Part of the Consolidated Financial Statements as of 31 December 2009; audited by KPMG AG Wirtschaftsprüfungsgesellschaft.

[12] Amendments to IAS 39 and IFRS 7, “Reclassification of Financial Assets”


Under the amendments to IAS 39 and IFRS 7 certain financial assets were reclassified in the second half of 2008 and the first quarter of 2009 from the financial assets at fair value through profit or loss and the available for sale classifications into the loans classification. The reclassifications were made in instances where management believed that the expected repayment of the assets exceeded their estimated fair values, which reflected the significantly reduced liquidity in the financial markets, and that returns on these assets would be optimized by holding them for the foreseeable future. Where this clear change of intent existed and was supported by an ability to hold and fund the underlying positions, the Group concluded that the reclassifications aligned the accounting more closely with the business intent. Assets that were reclassified in the third quarter 2008 were reclassified with effect from July 1, 2008 at the fair value as of that date. Where the business decision to reclassify was made by November 1, 2008 and these assets met the reclassification rules and the Group’s internal reclassification criteria, the reclassifications were made with effect from October 1, 2008. Business decisions to reclassify assets after November 1, 2008 were made on a prospective basis at fair value on the date reclassification was approved. The disclosures below detail the impact of the reclassifications on the Group.

The following table shows carrying values and fair values of the assets reclassified in 2008 and 2009.

 

Cumulative reclassifications  through Dec 31, 2009

Cumulative reclassifications  through Dec 31, 2008

 

Carrying value at reclassific-
ation date

31.12.2009

Carrying value at reclassific-
ation date

Dec 31, 2008

in € m.

Carrying value

Fair value

Carrying value

Fair Value

1

The decline of the carrying values since reclassification was mainly attributable to repayments, credit loss provisions and foreign exchange movements.

Assets reclassified in 2008:

 

 

 

 

 

 

Trading assets reclassified to loans

23,633

21,397

18,837

23,633

23,637

20,717

Financial assets available for sale reclassified to loans

11,354

9,267

8,290

11,354

10,787

8,628

Total financial assets reclassified to loans

34,987

30,6641

27,127

34,987

34,424

29,345

Assets reclassified in 2009:

 

 

 

 

 

 

Trading assets reclassified to loans

2,961

2,890

2,715

 

 

 

Total financial assets reclassified to loans

2,961

2,890

2,715

 

 

 

The following table shows the ranges of effective interest rates based on weighted average rates by business and the expected recoverable cash flows estimated at reclassification date.

 

Cumulative reclassifications through Dec 31, 2009

Cumulative reclassifications through Dec 31, 2008

in € bn.  
(unless stated otherwise)

Trading assets reclassified to loans

Financial assets available for sale reclassified to loans

Trading assets reclassified to loans

Financial assets available for sale reclassified to loans

Effective interest rates at reclassification date:

 

 

 

 

upper range

13.1 %

9.9 %

13.1 %

9.9 %

lower range

2.8 %

3.9 %

2.8 %

3.9 %

Expected recoverable cash flows at  reclassification date

39.6

17.6

35.9

17.6

The additional impact on the Group’s income statement and shareholders’ equity if the reclassifications had not been made is shown in the table below.

in € m.

2009

20081

1

Reclassifications were made from 1 July 2008 and so the 2008 balances represent a six month period.

Unrealized fair value losses on the reclassified trading assets,  gross of provisions for credit losses

(884)

(3,230)

Impairment losses on the reclassified financial assets available for sale  which were impaired

(9)

(209)

Movement in shareholders’ equity representing additional unrealized fair value gains (losses) on the reclassified financial assets available for sale

1,147

(1,826)

After reclassification, the pre-tax contribution of all reclassified assets to the income statement was as follows.

in € m.

2009

20081

1

Reclassifications were made from 1 July 2008 and so the 2008 balances represent a six month period.

Interest income

1,368

659

Provision for credit losses

(1,047)

(166)

Income before income taxes on reclassified trading assets

321

493

Interest income

227

258

Provision for credit losses

(205)

(91)

Income before income taxes on reclassified financial assets available for sale

22

167

Prior to their reclassification, assets reclassified in 2009 contributed fair value losses of € 252 million to the income statement for the year ended December 31, 2008 and fair value losses of € 48 million to the income statement for the year ended December 31, 2009.

Prior to their reclassification, assets reclassified from trading in 2008 contributed fair value losses of € 1.8 billion to the income statement for the year ended December 31, 2008 and € 613 million of fair value losses for the year ended December 31, 2007. Assets reclassified from available for sale during 2008 contributed, prior to their reclassification, impairment charges of € 174 million to the income statement and additional unrealized losses of € 736 million to the consolidated statement of recognized income and expense for the year ended December 31, 2008 and no impairment losses and additional unrealized losses of € 275 million to the consolidated statement of recognized income and expense for the year ended December 31, 2007.

As of the reclassification dates, unrealized fair value losses recorded directly in shareholders’ equity amounted to € 1.1 billion, which relate to reclassifications made during 2008. This amount is released from shareholders’ equity to the income statement on an effective interest rate basis. Where the asset subsequently becomes impaired the amount recorded in shareholders’ equity relating to the impaired asset is released to the income statement at the impairment date.

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