ING Direct 2011 Annual Report Download - page 112

Property developed and 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 carrying value.
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 the profit and loss account) 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 recognised in 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 carrying value is recognised in the profit and loss account under Other income.
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.
ING Group as the lessee
The leases entered into by ING Group are primarily operating leases. The total payments made under operating leases are recognised
in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 penalty payment to be made to the lessor is recognised
asan expense in the period in which termination takes place.
ING 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.
ACQUISITIONS, GOODWILL AND OTHER INTANGIBLE ASSETS
Acquisitions and goodwill
ING Group’s acquisitions are accounted for using the acquisition method of accounting. The consideration for each acquisition is measured
at the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued in
exchange for control of the acquire. 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.
Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration
arrangement, measured at its acquisition-date fair value. Subsequent changes in the fair value of contingent consideration classified as an
asset or liability are accounted for in accordance with relevant IFRSs, taking into account the initial accounting period below. Changes in
the fair value of the contingent consideration classified as equity are not recognised.
Accounting policies for the consolidated annual accounts of ING Group continued
110 ING Group Annual Report 2011