ING Direct 2004 Annual Report Download - page 73

ING Group Annual Report 2004 71
been a permanent diminution in value. These impairments are assessed on an individual basis and are taken to the profit and
loss account immediately. However, impairments of assets carried at revalued amounts are first charged directly to any
revaluation reserve for these assets.
For more details, reference is made to the critical accounting policies.
Receivables
Receivables are carried at the face value less any diminution in value deemed necessary to cover the risk of uncollectibility.
Investment and trading portfolios
The investment portfolio comprises those assets which are intended for use on a continuing basis and have been identified
as such. These investments are held in order to cover the insurance provisions and to manage interest rate, capital and
liquidity risks.
Positions held with trading intent are those held intentionally for short-term resale and/or with the intent of benefiting from
actual or expected short-term price movements or to lock in arbitrage profits, and positions held through matched principal
broking and market making.
If, due to a change in management’s intent, transfers are made between investment and trading portfolios, these assets are
remeasured to fair value and gains and losses are accounted for in accordance with the accounting principles applicable to the
portfolio in which the assets were originally held.
Leases
Assets held under a lease for which substantially all the risks and rewards are transferred to the lessee (finance lease) are
reported in the balance sheet at net present value. Income from a finance lease is recognised in the profit and loss account
over the lease term in proportion to the funds invested.
Income from an operating lease is recognised over the lease term in the profit and loss account. Lease payments under an
operating lease are recognised as an expense in the profit and loss account over the lease term.
Reinsurance
Reinsurance premiums, commissions and claim settlements, as well as provisions relating to reinsurance, are accounted for in
the same way as the original contracts for which the reinsurance was concluded. Receivables as a consequence of reinsurance
are deducted from the liabilities relating to the original insurance contracts.
SPECIFIC PRINCIPLES
Acquisition and disposal of group companies and goodwill
ING Group’s acquisitions are accounted for under the purchase method of accounting, whereby the cost of the acquisitions
is allocated to the fair value of the assets and liabilities acquired. Goodwill, being the difference between the cost of the
acquisition (including assumed debt) and ING Group’s interest in the fair value of the acquired assets and liabilities as at the
date of acquisition, is debited to Shareholders’ equity. The results of the operations of the acquired companies are included in
the profit and loss account from their respective dates of acquisition.
Adjustments to the fair value as of the date of acquisition of acquired assets and liabilities that are identified before the end of
the first annual accounting period commencing after acquisition are recorded as an adjustment to goodwill; any subsequent
adjustment is recognised as income or expense. However, recognition of deferred tax assets after the acquisition date is
recorded as an adjustment to goodwill even after the end of the first annual accounting period.
On disposal of group companies, the difference between the sale proceeds and cost is included in the profit and loss account;
for disposals within five years of acquisition, goodwill is adjusted on a pro-rata basis.
Tangible fixed assets
Tangible fixed assets are stated at cost less accumulated depreciation. The cost of these assets is depreciated on a straight-line
basis over their estimated useful lives, which are as follows: data processing equipment 2 to 5 years and other movable fixed
assets 4 to 10 years. Expenditures for maintenance and repair are charged to the profit and loss account as incurred.
Expenditure incurred on major improvements is capitalised and depreciated.
On disposal of these assets, the difference between the proceeds on disposal and net book value is recognised in the profit and
loss account.