GB00_erste lage_E - Erste Group

2000 CONSOLIDATED FIANCIAL STATEMENTS ACCORDING TO IAS
2) Risk provisions for loans and advances
The special risks inherent to the banking business are taken into account by making adequate
specific and general provisions. Creditworthiness risks are provisioned in accordance with prudent
valuation standards applied uniformly throughout the Group and take into account any eventual
collateralisation. The transfer risk inherent in loans to borrowers in foreign countries (country risk)
is valued using an internal rating system which takes into consideration the respective economic,
political and regional situation.
In analogous application of IAS 36, project financing in the tourism sector (especially hotels
and cable car rail systems), commercial project financing and properties up for sale that are not
used for banking operations (the latter for the first time in 2000) were submitted to an impairment
test. Project financing comprises building leases to third-parties and use of buildings by third parties,
the financing of which is serviced exclusively or primarily from the cash flow of the investment
project over a long period of time and for which the collateralisation is predominately the investment
project’s assets.
To this end, the recoverable amount was determined to be the maximum of the net selling
price or value in use, whereby the value in use was determined based on the present value method
of calculating the estimated future cash flows (discounted cash flow method) taking into account
the customary financing ratio of equity to debt capital. If the carrying amount is over the determined
recoverable amount, the impairment of value is reflected in an extraordinary write-off.
The total amount of risk provisions for loans and advances appearing in the Balance Sheet is reported
under assets as a separate item and presented as a line item deduction after loans and
advances to credit institutions and loans and advances to customers. The risk provision for offbalance-sheet
transactions (particularly warranties and guarantees as well as other lending commitments)
is included in provisions.
Risk provisions for securities and investments are made through direct valuation (depreciation
or reversal of depreciation) of the carrying amounts.
3) Trading assets
Securities, derivatives and other financial instruments held for trading purposes are reported in
the Balance Sheet at their fair values at the balance sheet date. Negative fair values are reported
in the balance sheet item other liabilities. Products listed on the stock exchange are valued at the
quoted prices. For non-listed products the fair values are determined according to the present
value method or using suitable options pricing models.
78 Erste Bank 2000