ING Direct 2004 Annual Report Download - page 75

ING Group Annual Report 2004 73
profit and loss account. Subsequently, these revaluations are included either in Provision for life policy liabilities or Insurance
provisions for policies for which the policyholders bear the investment risk.
Repurchase transactions and reverse repurchase transactions Fixed-interest securities, shares and convertible debentures,
which have been sold with an agreement to repurchase (repurchase transactions), are included as assets in the balance sheet.
Fixed-interest securities, shares and convertible debentures, which have been acquired in reverse sale and repurchase
transactions, are not recognised in the balance sheet.
Securities borrowing and lending Fixed-interest securities, shares and convertible debentures, which are lent out, are included
in the balance sheet. Fixed-interest securities, shares and convertible debentures, which are borrowed, are not recognised in the
balance sheet.
Provisions for investment losses The net amounts added to or withdrawn from the provision for default losses of investments
(credit losses and impairments) are included in the profit and loss account.
Lending and Banks
Lending and Banks refer to receivables from non-banks and banks that are carried at face value less any diminution in value
(impairment) deemed necessary to cover the risk of uncollectibility. Receivables are impaired if it is probable that the principal
and interest contractually due will not be collected.
In general, to determine the amount of this impairment (provision for loan losses), the degree of risk of uncollectibility
is assessed:
– per individual loan, taking into account among other things amounts outstanding at year-end, the financial position,
results and cash-flow information of the debtor, the payment history and the value of the collateral;
– per group of loans subdivided by country, taking into account country-specific risk percentages;
– per group of loans subdivided by the degree of risk of uncollectibility (risk classification), determined on the basis of a wide
range of aspects with regard to creditworthiness and taking into account empirically determined risk percentages for each
risk category.
The net amounts added to or withdrawn from these provisions are included in the profit and loss account.
When a borrower is in default as regards repayment of principal or payment of interest for 90 days or when, in the judgement
of management, the accrual of interest should cease before 90 days, such a loan is given non-accrual status. Any accrued but
unpaid interest is reversed and charged to current period interest revenue. Interest payments received during the period are
recorded as interest income on a cash basis.
Receivables are written off and charged against the provision for loan losses when all the necessary legal procedures have been
completed and the amount of the loss is finally determined.
For more details, reference is made to the critical accounting policies.
Other assets
Assets that are part of the trading portfolio are stated at fair value, which generally means quoted prices. Changes in the fair
value, both realised and unrealised, on these assets are included in the profit and loss account.
Fixed-interest securities in the trading portfolio repurchased after issue by group companies and equity participations are stated
at the lower of cost and fair value. Unrealised losses and results on disposal of equity participations are included in the profit
and loss account.
Computer software that has been purchased or generated internally for internal use is capitalised and amortised on a straight-
line basis over its useful life. This period will generally not exceed three years.
Property under development is held with the intention to sell to third parties and is valued at direct construction cost incurred
up to the balance sheet date, including interest during construction and the group’s own development and supervision
expenses. Rented property and infrastructure works are valued at the estimated proceeds on private sale or the contractually
agreed selling price. The difference between the net proceeds on disposal and cost of property under development, rented
property and infrastructure works and any downward value adjustments are reflected in the profit and loss account.