14 – Amendments to IAS 39 and IFRS 7, “Reclassification of Financial Assets”


Under the amendments to IAS 39 and IFRS 7, issued in October 2008, certain financial assets were reclassified in the second half of 2008 and the first quarter 2009 from the financial assets at fair value through profit or loss and the available for sale classifications into the loans classification. No reclassifications have been made since the first quarter 2009.

The Group identified assets, eligible under the amendments, for which at the reclassification date it had a clear change of intent and ability to hold for the foreseeable future rather than to exit or trade in the short term. The reclassifications were made at the fair value of the assets at the reclassification date.

Reclassified Financial Assets

in € bn.
(unless stated otherwise)

Trading assets reclassified to loans

Financial assets available for sale reclassified to loans

Carrying value at reclassification date

26.6

11.4

Unrealized fair value losses in accumulated other comprehensive income

(1.1)

Effective interest rates at reclassification date:

 

 

upper range

13.1 %

9.9 %

lower range

2.8 %

3.9 %

Expected recoverable cash flows at reclassification date

39.6

17.6

Carrying values and fair values by asset type of assets reclassified in 2008 and 2009

 

Dec 31, 2012

Dec 31, 2011

in € m.

Carrying value

Fair value

Carrying value

Fair Value

1

Securitized assets consist of mortgage- and asset-backed securities.

2

During 2012 the Group sold assets that were previously classified as trading with a carrying value of € 3.0 billion, including € 1.8 billion of mortgage-backed securities and € 1.2 billion of asset-backed securities.

3

During 2012 the Group sold assets that were previously classified as available for sale with a carrying value of € 0.7 billion, including € 0.6 billion of asset-backed securities.

Trading assets reclassified to loans:

 

 

 

 

Securitized assets1

3,599

2,783

6,733

5,501

Debt securities

795

757

859

823

Loans

6,810

6,226

7,754

7,117

Total trading assets reclassified to loans

11,2042

9,766

15,346

13,441

Financial assets available for sale reclassified to loans:

 

 

 

 

Securitized assets1

4,501

4,218

6,220

5,359

Loans

1,293

1,446

1,337

1,427

Total financial assets available for sale reclassified to loans

5,7943

5,664

7,557

6,786

Total financial assets reclassified to loans

16,998

15,430

22,903

20,227

Sales of reclassified assets are individually subject to a governance and approval process to determine if a sale is the best course of action for the Group’s overall profitability, capital position and regulatory compliance. During 2012 the Group sold reclassified assets with a carrying value of € 3.7 billion. Sales in this period resulted in net losses of € 177 million, driven by losses on disposal reported through other income of € 93 million and € 84 million relating to losses deemed to be impairments on disposal. The aforementioned governance and approval process determined that the assets sold were due to circumstances that were not foreseeable at the time of the reclassification, including amendments to the capital rules that led to significantly higher absolute capital requirements for the Group as a whole.

In addition to sales, the decrease in 2012 in the carrying value of reclassified assets previously classified as trading includes € 540 million attributable to restructuring of loans. The decrease also includes redemptions of € 695 million of asset-backed securities previously classified as available for sale. Provisions for credit losses taken during the period were mostly against loans formerly classified as trading and securitized assets formerly classified as available for sale.

Unrealized fair value gains (losses) that would have been recognized in profit or loss and net gains (losses) that would have been recognized in other comprehensive income if the reclassifications had not been made

in € m.

2012

2011

2010

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

38

(11)

120

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

(29)

(16)

(7)

Net gains (losses) recognized in other comprehensive income representing additional unrealized fair value gains (losses) on the reclassified financial assets available for sale which were not impaired

415

133

251

Pre-tax contribution of all reclassified assets to the income statement (after reclassification)

in € m.

2012

2011

2010

1

The significant decrease in Interest income for 2011 is mostly due to the restructuring of loans to Actavis Group that occurred in 2010 and are no longer part of the reclassified asset population.

2

Predominantly relates to gains and losses from the sale of reclassified assets.

3

Driven by increased sales of assets that were previously classified as available for sale during 2012.

Interest income

578

6911

1,154

Provision for credit losses

(186)

(186)

(278)

Other income2

(35)

34

1

Income before income taxes on reclassified trading assets

357

539

877

Interest income

139

153

146

Provision for credit losses

(228)

(1)

Other income2

(58)3

(1)

Income before income taxes on reclassified financial assets available for sale

(147)

152

145