UBI Banca Group

original loan contract, or in the presence of a progressive reversal of the present value
calculated at the time of recognising the impairment loss. Where loans are measured on a
collective basis, any upward value adjustments or reversals of impairment losses are
recalculated as differences in relation to each performing loan at the measurement date.
The fair value of medium and long-term loans and receivables is measured by considering
future cash flows discounted at the replacement rate or the market rate existing at the
measurement date and relating to a position with the same characteristics as the loan
measured.
The fair value is measured for all loans and receivables for information purposes only. For
loans and receivables subject to effective hedging, the fair value is calculated in relation to the
risk that is hedged for measurement purposes.
4.4 Derecognition criteria
Loans and receivables are derecognised when the rights to the cash flows from the financial
assets expire or when the financial assets are sold with the substantial transfer of all the risks
and rewards deriving from ownership of them. Otherwise loans and receivables continue to be
recognised for an amount equal to the remaining involvement, even if legal title has been
transferred to a third party.
The assets in question are derecognised even when the Bank maintains the contractual right
to receive cash flows from them, but when at the same time it has a contractual obligation to
pay those cash flows to a third party.
The profit or loss on the disposal of loans and receivables is recognised in the income
statement within the item 100 “Income from the disposal or repurchase of a) loans and
receivables”.
5. Hedging derivatives
5.1 Definition
Hedging transactions are designed to neutralise potential losses on a specific item (or group of
items) attributable to a determined risk, by means of the gains realised on another instrument
or group of instruments if that particular risk should actually result in losses.
The UBI Group uses the following type of hedging transactions, appropriately represented in
the financial statements and described below:
• a fair value hedge: the objective is to offset adverse changes in the fair value of the asset or
liability hedged;
• a cash flow hedge: the objective is to hedge against the exposure to variability in expected
cash flows with respect to the initial expectations.
Derivative contracts stipulated with external counterparties are designated as hedging
instruments.
5.2 Recognition criteria
As with all derivatives, derivative financial instruments used for hedging are initially
recognised and subsequently measured at fair value and are classified in the balance sheet
under assets within item 80 “Hedging derivatives” and under liabilities within item 60
“Hedging derivatives”.
A relationship qualifies as a hedge and is appropriately represented in the financial statements
if, and only if, all the following conditions are satisfied:
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