ING Direct 2011 Annual Report Download - page 117

Reorganisation provisions include employee termination benefits when the Group is demonstrably committed to either terminating the
employment of current employees according to a detailed formal plan without possibility of withdrawal, or providing termination benefits
as a result of an offer made to encourage voluntary redundancy.
INCOME RECOGNITION
Gross premium income
Premiums from life insurance policies are recognised as income when due from the policyholder. For non-life insurance policies, gross
premium income is recognised on a pro-rata basis over the term of the related policy coverage. Receipts under investment contracts are
not recognised as gross premium income.
Interest
Interest income and expense are recognised in the profit and loss account using the effective interest method. The effective interest
method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest income or
interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or
receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the
financial asset or financial liability. When calculating the effective interest rate, the Group estimates cash flows considering all contractual
terms of the financial instrument (for example, prepayment options) but does not consider future credit losses. The calculation includes all
fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs
and all other premiums or discounts. Once a financial asset or a group of similar financial assets has been written down as a result of an
impairment loss, interest income is recognised using the rate of interest used to discount the future cash flows for the purpose of
measuring the impairment loss.
All interest income and expenses from trading positions and non-trading derivatives are classified as interest income and interest expenses in the
profit and loss account. Changes in the ‘clean fair value’ are included in Net trading income and Valuation results on non-trading derivatives.
Fees and commissions
Fees and commissions are generally recognised as the service is provided. Loan commitment fees for loans that are likely to be drawn down
are deferred (together with related direct costs) and recognised as an adjustment to the effective interest rate on the loan. Loan syndication
fees are recognised as income when the syndication has been completed and the Group has retained no part of the loan package for itself or
has retained a part at the same effective interest rate as the other participants. Commission and fees arising from negotiating, or participating
in the negotiation of, a transaction for a third party – such as the arrangement of the acquisition of shares or other securities or the purchase
or sale of businesses – are recognised on completion of the underlying transaction. Portfolio and other management advisory and service fees
are recognised based on the applicable service contracts as the service is provided. Asset management fees related to investment funds and
investment contract fees are recognised on a pro-rata basis over the period the service is provided. The same principle is applied for wealth
management, financial planning and custody services that are continuously provided over an extended period of time. Fees received and paid
between banks for payment services are classified as commission income and expenses.
Lease income
The proceeds from leasing out assets under operating leases are recognised on a straight-line basis over the life of the lease agreement.
Lease payments received in respect of finance leases when ING Group is the lessor are divided into an interest component (recognised
asinterest income) and a repayment component.
EXPENSE RECOGNITION
Expenses are recognised in the profit and loss account as incurred or when a decrease in future economic benefits related to a decrease
inan asset or an increase in a liability has arisen that can be measured reliably.
Share-based payments
Share-based payment expenses are recognised as a staff expense over the vesting period. A corresponding increase in equity is recognised
for equity-settled share-based payment transactions. A liability is recognised for cash-settled share-based payment transactions. The fair
value of equity-settled share-based payment transactions is measured at the grant date and the fair value of cash-settled share-based
payment transactions is measured at each balance sheet date. Rights granted will remain valid until the expiry date, even if the share based
payment scheme is discontinued. The rights are subject to certain conditions, including a pre-determined continuous period of service.
GOVERNMENT GRANTS
Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be
complied with. When the grant relates to an expense item, the grant is recognised over the period necessary to match the grant on a
systematic basis to the expense that it is intended to compensate. In such case, the grant is deducted from the related expense in the profit
and loss account.
Accounting policies for the consolidated annual accounts of ING Group continued
1 Who we are 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information
115ING Group Annual Report 2011