ING Direct 2004 Annual Report Download - page 74

72 ING Group Annual Report 2004
Participating interests
Investments in associates Participating interests in which a significant influence is exercised over the financial and operating
policy are stated at net asset value. ING Group’s share in the results of these investments in associates is recognised in the profit
and loss account.
Investments in other participating interests Investments in other participating interests are stated at fair value. Each year, the
net asset value of the investment is determined, which approximates the fair value. Dividends received are credited to the profit
and loss account. Changes due to revaluation are credited or debited to Shareholders’ equity.
Investments
Realised gains and losses on investments Realised gains and losses on investments are determined as the difference between
the sale proceeds and cost. Cost is determined systematically (weighted average or specific identification) on a consistent basis
per portfolio.
Land and buildings and shares and convertible debentures Investments in land and buildings as well as shares and convertible
debentures held for the group’s own risk, are stated at fair value as at balance sheet date. Changes in the carrying amount resulting
from revaluations of these investments are credited or debited to Shareholders’ equity, allowing for taxation where necessary.
On disposal of these investments, the difference between the sale proceeds and cost is recognised in the profit and loss account.
Valuations of investments in land and buildings are made by rotation in such a way as to ensure that all properties are
appraised at least once every five years. Value-enhancing investments in existing properties made since the last valuation
are capitalised at the cost of the investment until the next valuation. Land and buildings are not depreciated.
Land and buildings under construction are stated at the direct purchase and construction cost incurred up to the balance sheet
date plus interest during construction and the group’s own development and supervision expenses, where necessary less any
expected diminution in value on completion.
Fixed-interest securities Fixed-interest securities are stated at redemption value less any diminution in value (impairment)
deemed necessary to cover the risk of uncollectibility. The difference between redemption value and purchase price is
amortised over the weighted average remaining term of the investments concerned, either credited or debited to the profit
and loss account.
Fixed-interest securities on which interest is not received annually and on which the redemption value is paid out as a lump sum on
maturity (such as ‘climbing’ loans, zero-coupon bonds and savings certificates) are included at purchase price plus the proportion
of the difference between purchase price and redemption value related to the period elapsed since the date of purchase.
Investments in interest-only securities are initially included at purchase price. Each year, the interest income decreases in
proportion to the decline in the net book value of the interest-only security over its remaining term.
Investments in principal-only securities are stated at purchase price plus the proportion of the difference between purchase
price and redemption value related to the period elapsed since the date of purchase, calculated on the basis of compound
interest. The increase in value is included in the profit and loss account as interest income.
Yield differences The results on disposal of fixed-interest securities, i.e. the differences between the proceeds on disposal and
the carrying amount of the investments sold, are shown as yield differences. Results on disposal of derivatives related to the
investments concerned are likewise shown as yield differences. Allowing for the weighted average remaining term of the
investment portfolio, these yield differences are included in the profit and loss account as interest income. Results on disposal
due to a structural reduction of investments are included directly in the profit and loss account, including the results on disposal
of the related derivatives.
Interests in investment pools Interests in investment pools are stated in accordance with the valuation principles of the
pools concerned.
Investments for risk of policyholders In the valuation of these investments, the same principles are generally applied as those
pertaining to the valuation of investments held for the group’s own risk. However, fixed-interest securities directly linked to life
policy liabilities are stated at fair value plus accrued interest where relevant.
Life insurance products In the case of life insurance products, where there is a relationship between the value of the investments
and the level of the insurance provisions, differences resulting from revaluations, realised or unrealised, are initially taken to the
ACCOUNTING PRINCIPLES FOR THE CONSOLIDATED
BALANCE SHEET AND PROFIT AND LOSS ACCOUNT
OF ING GROUP (continued)
2.1
ANNUAL ACCOUNTS