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

If there is control based on the preceding guidelines, the securitization funds are integrated into the
consolidated Group.
The consolidated Group is deemed to transfer substantially all risks and rewards if its exposure to the
potential variation in the future net cash flows of the securitized assets following the transfer is not
significant. In this instance, the consolidated Group may derecognize the securitized assets.
The BBVA Group has applied the most stringent prevailing criteria in determining whether or not it retains the
risks and rewards on such assets for all securitizations performed since 1 January 2004. As a result of this
analysis, the Group has concluded that none of the securitizations undertaken since that date meet the
prerequisites for derecognizing the underlying assets from the consolidated balance sheets (see Note 13.3
and Appendix VII) as it retains substantially all the risks embodied by expected loan losses or associated
with the possible variation in net cash flows, as it retains the subordinated loans and lines of credit extended
by the BBVA Group to these securitization funds.
2.2.3. FINANCIAL GUARANTEES
Financial guarantees are considered those contracts that oblige their issuer to make specific payments to
reimburse the lender for a loss incurred when a specific borrower breaches its payment obligations on the
terms – whether original or subsequently modified – of a debt instrument, irrespective of the legal form it may
take. These guarantees may take the form of a deposit, financial guarantee, insurance contract or credit
derivative, among others.
Financial guarantees, irrespective of the guarantor, instrumentation or other circumstances, are reviewed
periodically so as to determine the credit risk to which they are exposed and, if appropriate, to consider
whether a provision is required for them. The credit risk is determined by application of criteria similar to
those established for quantifying impairment losses on debt instruments measured at amortized cost (see
Note 2.2.1).
The provisions made for financial guarantees classified as substandard are recognized under the heading
“Provisions - Provisions for contingent exposures and commitments” in the liability side in the accompanying
consolidated balance sheets (see Note 25). These provisions are recognized and reversed with a charge or
credit, respectively, to “Provisions” in the accompanying consolidated income statements (see Note 48).
Income from guarantee instruments is recorded under the heading “Fee and commission income” in the
consolidated income statement and is calculated by applying the rate established in the related contract to
the nominal amount of the guarantee (see Note 42).
2.2.4. NON-CURRENT ASSETS HELD FOR SALE AND LIABILITIES ASSOCIATED WITH NON-
CURRENT ASSETS HELD FOR SALE
The heading “Non-current assets held-for-sale” in the accompanying consolidated balance sheets
recognized the carrying amount of financial or non-financial assets that are not part of operating activities of
the Group. The recovery of this carrying amount is expected to take place through the price obtained on its
disposal (see Note 16). The assets included under this heading are assets where an active sale plan has
been initiated and approved at the appropriate level of management and it is highly probable they will be sold
in their current condition within one year from the date on which they are classified as such.
This heading includes individual items and groups of items (“disposal groups”) and disposal groups that form
part of a major business unit and are being held for sale as part of a disposal plan (“discontinued
operations”). The individual items include the assets received by the subsidiaries from their debtors in full or
partial settlement of the debtors’ payment obligations (assets foreclosed or donated in repayment of debt
and recovery of lease finance transactions), unless the Group has decided to make continued use of these
assets. The Group has units that specialize in real estate management and the sale of this type of asset.
Symmetrically, the heading “Liabilities associated with non-current assets held for sale” in the accompanying
consolidated balance sheets reflects the balances payable arising from disposal groups and discontinued
operations.
Non-current assets held for sale are generally measured at fair value less sale costs or their carrying amount
upon classification within this category, whichever is the lower. Non-current assets held for sale are not
depreciated while included under this heading.
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