Annual report 2004 (PDF, 4141 kB) - Unicredit Bank

(h)
Sale and repurchase agreements
Securities sold subject to linked repurchase agreements (“repos”) are retained in the financial
statements as trading or available-for-sale securities and the counterparty liability is included
in amounts due to other banks, other deposits, or due to customers, as appropriate. Securities
purchased under agreements to resell (“reverse repos”) are recorded as loans and advances to
other banks or customers as appropriate. The difference between sale and repurchase price is
treated as interest and accrued over the life of repo agreements. Securities lent
to counterparties are retained in the financial statements.
Securities borrowed are not recognised in the financial statements, unless these are sold
to third parties, in which case the purchase and sale are recorded with the gain or loss
included in trading income. The obligation to return them is recorded at fair value
as a trading liability.
(i)
Securities available-for-sale
Securities intended to be held for an indefinite period of time, which may be sold in response
to needs for liquidity or changes in interest rates, exchange rates or equity prices are classified
as available-for-sale. Management determines the appropriate classification of its investments
at the time of the purchase.
Securities are initially recognised at cost. Available-for-sale financial assets are subsequently
re-measured at fair value based on quoted bid prices or amounts derived from cash flow
models. Fair values for unlisted equity securities are estimated using information from market
makers to reflect the specific circumstances of the issuer. Unrealised gains and losses arising
from changes in the fair value of securities classified as available-for-sale are recognised in
the income statement as gains less losses from available-for-sale securities.
Interest earned whilst holding available-for-sale securities is reported as interest income.
All spot purchases and sales of available-for-sale securities are recognised at settlement date.
All other purchases and sales are recognised as derivative forward transactions until
settlement.
(j)
Securities held-to-maturity
Securities where management has both the intent and the ability to hold to maturity are
classified as held-to-maturity.
At 31 December 2004 and 2003 the Group did not have any securities in the held-to-maturity
category.
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