ING Direct 2009 Annual Report Download - page 108

Property under development
Property developed and under development for which ING Group has the intention to sell the property after its completion is included in
Other assets – Property held for sale.
Property under development for which ING Group has the intention to sell the property under development after its completion and
where there is not yet a specifically negotiated contract is measured at direct construction cost incurred up to the balance sheet date,
including borrowing costs incurred during construction and ING Group’s own directly attributable development and supervision
expenses less any impairment losses. Profit is recognised using the completed contract method (on sale date of the property). Impairment
is recognised if the estimated selling price in the ordinary course of business, less applicable variable selling expenses is lower
than bookvalue.
Property under development for which ING Group has the intention to sell the property under development after its completion and
where there is a specifically negotiated contract is valued using the percentage of completion method (pro rata profit recognition). The
stage of completion is measured by reference to costs incurred to date as percentage of total estimated costs for each contract.
Property under development is stated at fair value (with changes in fair value recognised in profit and loss) if ING Group has the intention
to recognise the property under development after completion as real estate investments.
Equipment
Equipment is stated at cost less accumulated depreciation and any impairment losses. The cost of the assets is depreciated on a straight
line basis over their estimated useful lives, which are generally as follows: for data processing equipment two to five years, and four to ten
years for fixtures and fittings. Expenditure incurred on maintenance and repairs is charged to the profit and loss account as incurred.
Expenditure incurred on major improvements is capitalised and depreciated.
Assets under operating leases
Assets leased out under operating leases in which ING Group is the lessor are stated at cost less accumulated depreciation and any
impairment losses. The cost of the assets is depreciated on a straight-line basis over the lease term. Reference is made to the section ‘Leases’.
Disposals
The difference between the proceeds on disposal and net book value is recognised in the profit and loss account.
Borrowing costs
Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is required to complete
and prepare the asset for its intended use. Borrowing costs are determined at the weighted average cost of capital of the project.
LEASES
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement at inception date.
The Group as the lessee
The leases entered into by ING Group are primarily operating leases. The total payments made under operating leases are charged to the
profit and loss account on a straight-line basis over the period of the lease.
When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of
penalty is recognised as an expense in the period in which termination takes place.
The Group as the lessor
When assets are held subject to a finance lease, the present value of the lease payments is recognised as a receivable under Loans and
advances to customers or Amounts due from banks. The difference between the gross receivable and the present value of the receivable is
unearned lease finance income. Lease income is recognised over the term of the lease using the net investment method (before tax),
which reflects a constant periodic rate of return. When assets are held subject to an operating lease, the assets are included under Assets
under operating leases.
PURCHASE ACCOUNTING, GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
ING Group’s acquisitions are accounted for under the purchase method of accounting, whereby the cost of the acquisitions is allocated to
the fair value of the assets, liabilities and contingent liabilities acquired. The initial accounting for the fair value of the net assets of the
companies acquired during the year may be determined only provisionally as the determination of the fair value could be complex and the
time between the acquisition and the preparation of the Annual Accounts could be limited. The initial accounting shall be completed
within a year of acquisition. Goodwill, being the difference between the cost of the acquisition (including assumed debt) and the Group’s
interest in the fair value of the acquired assets, liabilities and contingent liabilities as at the date of acquisition, is capitalised as an intangible
asset. The results of the operations of the acquired companies are included in the profit and loss account from the date control is obtained.
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)