ING Direct 2011 Annual Report Download - page 321

DELTA HEDGE
The delta hedge minimises the exposure of the employee option
scheme by holding an appropriate number of (depositary receipts
for) ordinary shares. The exposure is reassessed every quarter and,
if necessary, ordinary shares are bought from the market. In
December 2010 ING Groep N.V. announced that it will no longer
rebalance its hedge portfolio. This decision is an effort to simplify
the management and administration of ING’s various employee
share and option programmes. The remaining shares in the hedge
portfolio will be used to fund the obligations arising out of exercise
and vesting. Once all shares in the hedge portfolio are used ING
will fund these obligations by issuing new shares.
DEPOSITARY RECEIPT
Depositary receipt for ordinary and preference shares, issued
by the ING Trust Office, in exchange for ordinary and preference
shares issued by ING Group.
DERIVATIVES
Financial instruments, which include forwards, futures, options
and swaps, whose value is based on an underlying asset, index
or reference rate.
DISCOUNTED BILLS
Bills that are sold under deduction of interest giving the owner the
right to receive an amount of money on a given date.
DISCONTINUED OPERATIONS
When a group of assets that is classified as held for sale represents
a major line of business or geographical area the disposal group
classifies as discontinued operations.
DISCRETIONARY PARTICIPATION FEATURE
A contractual right to receive, as a supplement to guaranteed
benefits, additional benefits that: are likely to be a significant
portion of the total contractual benefits, whose amount or timing
is contractually at the discretion of the insurer, that are contractually
based on the performance of a specified pool or type of contract,
(un)realised investment returns on a specified pool of assets held by
the insurer, or the profit of the company, fund, or other entity that
issues the contract.
DISPOSAL GROUP HELD FOR SALE
When groups of assets are to be sold together in a single
transaction, and the sale is considered to be highly probable, the
disposal group is classified separately in the balance sheet as Assets
held for sale. A sale is highly probable when management is
demonstrably committed to the sale, which is expected to occur
within one year from the date of classification as held for sale.
Liabilities directly associated with those assets, and that are
included in the transaction are to be included in the balance sheet
as ‘liabilities held for sale’.
EARNINGS SENSITIVITY (ES)
Measures the impact on earnings resulting from changes in
economic and financial conditions over a one-year horizon.
ECONOMIC CAPITAL
The minimum amount of capital that is required to absorb
unexpected losses in times of severe stress. Given ING Group’s
A target rating, ING calculates economic capital requirements
for ING Bank at a 99.95% level of confidence. This confidence
level is derived from the historical default frequency of AA-rated
companies (probability of default of 1 in 2000 years or 0.05%).
ForING Insurance the economic capital is calculated based on a
confidence level of 99.5%, which is aligned with the Solvency II.
EFFECTIVE INTEREST METHOD
A method of calculating the amortised cost of a financial asset
or liability and of allocating the interest income or interest expense
over the relevant period.
ELIMINATION
A process by which intercompany transactions are matched with
each other and deducted, so that the assets, liabilities, income and
expenses are not inflated.
EMPLOYEE BENEFITS
All forms of consideration given by a company in exchange for
service rendered by (current and former) employees.
FAIR VALUE
The amount for which an asset could be exchanged, or a liability
settled, between knowledgeable, willing parties in an arm’s length
transaction.
FINANCE LEASE
A lease that transfers substantially all the risks and rewards
associated with ownership of an asset to the lessee. Title may
or may not eventually be transferred.
FINANCIAL ASSET
Any asset that is:
• cash;
• an equity instrument of another company;
• a contractual right to;
– receive cash or another financial asset from another
company; or
– exchange financial instruments with another company
under conditions that are potentially favourable; or
– certain contract that will or may be settled in ING’s own
equity instruments.
FINANCIAL INSTRUMENTS
Contracts that give rise to both a financial asset for one company
and a financial liability or equity instrument for another company.
FINANCIAL LIABILITY
Any liability that is a contractual obligation:
• to deliver cash or another financial asset to another company; or
• to exchange financial instruments with another company under
conditions that are potentially unfavourable; or
• certain contracts that will or may be settled in ING’s own
equity instruments.
Financial glossary 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
319ING Group Annual Report 2011