Impact of Changes in Accounting Principles

 (unaudited)

Recently Adopted Accounting Pronouncements

The following are those accounting pronouncements which are relevant to the Group and which have been applied in the preparation of these condensed consolidated interim financial statements.

IAS 1

On January 1, 2013, the Group adopted the amendments to IAS 1, “Presentation of Financial Statements” which require companies to group together items within other comprehensive income (“OCI”) that may be reclassified to the statement of income. The amendments also reaffirm existing requirements that items in OCI and profit or loss should be presented as either a single statement or two separate statements. The adoption of the amendments did not have a material impact on presentation of other comprehensive income in the Group’s consolidated financial statements.

IFRS 10, IFRS 11, IAS 27 and IAS 28

On January 1, 2013, the Group adopted IFRS 10, “Consolidated Financial Statements”, IFRS 11, “Joint Arrangements”, a revised version of IAS 27, “Separate Financial Statements”, and a revised version of IAS 28, “Investments in Associates and Joint Ventures” which have been amended for conforming changes based on the issuance of IFRS 10 and IFRS 11. The Group also adopted the amendments to the transition guidance for IFRS 10 and IFRS 11. The Group recorded a cumulative charge to total equity as at January 1, 2012 of € 195 million, net of tax, for the initial adoption of these standards. Comparative information for 2012 has been restated.

IFRS 10 replaces IAS 27, “Consolidated and Separate Financial Statements” and SIC-12, “Consolidation – Special Purpose Entities”, and establishes a single control model that applies to all entities, including those that were previously considered special purpose entities under SIC-12. An investor controls an investee when it has power over the relevant activities, exposure to variable returns from the investee, and the ability to affect those returns through its power over the investee. The assessment of control is based on all facts and circumstances and the conclusion is reassessed if there is an indication that there are changes in facts and circumstances.

IFRS 11 supersedes IAS 31, “Interests in Joint Ventures” and SIC-13, “Jointly-controlled Entities – Non-monetary Contributions by Venturers”. IFRS 11 classifies joint arrangements as either joint operations or joint ventures and focuses on the nature of the rights and obligations of the arrangement. IFRS 11 requires the use of the equity method of accounting for joint arrangements by eliminating the option to use the proportionate consolidation method, which had not been applied by the Group. The adoption of IFRS 11 did not have an impact on the consolidated financial statements.

The following tables reflect the incremental impacts of the adoption of these standards on the Group’s consolidated balance sheet and statement of income, respectively, as at December 31, 2012.

in € m.

Dec 31, 2012

Assets

 

Interest-earning deposits with banks

1,088

Financial assets at fair value through profit or loss

8,958

Loans

94

Other assets

(189)

Total assets

9,951

 

 

Liabilities

 

Financial liabilities at fair value through profit or loss

675

Other short-term borrowings

601

Long-term debt

(772)

Other liabilities

9,628

Total liabilities

10,133

 

 

Equity

 

Total shareholders’ equity

(14)

Noncontrolling interests

(168)

Total equity

(182)

 

 

in € m.

2012

Net interest income

83

Net gains (losses) on financial assets/liabilities at fair value through profit and loss

435

Commissions and fee income

(127)

Other income (loss)

(393)

Income before income taxes

(6)

Income tax expense

3

Net income

(3)

The majority of the impacts above arose from the consolidation of certain funds where the Group provides guarantee protection to third parties over the fund’s assets. Under IFRS 10 the Group was deemed to have power over the funds as it acts as investment manager and cannot be removed, has variable returns through significant unit holdings and/or the guarantee, and is able to influence the returns of the funds through its power.

IAS 19

On January 1, 2013, the Group adopted IAS 19R, “Employee Benefits” which introduces the net interest approach which is based on the discount rate used to measure the defined benefit obligation multiplied with the net defined benefit asset/liability recognized on the balance sheet, both as determined at the start of the reporting period and adjusted for expected changes in the net defined benefit asset/liability due to contributions and benefit payments during the year. This measure of net interest cost replaces the interest cost on the defined benefit obligation and the expected return on plan assets. The standard also requires immediate recognition of remeasurement effects associated with all post-employment benefits through other comprehensive income such as actuarial gains and losses and any deviations between the actual return on plan assets and the return implied by the net interest cost, which is already consistent with the Group’s previous accounting policy. In addition, IAS 19R requires immediate recognition of any past service cost and will enhance the disclosure requirements for defined benefit plans. For 2012, the adoption of the net interest approach resulted in a reduction of the expenses for defined benefit plans and consequently increased actuarial losses recognized in other comprehensive income by € 36 million so that the impact on total comprehensive income and total shareholders’ equity was neutral.

IFRS 7

In December 2011, the IASB issued amendments to IFRS 7, “Disclosures – Offsetting Financial Assets and Financial Liabilities” (“IFRS 7R”) requiring extended disclosures to allow investors to better compare financial statements prepared in accordance with IFRS or U.S. GAAP. The amendments were effective for annual periods beginning on or after January 1, 2013 but also interim periods thereafter. The adoption of the amendments in the first quarter 2013 did not have a material impact on the Group’s consolidated financial statements. The Group has provided the extended disclosures in the note “Offsetting Financial Assets and Financial Liabilities” of this Interim Report.

IFRS 13

On January 1, 2013, the Group adopted IFRS 13, “Fair Value Measurement” which establishes a single source of guidance for fair value measurement under IFRS. IFRS 13 provides a revised definition of fair value and guidance on how it should be applied where its use is already required or permitted by other standards within IFRS. As such it permits an exception, through an accounting policy election, to measure the fair value of a portfolio of financial assets and financial liabilities on the basis of the net open risk position when certain criteria are met. The Group has elected to measure certain portfolios of financial instruments, such as derivatives, that meet those criteria on the basis of the net open risk position. IFRS 13 also introduces more comprehensive disclosure requirements on fair value measurement. There was no impact on the consolidated financial statements from the adoption of the measurement requirements of IFRS 13. The Group has provided the disclosures as required by IFRS 13 and IAS 34 in the notes “Financial Instruments carried at Fair Value” and “Fair Value of Financial Instruments not carried at Fair Value”, respectively, of this Interim Report.

Improvements to IFRS 2009-2011 Cycle

In May 2012, the IASB issued amendments to IFRS, which resulted from the IASB’s annual improvement project. They comprise amendments that result in accounting changes for presentation, recognition or measurement purposes as well as terminology or editorial amendments related to a variety of individual IFRS standards. The adoption of the amendments did not have a material impact on the Group’s consolidated financial statements.

New Accounting Pronouncements

IAS 32, “Offsetting Financial Assets and Financial Liabilities”, IFRS 9 and IFRS 9R, “Financial Instruments” will be relevant to the Group but were not effective as of June 30, 2013 and therefore have not been applied in preparing these financial statements.

IAS 36, “Recoverable Amount Disclosures for Non-Financial Assets (Amendment to IAS 36)”, addresses the disclosure of information about the recoverable amount of impaired assets if that amount is based on fair value less costs of disposal. The amendments will become effective for the Group on January 1, 2014.

IAS 39, “Novation of Derivatives and Continuation of Hedge Accounting (Amendments to IAS 39)”, allows hedge accounting to continue in a situation where a derivative, which has been designated as a hedging instrument, is novated to effect clearing with a central counterparty as a result of laws or regulation, if specific conditions are met. The amendments will become effective for the Group on January 1, 2014.

IFRS 12, “Disclosure of Interests in Other Entities (including amendments to the transition guidance for IFRS 10-12 issued in June 2012)”, which requires annual disclosures of the nature, associated risks, and financial effects of interests in subsidiaries, joint arrangements, associates and unconsolidated structured entities became effective for the Group on January 1, 2013 but will only be applied in the 2013 year-end financial statements.

IFRIC 21, “Levies”, an interpretation of IAS 37 “Provisions, Contingent Liabilities and Contingent Assets”, clarifies that an entity recognises a liability for a levy only when the activity that triggers payment, as identified by the relevant legislation, occurs. The interpretation will become effective for the Group on January 1, 2014.

While approved by the IASB, the above standards and interpretation – except for IAS 32, “Offsetting Financial Assets and Financial Liabilities” and IFRS 12, “Disclosure of Interests in Other Entities” – have yet to be endorsed by the EU.

The Group is currently evaluating the potential impact that the adoption of the amendment to IAS 32, amendment to IAS 39, IFRS 9, IFRS 9R and IFRIC 21 will have on its consolidated financial statements. The adoption of IFRS 12 and the amendment to IAS 36 will only have a disclosure impact on the consolidated financial statements.