Principles underlying financial statement reporting and notes

Fully consolidated companies

The con­sol­i­dated fi­nan­cial state­ments en­com­pass the fi­nan­cial state­ments of VP Bank Ltd, Vaduz, as well as those of its sub­- sidiaries, which are all pre­sented as a sin­gle eco­nomic unit. Sub­sidiaries which are di­rectly or in­di­rectly con­trolled by VP Bank Group are con­sol­i­dated. Sub­sidiaries are con­sol­i­dated as of the date on which con­trol is trans­ferred and de­con­sol­i­dated as of the date when con­trol ends.

Changes in the consolidation scope

In 2013, the share­hold­ings in IGT In­terges­tions Trust reg. Vaduz, Proven­tus Treu­hand und Ver­wal­tung AG, Vaduz, FIB Fi­nanz- und Beteili­gungs-AG, Vaduz, as well the 60 per cent eq­uity share in VP Bank and Trust Com­pany (BVI) Lim­ited, Tor­tola, were sold. These com­pa­nies are no longer in­cluded in the scope of con­sol­i­da­tion. The share­hold­ing in VP Bank (BVI) Ltd, Tor­tola was in­creased from 60 per cent to 100 per cent.

Method of capital consolidation

Cap­i­tal con­sol­i­da­tion is un­der­taken in ac­cor­dance with the pur­chase method, whereby the share­hold­ers’ eq­uity of the con­sol­i­dated com­pany is net­ted against the car­ry­ing amount of the share­hold­ing in the par­ent com­pa­ny’s fi­nan­cial state­ments as of the date of ac­qui­si­tion or the date of es­tab­lish­ment. 

Sub­se­quent to ini­tial con­sol­i­da­tion, changes oc­cur­ring through profit or loss and recog­nised in the con­sol­i­dated fi­nan­cial state­ments are al­lo­cated to profit re­serves. The ef­fects of in­tra-Group trans­ac­tions are elim­i­nated in prepar­- ing the con­sol­i­dated an­nual fi­nan­cial state­ments. 

The share of non-con­trol­ling in­ter­ests in share­hold­ers’ eq­uity and Group net in­come is shown sep­a­rately in the con­sol­i­dated bal­ance sheet and in­come state­ment.

Shareholdings in associated companies

Share­hold­ings on which VP Bank Group ex­er­cises ma­te­r­ial in­flu­ence are recorded us­ing the eq­uity method. A ma­te­r­ial in­flu­ence is gen­er­ally as­sumed to ex­ist when­ever VP Bank Group holds, di­rectly or in­di­rectly, 20 per cent to 50 per cent of the vot­ing rights. 

Un­der the eq­uity method, the shares of a com­pany are recog­nised at their ac­qui­si­tion cost at the time of ac­qui­si­tion. Sub­se­quently, the car­ry­ing value of the as­so­ci­ated com­- pany is in­creased or re­duced by the Group’s share of the prof­its or losses and by changes in the share­hold­ers’ eq­uity of the as­so­ci­ated com­pany not shown through profit or loss.

In ap­ply­ing the eq­uity method, the Group as­cer­tains whether it is nec­es­sary to record an ad­di­tional im­pair­ment loss for its in­vest­ments in as­so­ci­ated com­pa­nies. At each re­port­ing date, the Group as­cer­tains whether in­di­ca­tions ex­ist that the in­vest­ment in the as­so­ci­ated com­pany may be value-im­paired. If so, the dif­fer­ence be­tween the re­al­is­able value of the shares in the as­so­ci­ated com­pany and its car­ry­ing amount is charged against in­come.

Trade date versus settlement date

The trade-date method of record­ing pur­chases or sales of fi­nan­cial as­sets and li­a­bil­i­ties is ap­plied. This means that trans­ac­tions are recorded in the bal­ance sheet as of the date when the trade is en­tered into and not on the date when the trade is sub­se­quently set­tled.

Revenue recognition

Rev­enues from ser­vices are recorded when the re­lated ser­vice is ren­dered. Port­fo­lio man­age­ment fees, se­cu­ri­ties ac­count fees and sim­i­lar rev­enues are recorded on a pro-rata ba­sis over the pe­riod dur­ing which the ser­vice is ren­dered. In­ter­est is recorded in the pe­riod dur­ing which it ac­crues. Div­i­dends are recorded as and when they are re­ceived.

Foreign-currency translation

Func­tional cur­rency and re­port­ing cur­rency: the con­sol­i­dated fi­nan­cial state­ments are ex­pressed in Swiss francs. 

The for­eign-ex­change trans­la­tion into the func­tional cur­rency is un­der­taken at the rate of ex­change pre­vail­ing as of the trans­ac­tion date. Trans­la­tion dif­fer­ences aris­ing from such trans­ac­tions and gains and losses aris­ing from cur­rency trans­la­tion rates at bal­ance-sheet date rates for mon­e­tary fi­nan­cial as­sets and fi­nan­cial li­a­bil­i­ties are shown through profit or loss. 

Un­re­alised for­eign-cur­rency trans­la­tion dif­fer­ences in non-mon­e­tary fi­nan­cial as­sets are recog­nised as changes in fair value.

For the pur­pose of the prepa­ra­tion of the con­sol­i­dated fi­nan­cial state­ments, bal­ance sheets of Group com­pa­nies de­nomin­ated in a for­eign cur­rency are trans­lated into Swiss francs at the year-end ex­change rate. Av­er­age ex­change rates for the re­port­ing pe­riod are ap­plied for the trans­la­tion of items on the in­come state­ment, state­ment of other com­pre­hen­sive in­come and cash flow state­ment. For­eign-cur­rency trans­la­tion dif­fer­ences re­sult­ing from ex­change rate move­ments be­tween the be­gin­ning and end of the year and the dif­fer­ence in an­nual re­sults at av­er­age and clos­ing ex­change rates are recog­nised in other com­pre­hen­sive in­come.

Group companies

All bal­ance sheet items (ex­clud­ing share­hold­ers’ eq­uity) are con­verted into the Group re­port­ing cur­rency at the rate of ex­change pre­vail­ing as of the end of the re­port­ing pe­riod. The in­di­vid­ual items in the in­come state­ment are trans­lated at av­er­age rates for the pe­riod. For­eign-cur­rency dif­fer­ences aris­ing from the trans­la­tion of fi­nan­cial state­ments ex­pressed in for­eign cur­ren­cies are recog­nised di­rectly in share­hold­ers’ eq­uity (in­come re­serves).

For­eign-cur­rency trans­la­tion dif­fer­ences aris­ing in con­nec­tion with net in­vest­ments in for­eign com­pa­nies are recog­nised in share­hold­ers’ eq­uity. Upon dis­posal, such for­eign-cur­rency trans­la­tion dif­fer­ences are recorded in the in­come state­ment as a part of the gain or loss on dis­posal.

Good­will and fair value ad­just­ments from ac­qui­si­tions of for­eign com­pa­nies are treated as re­ceiv­ables and payables of these for­eign com­pa­nies and are trans­lated at the clos­ing rates pre­vail­ing on the bal­ance-sheet date. 

Domestic versus foreign

The term “do­mes­tic” in­cludes Switzer­land.

Cash and cash equivalents

Cash and cash equiv­a­lents en­com­pass cash, re­ceiv­ables aris­ing from money-mar­ket pa­per with an orig­i­nal ma­tu­rity of no more than 90 days as well as sight bal­ances with banks.

General

VP Bank Group clas­si­fies fi­nan­cial in­stru­ments, which also in­clude tra­di­tional fi­nan­cial as­sets and li­a­bil­i­ties as well as eq­uity in­stru­ments, as fol­lows:

• Fi­nan­cial in­stru­ments to be recorded via the in­come state­ment (“fair value through profit or loss” (FVTPL) – “trad­ing port­fo­lios” and “fi­nan­cial in­stru­ments at fair value”)
• Fi­nan­cial in­stru­ments at amor­tised cost
• Fi­nan­cial in­stru­ments at fair value with changes in value and im­pair­ment losses recorded in other com­pre­hen­sive in­come (FV­TOCI)

The clas­si­fi­ca­tion of fi­nan­cial in­stru­ments is made at the time of ini­tial recog­ni­tion us­ing the cri­te­ria set out in IFRS 9. VP Bank Group adopted IFRS 9 (2010) early as of 1 Jan­u­ary 2011. In cases where hedge con­di­tions are ful­filled, VP Bank Group will ap­ply hedge ac­count­ing in ac­cor­dance with IFRS 9 (2013) early as of 1 Jan­u­ary 2015.

Trading portfolios

Trad­ing port­fo­lios com­prise shares, bonds, pre­cious met­als and struc­tured prod­ucts. Fi­nan­cial as­sets held for trad­ing pur­poses are mea­sured at fair value. Short po­si­tions in se­cur­ities are dis­closed as li­a­bil­i­ties aris­ing from trad­ing port­fo­lios. Re­alised and un­re­alised gains and losses are recorded un­der in­come from trad­ing ac­tiv­i­ties af­ter de­duc­tion of re­lated trans­ac­tion costs. In­ter­est and div­i­dends from trad­ing ac­tiv­ities are recorded un­der in­ter­est in­come. 

Fair val­ues are based on quoted mar­ket prices if an ac­tive mar­ket ex­ists. If no ac­tive mar­ket ex­ists, the fair value is de­ter­mined by ref­er­ence to listed quotes or ex­ter­nal pric­ing mod­els. 

Financial instruments measured at amortised cost

In­vest­ments where the ob­jec­tive con­sists of hold­ing the fi­nan­cial as­set in or­der to re­alise the con­trac­tual pay­ment flows there­from and which are made up solely of in­ter­est as well as the re­demp­tion of parts of the nom­i­nal value are recog­nised at amor­tised cost us­ing the ef­fec­tive in­ter­est method.

A fi­nan­cial in­vest­ment recog­nised at amor­tised cost is clas­si­fied as be­ing im­paired when­ever it is prob­a­ble that the to­tal con­trac­tu­ally agreed amount due will not be col­lected in full. Causes giv­ing rise to an im­pair­ment loss can be coun­ter­party- or coun­try-spe­cific. When­ever im­pair­ment oc­curs, the car­ry­ing amount of the fi­nan­cial in­vest­ment is re­duced to its re­al­is­able value and the dif­fer­ence is charged against “in­come from fi­nan­cial in­vest­ments”.

In­ter­est is recog­nised in the pe­riod when it ac­crues us­ing the ef­fec­tive in­ter­est method and is re­ported in in­ter­est in­come un­der “in­ter­est in­come from fi­nan­cial in­stru­ments at amor­tised cost”.

Financial instruments at fair value (FVTPL)

Fi­nan­cial in­stru­ments not meet­ing the afore­men­tioned cri­te­ria are recog­nised at fair value. The en­su­ing gains/​losses are re­ported in “in­come on fi­nan­cial in­stru­ments at fair value” un­der “in­come from fi­nan­cial in­vest­ments”.

In­so­far as the cri­te­ria of IFRS 9 are not met, a fi­nan­cial in­stru­ment may be des­ig­nated and recorded un­der this cat­e­gory upon ini­tial recog­ni­tion.

In­ter­est and div­i­dend in­come are recorded in “in­come from fi­nan­cial in­vest­ments” un­der the items “in­ter­est in­come from FVTPL fi­nan­cial in­stru­ments” and “div­i­dend in­come from FVTPL fi­nan­cial in­stru­ments”.

Financial instruments at fair value with recording of changes in value and impairment losses through other comprehensive income (FVTOCI)

In­vest­ments in eq­uity in­stru­ments are recog­nised in the bal­ance sheet at fair value. Changes in value are shown through profit or loss, ex­cept in cases where VP Bank Group has de­cided that they are to be recog­nised at fair value through other com­pre­hen­sive in­come.

Div­i­dends are re­ported in “in­come from fi­nan­cial in­vest­ments” un­der the item “div­i­dend in­come from FV­TOCI fi­nan­cial in­stru­ments”.

Loans to banks and customers

Loans to banks and cus­tomers are val­ued at their ef­fec­tive cost, which equates to the fair value at the time the loans are granted. Sub­se­quent val­u­a­tions cor­re­spond to the amor­tised cost us­ing the ef­fec­tive in­ter­est method. In­ter­est on per­form­ing loans is recog­nised on an ac­crual ba­sis and re­ported un­der in­ter­est in­come us­ing the ef­fec­tive in­ter­est method.

Value-impaired loans

Value-im­paired loans are amounts out­stand­ing from clients and banks where it is im­prob­a­ble that the debtor can meet its oblig­a­tions. The rea­sons for an im­pair­ment in value are of a coun­ter­party- or coun­try-spe­cific na­ture. In­ter­est on value-im­paired loans is recorded on an ac­crual ba­sis. A val­u­a­tion al­lowance for credit risk is recorded as a re­duc­tion in the car­ry­ing amount of a loan in the bal­ance sheet. The al­lowance is mea­sured es­sen­tially by ref­er­ence to the dif­fer­ence be­tween the car­ry­ing amount and the amount likely to be re­cov­ered af­ter tak­ing into ac­count the re­al­is­able pro­ceeds from the dis­posal of any ap­plic­a­ble col­lat­eral. For off-bal­ance-sheet po­si­tions, on the other hand, such as a fixed fa­cil­ity granted, a provi­sion for credit risks is recorded un­der pro­vi­sions. Gen­eral port­fo­lio-based im­pair­ment al­lowances are recorded to cover po­ten­tial, as yet uniden­ti­fied credit risks. A credit re­view is per­formed at least once a year for all value-im­paired re­ceiv­ables. If changes have oc­curred as re­gards the amount and tim­ing of an­tic­i­pated fu­ture flows in com­pari­son to pre­vi­ous es­ti­mates, the val­u­a­tion al­lowance for credit risks is ad­justed and recorded in the in­come state­ment un­der val­u­a­tion al­lowances for credit risks or re­ver­sal of val­u­a­tion al­lowance and pro­vi­sions that are no longer re­quired.

Overdue loans

A loan is con­sid­ered to be over­due or non-per­form­ing if a ma­te­r­ial con­trac­tu­ally agreed pay­ment re­mains out­stand­ing for a pe­riod of 90 days or more. Such loans are not clas­si­fied as value-im­paired if it can be shown that they are still cov­ered by ex­ist­ing col­lat­eral. 

Derivative financial instruments

De­riv­a­tive fi­nan­cial in­stru­ments are mea­sured at fair value and recorded in the bal­ance sheet. Fair value is de­ter­mined on the ba­sis of listed quo­ta­tions or op­tion pric­ing mod­els. Re­alised and un­re­alised gains and losses are shown through profit or loss. 

Hedge accounting

When hedg­ing con­di­tions are ful­filled, VP Bank Group will ap­ply hedge ac­count­ing in ac­cor­dance with IFRS 9 (2013) as early as of 1 Jan­u­ary 2015.

Un­der the Group’s risk man­age­ment pol­icy, VP Bank uses cer­tain de­riv­a­tives as part of hedge trans­ac­tions. From an eco­nomic per­spec­tive, the op­pos­ing val­u­a­tion ef­fects of the un­der­ly­ing and hedg­ing trans­ac­tions off­set one an­other. How­ever, be­cause these trans­ac­tions do not sat­isfy strict and spe­cific IFRS guide­lines, asym­met­ri­cal val­u­a­tion dif­fer­ences be­tween the un­der­ly­ing and hedg­ing trans­ac­tions arise from an ac­count­ing stand­point. Fair value changes for such de­riv­a­tives are shown through profit or loss for the cor­re­spond­ing pe­ri­ods un­der trad­ing and in­ter­est in­come.

Hedge ac­count­ing was not ap­plied for ei­ther the re­port­ing pe­riod or the pre­vi­ous year. 

Debt securities issued

Medium-term notes are recorded at their is­sue price and sub­se­quently mea­sured at their amor­tised cost.

At the time of their ini­tial record­ing, bonds are recorded at fair value less trans­ac­tion costs. Fair value cor­re­sponds to con­sid­er­a­tion re­ceived. They are sub­se­quently val­ued at their amor­tised cost. As such, the ef­fec­tive in­ter­est method is em­ployed in or­der to amor­tise the dif­fer­ence be­tween the is­sue price and re­demp­tion amount over the life of the debt in­stru­ment. 

Treasury shares

Shares in VP Bank Ltd, Vaduz, held by VP Bank Group are dis­closed as trea­sury shares un­der share­hold­ers’ eq­uity and de­ducted at ac­qui­si­tion cost. The dif­fer­ence be­tween the sales pro­ceeds of trea­sury shares and the re­lated ac­qui­si­tion cost is shown un­der cap­i­tal re­serves. 

Repurchase and reverse repurchase transactions

Re­pur­chase and re­verse re­pur­chase trans­ac­tions serve to re­fi­nance or fi­nance, re­spec­tively, or to ac­quire se­cu­ri­ties of a cer­tain class. These are recorded as an ad­vance against col­lat­eral in the form of se­cu­ri­ties or as a cash de­posit with col­lat­eral in the form of own se­cu­ri­ties.

Se­cu­ri­ties re­ceived and de­liv­ered are only recorded in the bal­ance sheet or closed out when the con­trol over the con­trac­tual rights (risks and op­por­tu­ni­ties of own­er­ship) in­her­ent in these se­cu­ri­ties has been ceded. The fair val­ues of the se­cu­ri­ties re­ceived or de­liv­ered are mon­i­tored on an on­go­ing ba­sis in or­der to pro­vide or de­mand ad­di­tional col­lat­eral in ac­cor­dance with the con­trac­tual agree­ments. 

Securities lending and borrowing transactions

Fi­nan­cial in­stru­ments which are lent out or bor­rowed and val­ued at fair value, and in re­spect of which VP Bank Group ap­pears as prin­ci­pal, are recorded in the bal­ance sheet un­der amounts due to/​from cus­tomers and banks.

Se­cu­ri­ties lend­ing and bor­row­ing trans­ac­tions in which VP Bank Group ap­pears as agent are recorded un­der off-bal­ance-sheet items.

Fees re­ceived or paid are recorded un­der com­mis­sion in­come. 

Provisions

Pro­vi­sions are only recorded in the bal­ance sheet if VP Bank Group has a third-party li­a­bil­ity aris­ing from a pre­vi­ous event, if the out­flow of re­sources with eco­nomic ben­e­fit to ful­fil this li­a­bil­ity is prob­a­ble, and if this li­a­bil­ity can be re­li­ably es­ti­mated. If an out­flow of funds is un­likely to oc­cur or the amount of the li­a­bil­ity can­not be re­li­ably es­ti­mated, a con­tin­gent li­a­bil­ity is shown. 

Valuation allowances for long-term assets (impairment)

The value of prop­erty, plant and equip­ment and other as­sets (in­clud­ing good­will and other in­tan­gi­ble as­sets) is re­viewed at least once a year or at any time the car­ry­ing amount may be over-val­ued as a re­sult of oc­cur­rences or changed cir­cum­stances. If the car­ry­ing amount ex­ceeds the re­al­is­able value, an im­pair­ment charge is recorded.

Property, plant and equipment

Prop­erty, plant and equip­ment com­prises bank premises, other real es­tate, fur­nish­ings and equip­ment, as well as IT sys­tems. These as­sets are val­ued at ac­qui­si­tion cost less de­pre­ci­a­tion re­lated to op­er­a­tions. 

Prop­erty, plant and equip­ment are cap­i­talised, pro­vided their pur­chase or man­u­fac­tur­ing cost can be de­ter­mined re­li­ably, their value ex­ceeds a min­i­mum limit for cap­i­tal­i­sa­tion and the as­sets rep­re­sent fu­ture eco­nomic ben­e­fits.

De­pre­ci­a­tion and amor­ti­sa­tion is charged on a straight-line ba­sis over the es­ti­mated use­ful lives:

The de­pre­ci­a­tion meth­ods and use­ful lives are re­viewed at the end of each year. 

Mi­nor pur­chases are charged di­rectly to gen­eral and ad­min­is­tra­tive ex­penses. Main­te­nance and ren­o­va­tion ex­penses are gen­er­ally recorded un­der gen­eral and ad­min­is­tra­tive ex­penses. If the ex­pense is sub­stan­tial and re­sults in a sig­nif­i­cant in­crease in value, the amounts are cap­i­talised. The cap­i­talised as­sets are then de­pre­ci­ated over their use­ful lives. 

Gains on dis­posal of prop­erty, plant and equip­ment are re­ported as other in­come. Losses on dis­posal lead to ad­di­tional de­pre­ci­a­tion of prop­erty, plant and equip­ment.

Goodwill

In the case of a takeover, should the ac­qui­si­tion costs ex­ceed the value of the net as­sets ac­quired and val­ued in ac­cor­dance with uni­form Group guide­lines (in­clud­ing iden­ti­fi­able and cap­i­tal­is­able in­tan­gi­ble as­sets), the re­main­ing amount con­sti­tutes the ac­quired good­will. Good­will is cap­i­talised and sub­ject to an an­nual re­view for any im­pair­ment. Good­will is recorded in the orig­i­nal cur­rency and trans­lated on the bal­ance-sheet date at pre­vail­ing year-end rates. 

Intangible assets

Pur­chased soft­ware is cap­i­talised and amor­tised over three to seven years. Mi­nor pur­chases are charged di­rectly to gen­eral and ad­min­is­tra­tive ex­penses.

In­ter­nally gen­er­ated in­tan­gi­ble as­sets such as soft­ware are cap­i­talised in­so­far as the pre­req­ui­sites for cap­i­tal­i­sa­tion set forth in IAS 38 are met, i.e. it is prob­a­ble that the Group will de­rive a fu­ture eco­nomic ben­e­fit from the as­set and the costs of the as­set can be both iden­ti­fied and mea­sured in a re­li­able man­ner. In­ter­nally pro­duced soft­ware meet­ing these cri­te­ria and pur­chased soft­ware are recorded in the bal­ance sheet un­der soft­ware. The cap­i­talised val­ues are amor­tised on a straight-line ba­sis over their use­ful lives. The pe­riod of amor­ti­sa­tion is three to seven years. 

Other in­tan­gi­ble as­sets in­clude sep­a­rately iden­ti­fi­able in­tan­gi­ble as­sets aris­ing from ac­qui­si­tions, as well as cer­tain pur­chased client-re­lated as­sets, etc., and are amor­tised on a straight-line ba­sis over an es­ti­mated use­ful life of 5 to 10 years. Other in­tan­gi­ble as­sets are recorded in the bal­ance sheet at their pur­chase cost at the time of ac­qui­si­tion. 

Taxes and deferred taxes

Cur­rent in­come taxes are cal­cu­lated on the ba­sis of the ap­plic­able tax laws in the in­di­vid­ual coun­tries and are booked as ex­penses in the ac­count­ing pe­riod in which the re­lated prof­its are recorded. They are shown as tax li­a­bil­i­ties in the bal­ance sheet.

The tax im­pact of tim­ing dif­fer­ences be­tween the amounts at­trib­uted to the as­sets and li­a­bil­i­ties as re­ported in the con­sol­i­dated bal­ance sheet and their val­ues re­ported for tax pur­poses are recorded as de­ferred tax as­sets or de­ferred tax li­a­bil­i­ties. De­ferred tax as­sets aris­ing from tim­ing dif­fer­ences or from the util­i­sa­tion of tax loss carry-for­wards are only recog­nised when it is prob­a­ble that suf­fi­cient tax­able prof­its will ex­ist, against which these tim­ing dif­fer­ences or tax loss carry-for­wards can be off­set.

De­ferred tax as­sets and tax li­a­bil­i­ties are cal­cu­lated us­ing the tax rates which are ex­pected to ap­ply in the ac­count­ing pe­riod in which these tax as­sets will be re­alised or tax li­a­bil­ities will be set­tled. 

Tax as­sets and tax li­a­bil­i­ties are only off­set against each other if they re­late to the same tax­able en­tity, con­cern the same tax ju­ris­dic­tion and an en­force­able right of off­set ex­ists.

De­ferred taxes are cred­ited or charged di­rectly to share­hold­ers’ eq­uity if the tax re­lates to items which are di­rectly cred­ited or deb­ited to share­hold­ers’ eq­uity in the same or an­other pe­riod. 

The tax sav­ings ex­pected from the util­i­sa­tion of es­ti­mated fu­ture re­al­is­able loss carry-for­wards are cap­i­talised. The prob­a­bil­ity of re­al­is­ing ex­pected tax ben­e­fits is taken into ac­count when valu­ing a cap­i­talised as­set for fu­ture tax re­lief. Tax as­sets aris­ing from fu­ture tax re­lief en­com­pass de­ferred taxes on tim­ing dif­fer­ences be­tween the car­ry­ing amounts of as­sets and li­a­bil­i­ties in the con­sol­i­dated bal­ance sheet and those used for tax pur­poses as well as es­ti­mated fu­ture re­al­is­able loss carry-for­wards. De­ferred tax re­ceiv­ables in one sov­er­eign tax ju­ris­dic­tion are off­set against de­ferred tax li­a­bil­i­ties of the same ju­ris­dic­tion if the com­pany has a right of off­set be­tween ac­tual tax li­a­bil­i­ties and tax claims and the taxes are levied by the same tax au­thor­i­ties; amounts are off­set in­so­far as the ma­tu­ri­ties cor­re­spond. 

Retirement pension plans

VP Bank Group main­tains a num­ber of re­tire­ment pen­sion plans for the em­ploy­ees of its do­mes­tic and for­eign en­ti­ties, in­clud­ing both de­fined-ben­e­fit and de­fined-con­tri­bu­tion plans.

Ac­crued ben­e­fits from and li­a­bil­i­ties to these pen­sion funds are cal­cu­lated on the ba­sis of sta­tis­ti­cal and ac­tu­ar­ial calcu­la­tions of ex­perts. 

As re­gards de­fined-ben­e­fit pen­sion plans, pen­sion costs are de­ter­mined on the ba­sis of var­i­ous eco­nomic and de­mo­graphic as­sump­tions us­ing the pro­jected unit credit method, which takes into ac­count the num­ber of in­sur­ance years ac­tu­ally earned through the date of val­u­a­tion. Compu­tational as­sump­tions taken into ac­count by the Group in­clude the ex­pected fu­ture rate of salary in­creases, long-term in­ter­est earned on re­tire­ment as­sets, re­tire­ment pat­terns and life ex­pectancy. The val­u­a­tions are per­formed an­nu­ally by in­de­pen­dent ac­tu­ar­ies. Plan as­sets are re-mea­sured an­nu­ally at fair val­ues.

Pen­sion costs com­prise three com­po­nents:

• Ser­vice costs, which are recog­nised in the in­come state­ment
• Net in­ter­est ex­pense, which is also recog­nised in the in­come state­ment
• Reval­u­a­tion com­po­nents, which are recog­nised in the state­ment of com­pre­hen­sive in­come

Ser­vice costs en­com­pass cur­rent ser­vice costs, past ser­vice costs and gains and losses from non-rou­tine plan set­tle­ments. Gains and losses from plan cur­tail­ments are deemed to equate to past ser­vice costs. 

Em­ployee con­tri­bu­tions and con­tri­bu­tions from third par­ties re­duce ser­vice cost ex­pense and are de­ducted there­from, pro­vided that these de­rive from pen­sion plan rules or a de facto oblig­a­tion. 

Net in­ter­est ex­pense cor­re­sponds to the amount de­rived from ap­ply­ing the dis­count rate to the pen­sion li­a­bil­ity or plan as­sets at the be­gin­ning of the year. In the process, cap­i­tal flows of less than one year are recog­nised on a weighted ba­sis.

Reval­u­a­tion com­po­nents en­com­pass ac­tu­ar­ial gains and losses from the move­ment in the pre­sent value of pen­sion oblig­a­tions and plan as­sets. Ac­tu­ar­ial gains and losses re­sult from changes in as­sump­tions and ad­just­ments re­flect­ing ac­tual re­sults. Gains and losses on plan as­sets equate to the in­come from plan as­sets less the amounts con­tained in net in­ter­est ex­pense. Reval­u­a­tion com­po­nents also en­com­pass move­ments in un­recog­nised as­sets less the ef­fects con­tained in net in­ter­est ex­pense. Reval­u­a­tion com­po­nents are recog­nised in the state­ment of com­pre­hen­sive in­come and can­- not be booked as earn­ings in fu­ture pe­ri­ods (re­cy­cling). The amounts re­cog­nised in the state­ment of com­pre­hen­sive in­come can be re­clas­si­fied within share­hold­ers’ eq­uity. Ser­vice costs and net in­ter­est ex­pense are recorded in the con­sol­i­dated fi­nan­cial state­ments un­der per­son­nel ex­pense. Reval­u­a­tion com­po­nents are recog­nised in the state­ment of com­pre­hen­sive in­come.

The pen­sion li­a­bil­i­ties or plan as­sets recog­nised in the con­sol­i­dated fi­nan­cial state­ments cor­re­spond to the fund­ing deficit or sur­plus of de­fined-ben­e­fit pen­sion plans. The recog­nised pen­sion as­sets are lim­ited to the pre­sent value of the eco­nomic ben­e­fit of the Group aris­ing from the fu­ture re­duc­tion in con­tri­bu­tions or re­pay­ments. 

Li­a­bil­i­ties aris­ing in con­nec­tion with the ter­mi­na­tion of em­ploy­ment re­la­tion­ships are recog­nised at the time when the Group has no other al­ter­na­tive but to fi­nance the ben­e­fits of­fered. In any event, the ex­pense is to be recorded at the ear­li­est when the other re­struc­tur­ing cost is also recog­nised. 

For other long-term ben­e­fits, the pre­sent value of the ac­quired com­mit­ment is recorded as of the bal­ance-sheet date. Changes in pre­sent val­ues are recorded di­rectly in the in­come state­ment as per­son­nel ex­pense.

Em­ployer con­tri­bu­tions to de­fined-ben­e­fit pen­sion plans are recog­nised in per­son­nel ex­pense at the date when the em­ployee be­comes en­ti­tled thereto.

IFRS 2 – Share-Based Payment: definition of “vesting conditions”

Clar­i­fies the de­f­i­n­i­tions of “ex­er­cise con­di­tions” and “mar­ket con­di­tion” and adds de­f­i­n­i­tions for “per­for­mance con­di­tion” and “ser­vice con­di­tion” (pre­vi­ously in­cluded in the de­f­i­n­i­tion of “ex­er­cise con­di­tions”).

IFRS 8 – Operating Segments: aggregation of operating segments

Re­quires an en­tity to dis­close the judge­ments made by man­age­ment in ap­ply­ing the ag­gre­ga­tion cri­te­ria to op­er­at­ing seg­ments.

IFRS 8 – Operating Segments: reconciliation of the total of the reportable segments’ assets to the entity’s assets

Clar­i­fies that an en­tity shall only be re­quired to rec­on­cile the to­tal of the re­portable seg­ments’ as­sets to the en­ti­ty’s as­sets if the seg­ment as­sets are re­ported reg­u­larly.

IFRS 13 – Fair Value Measurement (amendments to the basis of conclusions only, with consequential amendments to the bases of conclusions of other standards)

Clar­i­fies that the is­suance of IFRS 13 and amend­ments to IFRS 9 and IAS 39 did not re­move the abil­ity to mea­sure short-term re­ceiv­ables and payables with no stated in­ter­est rate at their in­voice amounts with­out dis­count­ing if the ef­fect of not dis­count­ing is im­ma­te­r­ial.

IAS 24 – Related Party Disclosures

Clar­i­fies that an en­tity pro­vid­ing key man­age­ment per­son­nel ser­vices to the re­port­ing en­tity or to the par­ent of the re­port­ing en­tity is a re­lated party of the re­port­ing en­tity.

IFRS 3 – Business Combinations Scope of exception for joint ventures

Clar­i­fies that IFRS 3 ex­cludes from its scope the ac­count­ing for the for­ma­tion of a joint arrange­ment in the fi­nan­cial state­ments of the joint arrange­ment it­self.

IFRS 13 – Fair Value Measurement Scope of paragraph 52 (portfolio exception)

Clar­i­fies that the scope of the port­fo­lio ex­cep­tion de­fined in para­graph 52 of IFRS 13 in­cludes all con­tracts ac­counted for within the scope of IAS 39 Fi­nan­cial In­stru­ments: Recog­ni­tion and Mea­sure­ment or IFRS 9 Fi­nan­cial In­stru­ments, re­gard­less of whether they meet the de­f­i­n­i­tion of fi­nan­cial as­sets or fi­nan­cial li­a­bil­i­ties as de­fined in IAS 32 Fi­nan­cial In­stru­ments: Pre­sen­ta­tion.