ANNUAL REPORT 2006 - DG Hyp
ANNUAL REPORT 2006 - DG Hyp
ANNUAL REPORT 2006 - DG Hyp
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Notes to the Financial Statements<br />
Notes to the Financial Statements<br />
General Notes<br />
(1) General information on the preparation of<br />
financial statements<br />
The financial statements of <strong>DG</strong> HYP for the financial<br />
year <strong>2006</strong> have been prepared in accordance with the provisions<br />
of the German Commercial Code (Handelsgesetzbuch<br />
– “HGB”) and the German Accounting Directive for<br />
Banks (Verordnung über die Rechnungslegung der Kreditinstitute<br />
– “RechKredV”). They also comply with the<br />
requirements set out in the German Public Limited Companies<br />
Act (Aktiengesetz – “AktG”), and the German Pfandbrief<br />
Act (Pfandbriefgesetz – “PfandBG”).<br />
Given the non-materiality of all subsidiaries, in accordance<br />
with section 296 (2) of the HGB, the company has not<br />
prepared consolidated financial statements.<br />
All amounts have been quoted in euros, in accordance<br />
with section 244 of the HGB.<br />
(2) Accounting policies<br />
Loans and advances to banks/to customers<br />
Loans and advances to banks and customers are recognised<br />
at nominal value, in accordance with section 340e (2)<br />
of the HGB. Where their stated value of the loans differs<br />
from the amount disbursed, or cost, the amount of the difference<br />
is reported under deferred items and amortised in<br />
interest income over the term of the transaction.<br />
Loans and advances which are fully classified as current<br />
assets are valued strictly at the lower of cost or market. All<br />
existing individual lending risks are covered by specific loan<br />
loss provisions. Existing risks of default in the retail lending<br />
business are covered by recognising specific provisions at a<br />
flat rate. We have formed a tax-deductible general loan loss<br />
provision to cover expected loan losses which have been<br />
incurred but not identified as such at the balance sheet<br />
date. Special risks arising from banking operations are<br />
accounted for by the fund for general banking risks pursuant<br />
to section 340f of the HGB.<br />
Following the revocation of Statement 3/1977 issued by<br />
the Institute of Public Auditors in Germany (Institut der<br />
Wirtschaftsprüfer – “IdW”), we have adapted the procedure<br />
for recognising interest income on non-performing<br />
loans and advances during the year under review. Whilst in<br />
previous periods, our policy was to recognise interest claims<br />
until collateral had been realised in full, we now no longer<br />
recognise interest income where it becomes obvious during<br />
execution proceedings that the realisable proceeds will fall<br />
short of the carrying amount. The change in policy will<br />
result in a € 9.4 million shortfall in net interest income,<br />
with a corresponding reduction in loan loss provisions.<br />
Early repayment penalties charged for loan repayments<br />
or extensions during the fixed-interest term of a loan are<br />
fully recognised in interest income.<br />
Bonds and other fixed-income securities<br />
Securities issued by public-sector entities, or by banks<br />
under public-law, acquired within the scope of the bank’s<br />
public finance business, as well as Mortgage Backed Securities<br />
(MBS) held for investment, were accounted for as<br />
fixed assets. Premiums and discounts are amortised in<br />
interest income over the term of the securities. Other debt<br />
securities and other fixed-income securities are allocated to<br />
liquidity reserves, and valued strictly at the lower of cost or<br />
market, pursuant to section 253 (3) of the HGB.<br />
Securities transferred under repurchase agreements are<br />
accounted for, and valued (including accrued economic<br />
benefits) in line with their original classification, simultaneously<br />
recognising a liability equivalent to the agreed repurchase<br />
amount. The difference between the repurchase<br />
amount and the amount received is reported under<br />
deferred items and amortised in interest income over the<br />
term of the transaction.<br />
Participations and interests in affiliated companies<br />
Participations and interests in affiliated companies are<br />
carried at amortised cost.<br />
Intangible and tangible fixed assets<br />
Fixed assets are carried at cost less regular straight-line<br />
depreciation, where applicable. Movable fixed assets are<br />
predominantly depreciated on a straight-line basis, using<br />
the maximum rates permissible under tax laws, or<br />
degressively with a subsequent transfer to straight-line<br />
depreciation. Low-value assets are written off in full during<br />
their year of purchase. Standard software is reported<br />
under intangible assets, as prescribed by accounting standard<br />
HFA 11 issued the Main Committee of the IdW<br />
(IDW RS HFA 11).<br />
Goodwill capitalised upon the merger with Schleswig-<br />
Holsteinische Landschaft <strong>Hyp</strong>othekenbank Aktiengesellschaft<br />
Kiel (“SHL HYP”) is amortised over the expected<br />
useful life (15 years), pursuant to section 255 (4) sentence 3<br />
of the HGB, and in line with applicable tax rules.<br />
Deutsche Genossenschafts-<strong>Hyp</strong>othekenbank AG | Annual Report <strong>2006</strong><br />
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