BANCO BILBAO VIZCAYA ARGENTARIA, S.A. AND ... - BBVA

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