Basis of Segment presentation

The following segment information has been prepared in accordance with IFRS 8, “Operating Segments,” which defines requirements for the disclosure of financial information of an entity’s operating segments. IFRS 8 replaces IAS 14, “Segment Reporting”. It follows the “management approach”, which is the basis for steering our businesses and the basis on which we have presented segment information in the past. IFRS 8, which has not yet been endorsed by the EU, was approved by the IASB in November 2006 and is effective for reporting periods beginning on or after January 1, 2009. Early adoption is permitted.

The main differences between IFRS 8, “Operating Segments,” and IAS 14, “Segment Reporting,” refer to the identification of segments and to the accounting methods used to measure segment results.

Identification of segments

IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the entity that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess its performance. IAS 14 requires an entity to identify two sets of segments, business and geographical, using a risks and rewards approach, with the entity's “system of internal financial reporting to key management personnel” serving as the starting point for the identification of such segments.

Risks and rewards in Deutsche Bank are predominantly affected by the products and services offered by its individual businesses, and as such no different business segments, were identified under IFRS 8 than under IAS 14.

Accounting methods

IFRS 8 requires the disclosure of the information used by the chief operating decision maker to allocate resources and to assess performance. IAS 14 requires segment information to be prepared in conformity with the accounting policies used for the consolidated financial statements.

Management reporting in Deutsche Bank is generally based on IFRS. Non-IFRS-compliant accounting methods are only established on rare occasions and could represent either valuation or classification differences. The largest valuation differences relate to mark-to-market accounting in management reporting versus accrual accounting under IFRS (e.g. for certain financial instruments in our treasury books in CB&S and PBC) and to the recognition of trading results from own shares in revenues in management reporting (mainly in CB&S) as opposed to a recognition in equity under IFRS. The major classification difference relates to minority interest, which is a component of pre-tax income in management reporting and a component after net income in the IFRS income statement.

Segment reporting under IFRS 8 requires a presentation of the segment results based on management reporting methods and a reconciliation between the results of the business segments and the consolidated financial statements. Under IFRS 8 we report the reconciliation within the
“Consolidation & Adjustments” section. IAS 14 requires business segments to be presented on an IFRS basis, and adjustments to reconcile between management reporting methods and IFRS have to be reflected within the results of the individual business segments. For further details regarding the reconciliation of segmental results from IFRS 8 to IAS 14, please refer to Reconciliation of Segmental Results of this report.

Composition of the business segments

The Group’s segment reporting follows the organizational structure as reflected in its internal management reporting systems, which are the basis for assessing the financial performance of the business segments and for allocating resources to the business segments.

During the first half of 2007, there were no material changes in the organizational structure which affected the composition of the business segments. Restatements due to minor changes in the organizational structure have been implemented in the presentation of prior period comparables if they were considered in our management reporting systems.

The following describes certain transactions with a material impact on our segment operations:

•  Effective January 1, 2007, the Group completed the acquisition of Berliner Bank, which is included in the corporate division Private & Business Clients.
• Effective January 2, 2007, the Group announced the completion of the acquisition of MortgageIT Holdings, Inc, a residential mortgage real estate investment trust (REIT) in the U.S. The business is included in the corporate division Corporate Banking & Securities.
• On January 22, 2007, the Group sold the second tranche (41 %) of PBC’s Italian BankAmericard processing activities to Istituto Centrale delle Banche Popolari Italiane (“ICBPI”), the central body of Italian cooperative banks. The business was part of our corporate division Private & Business Clients.
• On June 1, 2007, the Group completed the sale of the Australian Asset Management domestic manufacturing operations to Aberdeen Asset Management. The business was included within the corporate division Asset and Wealth Management.