Principles of accounting and valuation, disclosures on risk management

Ac­count­ing and val­u­a­tion fol­low the pre­scrip­tions of the Liecht­en­stein Per­sons and Com­pa­nies Act, as well as the Liecht­en­stein Bank­ing Act and its re­lated Or­di­nance.

In ac­cor­dance with the val­u­a­tion poli­cies laid down, all busi­ness trans­ac­tions are recorded in the Bank’s ac­counts as of their trad­ing date. For­ward con­tracts are recorded un­der off-bal­ance-sheet trans­ac­tions as of their set­tle­ment or value date. 

In­come and ex­pen­di­ture in for­eign cur­ren­cies are con­verted into Swiss francs at their re­spec­tive daily rates; as­sets and li­a­bil­i­ties are con­verted at the rates pre­vail­ing at year-end. For­eign-ex­change gains and losses re­sult­ing from reval­u­a­tion are recorded in the in­come state­ment.

Record­ing is made at nom­i­nal val­ues mi­nus any ap­plic­a­ble un­earned dis­count in the case of money-mar­ket pa­per. Val­u­a­tion al­lowances are es­tab­lished to cover iden­ti­fi­able risks tak­ing into ac­count the prin­ci­ple of pru­dence. In­di­vid­ual and lump-sum val­u­a­tion al­lowances are de­ducted di­rectly from the re­lated bal­ance-sheet po­si­tions. 

In­ter­est over­due for more than 90 days is pro­vided for and recorded in the in­come state­ment as and when re­ceived.

Trad­ing port­fo­lios of se­cu­ri­ties and pre­cious met­als are val­ued at the quoted mar­ket price as of the bal­ance-sheet date. 

Port­fo­lios of se­cu­ri­ties and pre­cious met­als clas­si­fied as cur­rent as­sets are val­ued at the lower of cost and mar­ket. In­ter­est on in­ter­est-bear­ing se­cu­ri­ties is re­flected in the in­ter­est in­come items, div­i­dend in­come in the cur­rent in­come from se­cu­ri­ties items. Gains and losses from reval­u­a­tion are dis­closed in the item gains/​losses aris­ing from fi­nan­cial trans­ac­tions.

Eq­uity share­hold­ings in com­pa­nies owned by the Bank rep­re­sent­ing a non-con­trol­ling in­ter­est held on a long-term ba­sis are recorded as par­tic­i­pa­tions. Par­tic­i­pa­tions are val­ued at ac­qui­si­tion cost mi­nus eco­nom­i­cally re­quired val­u­a­tion al­lowances.

The ex­ist­ing ma­jor­ity share­hold­ings of VP Bank Ltd are recorded as shares in af­fil­i­ated com­pa­nies. Shares in af­fil­i­ated com­pa­nies are val­ued at ac­qui­si­tion cost mi­nus eco­nom­i­cally re­quired val­u­a­tion al­lowances. 

These af­fil­i­ated com­pa­nies are fully con­sol­i­dated for the pur­poses of the pub­lished con­sol­i­dated fi­nan­cial state­ments.

Value-en­hanc­ing ex­pen­di­tures in con­nec­tion with the ac­qui­sition and in­stal­la­tion of soft­ware are cap­i­talised and amort­ised on a straight-line ba­sis over the es­ti­mated ser­vice life of three to seven years. Self-de­vel­oped in­tan­gi­ble as­sets are not cap­i­talised. Mi­nor pur­chases are charged di­rectly to gen­eral and ad­min­is­tra­tive ex­penses.

Other as­sets and li­a­bil­i­ties in­clude the pos­i­tive and neg­a­tive re­place­ment val­ues, re­spec­tively, of all fi­nan­cial de­riv­a­tive in­stru­ments open at the bal­ance-sheet date aris­ing from nos­tro trans­ac­tions as well as over-the-counter con­tracts (OTC) aris­ing from trans­ac­tions on be­half of clients. In add­ition, these po­si­tions in­clude bal­ances of var­i­ous set­tle­ment and clear­ing ac­counts.

Val­u­a­tion al­lowances and pro­vi­sions are es­tab­lished to re­flect iden­ti­fi­able risks, as dic­tated by the prin­ci­ple of pru­dence. In­di­vid­ual and lump-sum val­u­a­tion al­lowances for re­ceiv­ables from banks and clients as well as on mort­gage re­ceiv­ables are de­ducted di­rectly from the cor­re­spond­ing as­set po­si­tion. Pro­vi­sions are raised for re­ceiv­ables sub­ject to a coun­try risk as dic­tated by the prin­ci­ple of pru­dence.

Pro­vi­sions for gen­eral bank­ing risks are pru­dently es­tab­lished re­serves to cover la­tent risks aris­ing from the nor­mal course of busi­ness of the Bank. As re­quired by the pre­scrip­tions gov­ern­ing fi­nan­cial state­ment re­port­ing, they are shown as a sep­a­rate item in the bal­ance sheet. Changes thereto are dis­closed sep­a­rately in the in­come state­ment.

Amounts dis­closed as off-bal­ance-sheet items are stated at nom­i­nal val­ues. Lump-sum pro­vi­sions ex­ist in the bal­ance sheet for la­tent de­fault risks.

VP Bank Ltd is ex­empted from draw­ing up a state­ment of cash flow as a re­sult of the oblig­a­tion to pre­pare con­sol­i­dated fi­nan­cial state­ments (Art. 24l FL-BankV). The con­sol­i­dated state­ment of cash flow of VP Bank Group is a part of the con­sol­i­dated fi­nan­cial state­ments.