ING Direct 2009 Annual Report Download - page 102

ING Group’s interests in jointly controlled entities are accounted for using proportionate consolidation. ING Group proportionately
consolidates its share of the joint ventures’ individual income and expenses, assets and liabilities, and cash flows on a line-by-line basis
with similar items in ING Group’s financial statements. ING Group recognises the portion of gains or losses on the sale of assets to the joint
venture that is attributable to the other venturers. ING Group does not recognise its share of profits or losses from the joint venture that
results from the purchase of assets by ING Group from the joint venture until it resells the assets to an independent party. However, if a
loss on the transaction provides evidence of a reduction in the net realisable value of current assets or an impairment loss, the loss is
recognised immediately.
USE OF ESTIMATES AND ASSUMPTIONS
The preparation of the consolidated financial statements necessitates the use of estimates and assumptions. These estimates and
assumptions affect the reported amounts of the assets and liabilities and the amounts of the contingent liabilities at the balance sheet
date, as well as reported income and expenses for the year. The actual outcome may differ from these estimates.
The process of setting assumptions is subject to internal control procedures and approvals, and takes into account internal and external
studies, industry statistics, environmental factors and trends, and regulatory requirements.
SEGMENT REPORTING
An operating segment is a distinguishable component of the Group engaged in providing products or services that is subject to risks and
returns that are different from those of other operating segments. A geographical area is a distinguishable component of the Group
engaged in providing products or services within a particular economic environment that is subject to risks and returns that are different
from those of segments operating in other economic environments. The geographical analyses are based on the location of the office
from which the transactions are originated.
ANALYSIS OF INSURANCE BUSINESS
Where amounts in respect of insurance business are analysed into ‘life’ and ‘non-life’, health and disability insurance business which is
similar in nature to life insurance business is included in ‘life’.
FOREIGN CURRENCY TRANSLATION
Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic
environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in euros, which is
ING Group’s functional and presentation currency.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions. Exchange rate differences resulting from the settlement of such transactions and from the translation at year-end exchange
rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profit and loss account, except when
deferred in equity as part of qualifying cash flow hedges or qualifying net investment hedges.
Exchange rate differences on non-monetary items, measured at fair value through profit and loss, are reported as part of the fair value
gain or loss. Non-monetary items are retranslated at the date fair value is determined. Exchange rate differences on non-monetary items
measured at fair value through the revaluation reserve are included in the revaluation reserve in equity.
Exchange rate differences in the profit and loss account are generally included in Net trading income. Reference is made to Note 41 ‘Net
trading income’, which discloses the amounts included in the profit and loss account. Exchange rate differences relating to the disposal of
Available-for-sale debt and equity securities are considered to be an inherent part of the capital gains and losses recognised in Investment
income. As mentioned in Group companies below any exchange rate differences deferred in equity are recognised in the profit and loss
account in Net result on disposals of group companies. Reference is also made to Note 13 ‘Shareholders’ equity (parent)/non-voting equity
securities’, which discloses the amounts included in the profit and loss account.
Group companies
The results and financial position of all group companies that have a functional currency different from the presentation currency are
translated into the presentation currency as follows:
Assets and liabilities included in each balance sheet are translated at the closing rate at the date of that balance sheet;•
Income and expenses included in each profit and loss account are translated at average exchange rates (unless this average is not a •
reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses
are translated at the dates of the transactions); and
All resulting exchange rate differences are recognised in a separate component of equity.•
On consolidation, exchange rate differences arising from the translation of a monetary item that forms part of the net investment in a
foreign operation, and of borrowings and other instruments designated as hedges of such investments, are taken to shareholders’ equity.
When a foreign operation is sold, these exchange rate differences are recognised in the profit and loss account as part of the gain or loss
on sale.
2.1 Consolidated annual accounts
ING Group Annual Report 2009
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Accounting policies for the consolidated balance sheet and profit and loss account of ING Group (continued)