownership of an asset. An operatinglease is a lease other than a finance lease.1.20.1. Dexia is the lesseeDexia grants operating leases principally for the rental ofequipment or real estate. Lease rentals are recognised in thestatement of income on a straight-line basis over the leaseterm.When an operating lease is terminated before the lease periodhas expired, any payment to be made to the lessor by wayof penalty is recognised as an expense in the period in whichtermination takes place.If the lease agreement substantially transfers the risk andrewards of ownership of the asset, the lease is recorded as afinance lease and the related asset is capitalised. At inceptionthe asset is recorded as the the present value of the minimumlease payments or the fair value (whichever is the lower) andis depreciated over its estimated useful life unless the leaseterm is short and the title is not expected to be transferred toDexia. Subsequent to initial recognition, the asset is accountedfor in accordance with the accounting policies applicable tothat asset. The corresponding rental obligations are recordedas borrowings and interest payments are recorded using theeffective interest-rate method.1.20.2. Dexia is the lessorDexia grants both operating and finance leases.Revenue from operating leases is recognised in the statementof income on a straight-line basis over the lease term. Theunderlying asset is accounted for in accordance with theaccounting policies applicable to this type of asset.For finance leases, Dexia recognises “leases receivable“ atan amount equal to the net investment in the lease, whichcan be different from the present value of minimum leasepayments.The interest-rate implicit in the lease contract acts as thediscount rate. Interest income is recognised over the term ofthe lease using the interest-rate implicit in the lease.1.21. SALE AND REPURCHASE AGREEMENTSAND LENDING OF SECURITIESSecurities sold subject to a linked repurchase agreement(“repos“) are not derecognised and remain in their originalcategory. The corresponding liability is entered under “Dueto banks“ or “Customer borrowings and deposits“, asappropriate. The asset is reported as “pledged“ in the notes.Securities purchased under agreements to resell (“reverserepos“) are recorded as off-balance sheet items and thecorresponding loans recorded as “Loans and advances duefrom banks“ or “Loans and advances to customers“.The difference between the sale and repurchase price istreated as interest income or expense and is accrued overthe life of the agreements using the effective interest-ratemethod.Securities lent to counterparties are not derecognised but,rather recorded in the financial statements in the sameheading.Securities borrowed are not recognised in the financialstatements.If they are sold to third parties, the gain or loss is enteredunder “Net income from financial instruments at fair valuethrough profit or loss“ and the obligation to return them isrecorded at fair value under “Financial liabilities measured atfair value through profit or loss“.1.22. DEFERRED INCOME TAXDeferred income tax is recognised in full, using the liabilitymethod, on temporary differences arising between the taxbases of assets and liabilities and their carrying amounts inthe financial statements.The principal temporary differences arise from the depreciationof property, plant & equipment, the revaluation of certainfinancial assets and liabilities (including derivative contracts,provisions for pensions and other post-retirement benefits),provisions for loan and other impairments and, in relation toacquisitions, from the difference between the fair value of thenet assets acquired and their tax base.The rates enacted or substantively enacted at the balancesheetdate are used to determine the deferred income tax.Deferred tax assets and liabilities are not discounted. Deferredtax assets on deductible temporary differences and tax losscarry-forwards are recognised to the extent that it is probablethat future taxable profit will be available against which thetemporary differences and tax losses can be utilised.Deferred tax liability is provided on taxable temporarydifferences arising from investments in subsidiaries, associatesand joint ventures, except where the timing of the reversal ofthe temporary difference can be controlled and it is probablethat the difference will not reverse in the foreseeable future.Deferred tax related to the fair value remeasurement ofavailable-for-sale investments and cash flow hedges, andother transactions recorded directly in equity, are also creditedor charged directly to equity.1.23. EMPLOYEE BENEFITS1.23.1. Short-term benefitsShort-term benefits, payable within 12 months of the servicebeing rendered, are measured on an undiscounted basis andrecognised as an expense.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia139