ING Direct 2009 Annual Report Download - page 107

IMPAIRMENT OF OTHER FINANCIAL ASSETS
At each balance sheet date, the Group assesses whether there is objective evidence that a financial asset or a group of financial assets is
impaired. In the specific case of equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the
security below its cost is considered in determining whether the assets are impaired. ‘Significant’ and ‘prolonged’ are interpreted on a
case-by-case basis for specific equity securities; generally 25% and 6 months are used as triggers. If any objective evidence exists for
available-for-sale debt and equity investments, the cumulative loss – measured as the difference between the acquisition cost and the
current fair value, less any impairment loss on that financial asset previously recognised in net result – is removed from equity and
recognised in the profit and loss account. Impairment losses recognised on equity instruments can never be reversed. If, in a subsequent
period, the fair value of a debt instrument classified as available-for-sale increases and the increase can be objectively related to an event
occurring after the impairment loss was recognised in the profit and loss account, the impairment loss is reversed through the profit and
loss account.
INVESTMENTS IN ASSOCIATES
Associates are all entities over which the Group has significant influence but not control. Significant influence generally results from a
shareholding of between 20% and 50% of the voting rights, but also is the ability to participate in the financial and operating policies
through situations including, but not limited to one or more of the following:
Representation on the board of directors;•
Participation in the policymaking process; and•
Interchange of managerial personnel. •
Investments in associates are initially recognised at cost and subsequently accounted for using the equity method of accounting.
The Group’s investment in associates (net of any accumulated impairment loss) includes goodwill identified on acquisition. The Group’s
share of its associates’ post-acquisition profits or losses is recognised in the profit and loss account, and its share of post-acquisition
changes in reserves is recognised in equity. The cumulative post-acquisition changes are adjusted against the carrying amount of the
investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured
receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the
associates. Unrealised losses are also eliminated unless they provide evidence of an impairment of the asset transferred. Accounting
policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group. The reporting
dates of all material associates are consistent with the reporting date of the Group.
For interests in investment vehicles the existence of significant influence is determined taking into account both the Group’s financial
interests for own risk and its role as investment manager.
REAL ESTATE INVESTMENTS
Real estate investments are stated at fair value at the balance sheet date. Changes in the carrying amount resulting from revaluations are
recognised in the profit and loss account. On disposal the difference between the sale proceeds and book value is recognised in the profit
and loss account.
The fair value of real estate investments is based on regular appraisals by independent qualified valuers. Each year every property is valued
either by an independent valuer or internally. Indexation is used when a property is valued internally. The index is based on the results of
the independent valuations carried out in that period. Market transactions, and disposals made by the Group, are monitored as part of the
procedures to back test the indexation methodology. All properties are valued independently at least every five years.
PROPERTY AND EQUIPMENT
Property in own use
Land and buildings held for own use are stated at fair value at the balance sheet date. Increases in the carrying amount arising on
revaluation of land and buildings held for own use are credited to the revaluation reserve in shareholders’ equity. Decreases that offset
previous increases of the same asset are charged against the revaluation reserve directly in equity; all other decreases are charged to the
profit and loss account. Increases that reverse a revaluation decrease on the same asset previously recognised in net result are recognised
in the profit and loss account. Depreciation is recognised based on the fair value and the estimated useful life (in general 20–50 years).
Depreciation is calculated on a straight-line basis. On disposal the related revaluation reserve is transferred to retained earnings.
The fair values of land and buildings are based on regular appraisals by independent qualified valuers. Subsequent expenditure is included
in the asset’s carrying amount when it is probable that future economic benefits associated with the item will flow to the Group and the
cost of the item can be measured reliably.
Property obtained from foreclosures
Property obtained from foreclosures is stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price
in the ordinary course of business, less applicable variable selling expenses. Property obtained from foreclosures is included in Other assets
– Property held for sale.
2.1 Consolidated annual accounts
ING Group Annual Report 2009 105
Accounting policies for the consolidated balance sheet and profit and loss account of ING Group (continued)