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Basis of Accounting
Deutsche Bank Aktiengesellschaft (“Deutsche Bank” or the “Parent”) is a stock corporation organized under the laws of the Federal Republic of Germany. Deutsche Bank together with all entities in which Deutsche Bank has a controlling financial interest (the “Group”) is a global provider of a full range of corporate and 
investment banking, private clients and asset management products and services. For a discussion of the Group’s business segment information, see Note [2].
The accompanying consolidated financial statements are presented in euros, the presentation currency of the Group, and have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and endorsed by the European Union (“EU”). Since the Group does not use the “carve-out” relating to hedge accounting included in IAS 39, “Financial Instruments: Recognition and Measurement,” as endorsed by the EU, its financial statements fully comply with IFRS as issued by the IASB. In accordance with IFRS 4, “Insurance Contracts”, the Group has applied its previous accounting practices (U.S. GAAP) for insurance contracts. The date of transition to IFRS for the Group was January 1, 2006.
The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions for certain categories of assets and liabilities. Areas where this is required include the fair value of certain financial assets and liabilities, the allowance for loan losses, the impairment of assets other than loans, goodwill and intangibles, the recognition and measurement of deferred tax assets, provisions for uncertain income tax positions, legal and regulatory contingencies, the reserves for insurance and investment contracts, reserves for pensions and similar obligations. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the balance sheet date, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from management’s estimates.
In preparation of the 2008 financial statements, the Group made a number of minor adjustments, with immaterial effect, to prior year footnote disclosures. The Group has assessed the impact of errors on current and prior periods and concluded that the following described adjustments are required to comparative amounts or the earliest opening balance sheet. The Group also voluntarily elected to change its accounting policy for the recognition of actuarial gains and losses related to post-employment benefits.
|
Balance |
Change in accounting policy |
Adjustments |
Balance | |||
|---|---|---|---|---|---|---|
|
in € m. |
|
Defined benefit plan accounting |
LCH Off- |
Interest |
Income tax liabilities |
|
|
December 31, 2006 |
|
|
|
|
|
|
|
Balance Sheet |
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
Financial assets at fair value through profit or loss |
1,104,650 |
|
(64,108) |
|
|
1,040,542 |
|
Deferred tax assets |
4,332 |
31 |
|
|
|
4,363 |
|
Other assets |
139,021 |
164 |
|
|
|
139,185 |
|
Liabilities: |
|
|
|
|
|
|
|
Financial liabilities at fair value through profit or loss |
694,619 |
|
(64,108) |
|
|
630,511 |
|
Other liabilities |
144,129 |
15 |
|
|
|
144,144 |
|
Liabilities for current tax |
4,033 |
|
|
|
(327) |
3,706 |
|
Deferred tax liabilities |
2,285 |
96 |
|
|
|
2,381 |
|
Equity: |
|
|
|
|
|
|
|
Retained earnings |
20,451 |
84 |
|
|
365 |
20,900 |
|
Net gains (losses) not recognized in the income statement: |
|
|
|
|
|
|
|
Foreign currency translation, net of tax |
(760) |
|
|
|
(38) |
(798) |
|
|
|
|
|
|
|
|
|
December 31, 2007 |
|
|
|
|
|
|
|
Income Statement |
|
|
|
|
|
|
|
Interest and similar income |
67,706 |
|
|
(3,031) |
|
64,675 |
|
Interest expense |
58,857 |
|
|
(3,031) |
|
55,826 |
|
Balance Sheet |
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
Financial assets at |
1,474,103 |
|
(96,092) |
|
|
1,378,011 |
|
Deferred tax assets |
4,772 |
5 |
|
|
|
4,777 |
|
Other assets |
182,897 |
741 |
|
|
|
183,638 |
|
Liabilities: |
|
|
|
|
|
|
|
Financial liabilities at fair value through profit or loss |
966,177 |
|
(96,092) |
|
|
870,085 |
|
Other liabilities |
171,509 |
(65) |
|
|
|
171,444 |
|
Liabilities for current tax |
4,515 |
|
|
|
(294) |
4,221 |
|
Deferred tax liabilities |
2,124 |
256 |
|
|
|
2,380 |
|
Equity: |
|
|
|
|
|
|
|
Retained earnings |
25,116 |
570 |
|
|
365 |
26,051 |
|
Net gains (losses) not recognized in the income statement: |
|
|
|
|
|
|
|
Foreign currency translation, net of tax |
(2,450) |
(15) |
|
|
(71) |
(2,536) |
Employee Benefits: Defined Benefit Accounting
In the fourth quarter 2008, the Group changed its accounting policy for the recognition of actuarial gains and losses related to post-employment benefits for defined benefit plans. On transition to IFRS, the Group elected to recognize all cumulative actuarial gains and losses as an opening retained earnings adjustment in accordance with the transition provisions of IFRS 1, “First-Time Adoption of IFRS”. The Group’s accounting policy for future recognition of actuarial gains and losses was to defer and amortize to earnings based on the 10 % “corridor approach”. The Group has elected to voluntarily change its accounting policy from the corridor approach to immediate recognition of actuarial gains and losses in shareholders’ equity in the period in which they arise. In accordance with IFRS, the change was applied retrospectively. The change in accounting policy is considered to provide more relevant information about the Group’s financial position, as it recognizes economic events in the period in which they occur. The retrospective adjustments had an impact on the consolidated balance sheet and the consolidated statement of recognized income and expense but not on the consolidated statement of income or consolidated cash flow statement.
Offsetting
In second quarter 2008, the Group concluded that it meets the criteria required to offset the positive and negative market values of OTC interest rate swaps transacted with the London Clearing House (“LCH”). Under IFRS, positions are netted by currency and across maturities. The application of offsetting had no impact on the consolidated income statement or shareholder’s equity.
The presentation of interest and similar income and interest expense was adjusted with no impact on net interest income.
Adjustment of Current Tax Liability
In the fourth quarter 2008, the Group determined that it had continued to report tax liabilities for periods prior to 2006 which were not required. Current tax liabilities were retrospectively adjusted by the amounts in the table above, with related adjustments to opening retained earnings and opening foreign currency translation reserves where appropriate.
The following is a description of the significant accounting policies of the Group. Other than as previously and otherwise described, these policies have been consistently applied for 2006, 2007 and 2008.
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