BANCO BILBAO VIZCAYA ARGENTARIA, S.A. AND ... - BBVA
BANCO BILBAO VIZCAYA ARGENTARIA, S.A. AND ... - BBVA
BANCO BILBAO VIZCAYA ARGENTARIA, S.A. AND ... - BBVA
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2.2.2. TRANSFERS <strong>AND</strong> DERECOGNITION OF FINANCIAL ASSETS <strong>AND</strong> LIABILITIES<br />
The accounting treatment of transfers of financial assets depends on the extent to which the risks and<br />
rewards associated with the transferred assets are transferred to third parties.<br />
Financial assets are only derecognized the consolidated balance sheet when the cash flows they generate<br />
have extinguished or when their implicit risks and benefits have been substantially transferred out to third<br />
parties. Similarly, financial liabilities are derecognized from the consolidated balance sheet only if their<br />
obligations are extinguished or acquired (with a view to subsequent cancellation or renewed placement).<br />
When the risks and benefits of transferred assets are substantially transferred to third parties, the financial<br />
asset transferred is derecognized the consolidated balance sheet, and any right or obligation retained or<br />
created as a result of the transfer is simultaneously recognized.<br />
The Group is considered to have transferred substantially all the risks and benefits if such risks and benefits<br />
account for the majority of the risks and benefits involved in ownership of the transferred assets.<br />
If all the risks and benefits associated with the transferred financial asset are substantially retained:<br />
• The transferred financial asset is not derecognized and continues to be measured in the<br />
consolidated balance sheet using the same criteria as those used before the transfer.<br />
• A financial liability is recognized at the amount of compensation received, which is subsequently<br />
measured at amortized cost and included under the heading “Financial liabilities at amortized cost –<br />
Debt certificates” in the accompanying consolidated balance sheet (see Note 23). As these liabilities<br />
do not constitute a current obligation, when measuring such a financial liability the Group deducts<br />
those financial instruments owned by it which constitute financing for the entity to which the financial<br />
assets have been transferred, to the extent that these instruments are deemed to specifically finance<br />
the assets transferred.<br />
• Both the income generated on the transferred (but not derecognized) financial asset and the<br />
expenses of the new financial liability are recognized in the accompanying consolidated income<br />
statements.<br />
Purchase and sale commitments<br />
Financial instruments sold with a repurchase agreement are not derecognized from the consolidated balance<br />
sheets and the amount received from the sale is considered financing from third parties.<br />
Financial instruments acquired with an agreement to subsequently resell them are not recognized in the<br />
accompanying consolidated balance sheets and the amount paid for the purchase is considered credit given<br />
to third parties.<br />
Securitization<br />
In the specific instance of the securitization funds to which the Group’s entities transfer their loan portfolios,<br />
the following indications of the existence of control are considered for the purpose of analyzing the possibility<br />
of consolidation:<br />
• The securitization funds’ activities are undertaken in the name of the entity in accordance with its<br />
specific business requirements with a view to generating benefits or gains from the securitization<br />
funds’ operations.<br />
• The entity retains decision-making power with a view to securing most of the gains derived from the<br />
securitization funds’ activities or has delegated this power in some kind of “auto-pilot” mechanism<br />
(the securitization funds are structured so that all the decisions and activities to be performed are<br />
pre-defined at the time of their creation).<br />
• The entity is entitled to receive the bulk of the profits from the securitization funds and is accordingly<br />
exposed to the risks inherent in their business activities. The entity retains the bulk of the<br />
securitization funds’ residual profit.<br />
• The entity retains the bulk of the securitization funds’ asset risks.<br />
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