Annual report 2010 - Dexia.com

Notes to the consolidated financial statementsThe impact on the result regarding the “cost of risk“ is thenet of allocation and use of collective impairment and specificimpairments. In 2009, the net impact was estimated to anadditional charge of EUR 108 millions before tax while in2010, the net impact was estimated to reduce the cost of riskby EUR 13 million.If there is objective evidence of impairment for a financialasset initially classified as “Available-for-sale“ but reclassifiedto “Loans and receivables“ in accordance with the amendedIAS39, any difference between the net present value ofexpected future cash flows, discounted at the effective interestrate at date of reclassification, and the carrying amount isrecognised as an impairment loss. Consequently, any nonamortisedoutstanding amount recognised in the “frozen“fair value adjustment of financial assets reclassified to Loansand Receivables is recognised as an impairment loss as well.The decrease of the carrying amount of the reclassified assetscomes from repayments, prepayments or opportunistic sale ofbonds in the context of balance sheet management and alsofrom bonds on which an impairment has been recorded.In comparison with 2009, the increase of the differencebetween the carrying amount of reclassified asset and itsfair value reflects the increase of the carrying amount duringthe period by the effect of the amortization of the premium/discount for the year (EUR 816 million) and the changesdue to the variations of credit and liquidity spreads on themarkets.Impact on interest marginFor assets transferred from AFS to L&R, the amortization ofthe premium discount on the bond is compensated by theamortization of the "frozen" AFS reserve, so that the netimpact on result is zero.For assets transferred from trading to AFS and L&R, the impacton the interest margin of the amortization of the negativemark-to-market of previous periods amounted to EUR 162million in 2009 and to EUR 38 million in 2010.Management reportAdditional information Annual financial statementsConsolidatedfinancial statementsAnnual report 2010 Dexia155