GB00_erste lage_E - Erste Group

Principles
of Consolidation
Accounting policies
All significant subsidiaries which are controlled by Erste Bank AG are included in the Consolidated
Financial Statements. Significant investments of between 20% and 50% (associates) are stated at
equity and, where necessary, the corresponding financial statements have been restated according
to IAS. As for investments in the insurance sector, owing to the special national legal requirements
and the fact that insurance companies in Austria are not yet reporting according to IAS
these are stated at equity pursuant to local accounting standards.
The remaining investments are reported at cost and in the case of permanent impairment of
value the asset is written off accordingly.
Capital consolidation is done according to the purchase method by setting off fair value against
the parent company’s interest obtained in the equity stake at the time of acquisition. Any difference
between fair value and the equity stake is either partially or completely attributed to the
assets of the subsidiary. Goodwill resulting from acquisitions after 1 January 1995 is capitalised
and written off over its estimated useful life. This is generally set at 20 years for domestic banks
and financial service providers, at 15 years for foreign banks and financial service providers and
between 5 and 15 years for all other companies (see Note 6 Intangible fixed assets).
Intercompany balances, income and expenses as well as intercompany profits and losses are
eliminated provided they are not of minor significance.
1) Loans and advances
Loans and advances to credit institutions and customers are reported at their nominal amount
or at cost.
Provisions for specific and country risks are not set off against the corresponding loans and
advances, but rather reported as a separate line item in the Balance Sheet.
Premiums and discounts—the differences between amounts paid out and nominal amounts—
are reported as interest income or interest expense under other assets or other liabilities, and
attributed to the accounting period in which they are earned or incurred, respectively.
Interest receivable is not recognised as revenue in the Income Statement if—regardless of
the legal right to do so—it is highly improbable that future economic benefits will flow to the company.
Securities not listed on the stock exchange and credit substitutes evidenced by certificates
are reported under the appropriate securities portfolio item (trading portfolio, investments available
for sale or financial investments).
Erste Bank 2000 77