Ársskýrsla Landsbankans - Landsbankinn

Notes to the Consolidated Financial Statements
3. Significant accounting policies
These consolidated financial statements have been prepared using uniform accounting policies for like transactions and other events in similar
circumstances. The accounting policies have been applied consistently to all periods presented. As explained in Note 2 certain changes were made
during 2010 to the presentation of certain items in the income statement and statement of financial position. There were no items of revenue or
expense that the Group had to recognise in other comprehensive income during the years 2010 and 2009.
The principal accounting policies used in preparing these consolidated financial statements are set out below.
Consolidation
(a) Subsidiaries
Subsidiaries are entities over which the Group has the power to govern financial and operating policies so as to obtain benefits from their activities,
generally accompanied by a shareholding of over half of the voting rights. The existence and effect of potential voting rights that are currently
exercisable or convertible are considered when assessing whether the Group controls an entity. Subsidiaries are fully consolidated from the date on
which control is obtained, and are de-consolidated from the date on which control ceases.
The acquisition method is used to account for business combinations by the Group. The consideration transferred for the acquisition of a subsidiary is
the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the
fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred, except
for costs related to the issue of debt and equity instruments. Identifiable assets acquired and liabilities assumed in a business combination are
initially measured at their fair value on the acquisition date. A contingent liability of an acquiree is only recognised in a business combination if such
a liability represents a present obligation and arises from a past event, and its fair value can be measured reliably. More information about how the
Group accounts for goodwill acquired in a business combination is disclosed further in this note.
Inter-company transactions, balances, and unrealised gains on transactions between Group entities are eliminated in the consolidated financial
statements. Unrealised losses are also eliminated unless the transaction provides evidence of impairment of the asset transferred. The accounting
policies of subsidiaries have been changed where this was necessary to ensure consistency with the accounting policies adopted by the Group.
(b) Non-controlling interests
Non-controlling interests represent the portion of profit or loss and equity not owned, directly or indirectly, by the Bank; such interests are presented
separately in the consolidated income statement and are included in equity in the consolidated statement of financial position, separately from
equity attributable to owners of the Bank. The Group chooses on an acquisition-by-acquisition basis whether to measure non-controlling interests in
an acquiree at fair value or according to the proportion of non-controlling interests in the acquiree's net assets. Changes in the Bank's ownership
interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions transactions. In such circumstances the carrying amounts of
the controlling and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between
the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in
equity and attributed to the owners of the Bank.
(c) Associates
Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Significant
influence is presumed to exist when the Group holds between 20 and 50 percent of the voting power of another entity. Investments in associates are
accounted for using the equity method as of the date on which significant influence is obtained and are initially recognised at cost. Goodwill relating
to an associate is included in the carrying amount of the investment. Amortisation of goodwill is not permitted. Any excess of the Group's share of
net fair value of the associate's identifiable assets and liabilities over the cost of the investment is included as income in the determination of the
Group's share of the associate's profit or loss in the period which the investment is acquired.
Because goodwill included in the carrying amount of an investment in an associate is not recognised separately, it is not separately tested for
impairment according to the requirements for goodwill impairment testing in IAS 36 Impairment of Assets . Instead, the entire carrying amount of the
investment is tested for impairment under IAS 36 by comparing its recoverable amount with its carrying amount, whenever application of the
requirements in IAS 39 Financial Instruments: Recognition and Measurement indicates the investment may be impaired.
The Group’s share of its associates' post-acquisition profits or losses is recognised in the income statement, and its share of movements in their
reserves is recognised in the Group's equity reserves. Cumulative post-acquisition movements are adjusted against the carrying amount of the
investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured
receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group's interest in the associates.
Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. The accounting policies of
associates have been changed where this was necessary to ensure consistency with the accounting policies adopted by the Group.
NBI hf. Consolidated Financial Statements 2010 12
All amounts are in ISK million
112 Ársreikningur 2010 Allar upphæðir eru í milljónum króna