Erste Bank JPMorgan Merrill Lynch International

Accounting policies for specific items in the annual financial statements
Intangible assets
Goodwill
The goodwill shown in the balance sheet is essentially the result of applying the purchase method
of accounting for companies acquired since 1 January 2004 (date that financial reporting was
converted to IFRS). For companies acquired before 1 January 2004, the difference between the cost
of acquisition and the value of the net assets acquired is deducted directly from equity. In accordance
to IFRS 1 no adjustments were made.
Goodwill is valued at the cost of acquisition less accumulated impairment losses. In the case of
ownership interests in associated companies, goodwill is included in the adjusted book value of the
ownership interest. If goodwill due to reorganisations was recognised in the consolidated financial
statements of previous years, the book values of these goodwill items were carried over into the IFRS
accounting in accordance with IFRS 1.
Present value of insurance in force
Present value of insurance in force relates, in particular, to the values of contract holdings
recognised as a result of acquisitions following 1 January 2004, using purchase price allocation under
the election provided in IFRS 4.31. The values recognised correspond to the differences between fair
value and book value of the underwriting assets and liabilities. Depending on the value of the
underwriting reserves, amortisation of these items is performed using the declining-balance or
straight-line method for a maximum of 10 years.
In addition, the value arising from the acquisition of an insurance portfolio before conversion of
the accounting to IFRS is also reported in this item. It was possible to carry the portfolio value over to
the IFRS financial statements without change. Linear amortisation is being performed over a maximum
of 10 years.
Other intangible assets
Intangible assets acquired for consideration are recognised in the balance sheet at the cost of
acquisition less accumulated scheduled amortisation and impairment losses.
No intangible assets were created by the Group companies themselves.
All intangible assets have a definite useful economic life. Scheduled amortisation of the immaterial
asset is therefore performed over its period of use. The useful economic lives of significant immaterial
assets are as follows:
Useful economic
life in years
from to
Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 15
Customer base (value of new business) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 10
Software is amortised by using the straight-line method. Amortisation of the customer base
(“value of new business”) recognised as an intangible asset arising from corporate acquisitions is also
performed using the straight-line method.
Capital assets
General information on the accounting and valuation of capital assets
In accordance with associated IFRS requirements, some Group assets and liabilities are carried
at fair value in the accounts for the consolidated financial statements. This applies in particular to a
significant portion of the capital assets. The determination of fair value for financial assets and
liabilities is generally based on an established market value or a price offered by brokers and dealers.
If a price cannot be readily determined, fair value is determined either by the use of an internal
valuation model or by an assessment by management as to what amounts could be realised by an
orderly sale at current market conditions. The fair value of certain financial instruments, particularly
unlisted derivative financial instruments, is determined using pricing models which take into account
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