Balance Sheet at 31 December 2010 of BBVA

Translation of financial statements originally issued in Spanish and prepared in accordance with generally accounting principles Spain
(See Note 1 and 54). In the event of a discrepancy, the Spanish-language version prevails.
As a general rule, the carrying amount of impaired financial instruments is adjusted with a charge to the
income statement for the year in which the impairment becomes known, and the recoveries of previously
recognized impairment losses are recognized in the income statement for the year in which the impairment is
reversed or reduced, with the exception of any recovery of previously recognized impairment losses for an
investment in an equity instrument classified as available for sale which are not recognized through profit or
loss but recognized under the heading “Valuation adjustments – Available-for-sale financial assets” in the
balance sheet.
The amounts in balance sheet are considered to be impaired, and accrual of the interest thereon is
suspended, when there are reasonable doubts that the balances will be recovered in full and/or the related
interest will be collected for the amounts and on the dates initially agreed upon, taking into account the
guarantees received by the entity to assure (in part or in full) the performance of the transactions. Amounts
collected in relation to impaired loans and receivables are used to recognize the related accrued interest and
any excess amount is used to reduce the principal not yet paid.
When recovery of any recognized amount is considered to be remote, this amount is removed from the
balance sheet, notwithstanding any actions taken by the entity in order to collect the amount until their rights
expire in full through expiry, forgiveness or for other reasons.
Calculation of impairment on financial assets
Impairment on financial assets is determined by the type of instrument and the category in which they are
recognized. The Bank recognizes impairment charges directly against the impaired asset when the likelihood
of recovery is deemed remote, and uses an offsetting or allowance account when it records non-performing
loan provisions.
Debt securities at amortized cost
The amount of impairment losses of debt securities at amortized cost is measured depending on whether the
impairment losses are determined individually or collectively.
Impairment losses determined individually
The amount of the impairment losses incurred on these instruments relates to the positive difference
between their respective carrying amounts and the present values of their expected future cash flows.
The following is to be taken into consideration when estimating the future cash flows of debt instruments:
• All the amounts that are expected to be obtained over the residual life of the instrument, including,
where appropriate, those which may result from the collaterals and other credit enhancements
provided for the instrument (after deducting the costs required for foreclosure and subsequent sale).
Impairment losses include an estimate of the possibility of collecting accrued, past due and
uncollected interest.
• The various types of risk to which each instrument is subject.
• The circumstances in which collections will foreseeably be made.
These cash flows are discounted using the original effective interest rate. If a financial instrument has a
variable interest rate, the discount rate for measuring any impairment loss is the current effective rate
determined under the contract.
As an exception to the rule described above, the market value of debt instruments listed on an active market
is deemed to be a fair estimate of the present value of their future cash flows.
In respect to impairment losses resulting from the materialization of insolvency risk of the obligors (credit
risk), a debt instrument is impaired:
• When there is evidence of a reduction in the obligor's capacity to pay, whether manifestly by
default or for other reasons; and/or
• When country-risk is risk materializes, understood as the risk among debtors who are resident in a
particular country as a result of factors other than normal commercial risk.
The Bank has policies, methods and procedures for hedging its credit risk, for insolvency attributable to both
counterparties and country-risk.
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