UBI Banca Group

1.2. Definition of financial assets and liabilities at fair value
Financial assets and liabilities may be designated on initial recognition under “financial assets
and liabilities at fair value” and recorded under items 30 “Financial assets at fair value” and
50 “Financial liabilities at fair value”.
A financial asset/liability is designated at fair value through profit or loss on initial recognition
only when:
a) it is a hybrid contract containing one or more embedded derivatives and the embedded
derivative significantly alters the cash flows that would otherwise be generated by the contract;
b) the designation at fair value through profit or loss allows better information to be provided
because:
• it eliminates or considerably reduces an asymmetry in the valuation or in the
recognition, which would otherwise result from the valuation of assets or liabilities or
from recognition of the relative profits and losses on a different basis; or,
• a group of financial assets, financial liabilities or of both is managed and its
performance is valued on the basis of its fair value according to a documented risk
management procedure or investment strategy and the information on the group is
provided internally on that basis to senior managers with strategic responsibilities.
1.3. Recognition criteria
The financial instruments “Financial assets and liabilities held for trading and financial assets
at fair value” are recognised
• at the time of settlement if they are debt or equity instruments; or,
• on the trade date if they are derivative contracts.
Measurement on initial recognition is at cost considered to be the fair value of the instrument
without considering any transaction costs or income directly attributable to the instruments
themselves.
1.4. Measurement criteria
Subsequent to initial recognition, the financial instruments in question are measured at fair
value with changes recognised in the income statement within item 80 “Net trading income
(loss)”, for assets/liabilities held for trading and within item 110 “Net income/loss on financial
assets and liabilities at fair value” for financial assets/liabilities at fair value”. The
measurement of the fair value of the assets and liabilities held in a trading portfolio is based
on prices quoted on active markets or on internal valuation models which are generally used
in financial practice as described in greater detail in Part A.3.2 of the Notes to the financial
statements “Fair Value Hierarchy”.
1.5. Derecognition criteria
“Financial assets and liabilities held for trading and financial assets at fair value” are
derecognised in the accounts when the rights to the cash flows from the financial assets or
liabilities expire or when the financial assets or liabilities are transferred with the substantial
transfer of all the risks and rewards deriving from ownership of them.
The result of the transfer of financial assets or liabilities held for trading is recognised in the
income statement within item 80 “Trading income (loss)”, while the result of the transfer of
financial assets or liabilities at fair value is recognised within item 110 “Net income/loss on
financial assets and liabilities at fair value”.
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