ING Direct 2015 Annual Report Download - page 51

Contents
Who we are
Report of the
Management
Board
Corporate
Governance
Consolidated
annual accounts
Parent company
annual accounts
Other
information
Additional
information
Notes to the Consolidated annual accounts of ING Bank - continued
Income recognition
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, ING Bank 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 ING Bank 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 Bank 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. The fair value of equity-settled share-based payment transactions is
measured at the grant 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.
Fiduciary activities
ING Bank commonly acts as trustee and in other fiduciary capacities that result in the holding or placing of assets on behalf of
individuals, trusts, retirement benefit plans and other institutions. These assets and income arising thereon are excluded from these
financial statements, as they are not assets of ING Bank.
Statement of cash flows
The statement of cash flows is prepared in accordance with the indirect method, classifying cash flows as cash flows from operating,
investing and financing activities. In the net cash flow from operating activities, the result before tax is adjusted for those items in the
profit and loss account and changes in balance sheet items, which do not result in actual cash flows during the year.
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