IBRC annual report for 2011 - Irish Bank Resolution Corporation ...

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Notes to the financial statements continued1. General information and accounting policies continued1.25 Foreign currency translationFunctional and presentation currencyThe consolidated financial statements are presented in euro, which is the Bank's functional and presentation currency. Each entity in theGroup 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 balancesTransactions in foreign currencies are initially recorded at the functional currency rate ruling at the date of the transaction. Monetaryassets and liabilities denominated in foreign currencies are translated at the functional currency rate of exchange ruling at the end of thereporting period. Foreign exchange gains and losses resulting from the settlement of such transactions and from the retranslation atperiod end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss exceptwhen 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 thedates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange ratesat the date when the fair value was determined.Foreign operationsThe 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 ofthe reporting period;b) income and expenses are translated into euro at the average rates of exchange during the period where these are areasonable approximation of the exchange rates at the dates of these transactions; andc) all resulting exchange differences are recognised in other comprehensive income and accumulated as a separate componentof equity.On consolidation, exchange differences arising from the translation of the net investment in foreign entities and of funding designated ashedges of such investments are included as a separate component of equity. When a foreign entity is sold, the cumulative exchangedifferences deferred as a separate component of equity are recognised in profit or loss as part of the gain or loss on disposal.1.26 Provisions and contingent liabilitiesProvisions are recognised in respect of present legal or constructive obligations arising from past events where it is probable thatoutflows 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 presentobligations where the outflows of resources are uncertain or cannot be measured reliably. Contingent liabilities are not recognised in thefinancial statements but are disclosed unless they are remote.1.27 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 forthe period adjusted for changes to previous years and is calculated based on the applicable tax law in each jurisdiction in which theGroup operates. Deferred tax is provided using the liability method on temporary differences arising between the tax bases of assets andliabilities for taxation purposes and their carrying amounts in the financial statements. Current and deferred taxes are determined usingtax rates based on legislation enacted or substantively enacted at the end of the reporting period and expected to apply when therelated 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 differenceswill be utilised. Deferred tax is provided on temporary differences arising from investments in subsidiaries and joint ventures, exceptwhere the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the difference will notreverse 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 theyrelate to items recognised in other comprehensive income or directly in equity, in which case the taxes are also recognised in othercomprehensive income or directly in equity.Deferred and current tax assets and liabilities are only offset when they arise in the same reporting group for tax purposes and wherethere is both the legal right and intention to settle on a net basis or to realise the asset and settle the liability simultaneously.1.28 LeasesGroup as lessorLeasing and instalment credit agreements with customers are classified as finance leases if the agreements transfer substantially all therisks and rewards of ownership of an asset, with or without ultimate legal title. An asset classified as a finance lease is recorded withinloans and advances to customers as a receivable based on the present value of the lease payments, discounted at the rate of interestimplicit in the lease, less any provisions for bad and doubtful rentals. The difference between the total payments receivable under thelease and the present value of the receivable is recognised as unearned finance income, which is allocated to accounting periods underthe pre-tax net investment method to reflect a constant periodic rate of return.52
Irish Bank Resolution Corporation LimitedAnnual Report & Accounts 2011Assets leased to customers are classified as operating leases if the lease agreements do not transfer substantially all the risks and rewardsof ownership. Where leased assets are included within investment property held on own account in the Group's statement of financialposition, 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 basisover the non-cancellable term of the lease. Investment contract accounting applies where leased assets are included within investmentproperty held in respect of linked liabilities to customers.Group as lesseeOperating lease rentals payable and related lease incentives receivable are recognised in profit or loss on a straight-line basis over thenon-cancellable term of the lease.1.29 Interests in joint ventures and associatesJoint 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 votingrights. The determination of significant influence includes a consideration of the Group’s ability to participate in the financial andoperating policies of the entity.The Group's interests in joint ventures and associates are primarily recognised using the equity method of accounting and are initiallyrecognised at cost, with the exception of interests in joint ventures or associates held under investment contracts which are designatedat fair value through profit or loss. Under the equity method, the Group's share of the post-acquisition profits or losses after taxation ofjoint ventures and associates is recognised in profit or loss and its share of post-acquisition movements in reserves is recognised inreserves. The Group does not recognise any share of post-acquisition profits if a contractual obligation to pay such profits to anotherentity arises. 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 theGroup does not recognise further losses unless it has incurred obligations or made payments on behalf of the associate or joint venture.In certain cases where the Group obtains an interest in an entity as a result of a debt restructuring or a reorganisation, the Group maydesignate its interest as a financial asset at fair value through profit or loss.Unrealised gains on transactions between the Group and its associates or joint ventures are eliminated to the extent of the Group’sinterest in the associate or joint venture. Unrealised losses are also eliminated to the extent of the Group’s interest in the associate orjoint 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 theGroup's accounting policies.1.30 Venture capital and other investmentsVenture capital equity interests held on own account are carried at fair value with gains and losses taken to net trading income as theyarise.All other equity shares and similar instruments held on own account are classified as available-for-sale. They are held in the statement offinancial position at fair value with unrealised gains or losses being recognised in other comprehensive income and accumulated in equityexcept for impairment losses, which are recognised immediately through profit or loss. Income on these equity instruments is credited toother operating income.1.31 Sale and repurchase agreementsDebt securities sold subject to a commitment to repurchase them are retained in the statement of financial position when substantially allthe risks and rewards of ownership remain with the Group. The liability to the counterparty is included separately in the statement offinancial 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. Thesecurities 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 theeffective interest rate method.Securities lent to counterparties are retained in the financial statements. Securities borrowed are not recognised in the financialstatements.1.32 Share capitalOn 21 January 2009, under the terms of the Anglo Irish Bank Corporation Act, 2009, all of the Bank's ordinary and preference sharecapital was transferred to the Minister for Finance.1.33 Segmental reportingThe Restructuring Plan approved by the EC on 29 June 2011 provides for the orderly resolution of the Group following its amalgamationwith INBS over a period of up to ten years. In conjunction with EC approval, several commitments have been given by the Group,including commitments not to develop any new activities and to only carry out activities consistent with managing the work-out of theremaining loan book.53
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Irish Bank Resolution Corporation L
Page 3 and 4: ContentsIrish Bank Resolution Corpo
Page 5 and 6: Chairman’s statementIrish Bank Re
Page 7 and 8: Group Chief Executive’s reviewIri
Page 9 and 10: Group Chief Executive’s review co
Page 11 and 12: Business review continuedIrish Bank
Page 17 and 18: Board of DirectorsIrish Bank Resolu
Page 19 and 20: Corporate Responsibility continuedI
Page 21 and 22: Principal risks and uncertainties c
Page 23 and 24: Principal risks and uncertainties c
Page 25 and 26: Report of the DirectorsIrish Bank R
Page 27 and 28: Corporate governance statementIrish
Page 29 and 30: Corporate governance statement cont
Page 31 and 32: Corporate governance statement cont
Page 33 and 34: OpinionIn our opinion:• the Group
Page 35 and 36: Consolidated statement of comprehen
Page 37 and 38: Bank statement of financial positio
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Supplementary information (unaudite
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Irish Bank ResolutionCorporation Li
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IBRC annual report for 2011 - Irish Bank Resolution Corporation ...

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