Valuation and income recognition differences between IFRS and EU Accounting Directives
A Financial assets classified as available-for-sale
Under EU Accounting Directives, available for sale instruments are recorded at the lower of acquisition price or market value. The value adjustments are reported under “Net loss on financial operations” in the profit and loss for the period in which they are made.
Accrued interest is recorded under balance sheet items “Prepayments and accrued income” or “Accruals and deferred income”.
Under IFRS, available for sale instruments are carried at fair value with changes in fair value reflected directly in equity.
Impairment is recognised in the profit and loss for the year when negative changes in the fair valuation are other than temporary. It is reported separately on the face of the income statement.
Accrued interest is reported on the balance sheet within the balance of the instrument to which it relates.
B Financial assets and liabilities designated at fair value through profit or loss
1 Derivative assets and liabilities
Under EU Accounting Directives, derivative assets and liabilities are not recognised on the balance sheet. They are carried off balance sheet at nominal amount.
Under IFRS, derivative assets and liabilities are recognised on balance sheet and carried at their replacement values.
Changes in fair values of derivatives are recognised in the profit and loss.
2 Loans and advances
Under EU Accounting Directives, all loans and advances are carried at amortised cost. Accrued interest is recorded under balance sheet items “Prepayments and accrued income” or “Accruals and deferred income”.
Under IFRS certain loans are classified on initial recognition as “fair value loans” and valued at fair value through profit or loss. Accrued interest is reported on the balance sheet within the balance of the asset to which it relates.
Payments due are reclassified from other debtors to the loan balance to which they relate.
3 Borrowings
Under EU Accounting Directives, borrowings are recorded at amortised cost. Accrued interest is recorded under balance sheet items “Prepayments and accrued income” or “Accruals and deferred income”.
Under IFRS, EIB applies the fair value option to a significant portion of its issued debt. Accrued interest is reported on the balance sheet within the balance of the debt instrument to which it relates.
C Investment property
This category is not used under EU Accounting Directives. Assets in this category under IFRS are reported in the “Tangible Assets” category under EU Accounting Directives. Under IFRS, assets in this category are held under the historical cost model.
D Pension funds
Under EU Accounting Directives, any actuarial deficits result in an additional specific pension plan provision.
Under IFRS, the corridor approach is adopted, resulting in a proportion only of the actuarial losses being recognised in the period.
E Minority interest adjustment
EIB granted a put option to the minority shareholders on their entire holding of the subsidiary.
Under EU Accounting Directives, this put option does not influence the accounting treatment of minority interest on consolidation.
Under IFRS, the put option results in the non-controlling interest balance being classified as liability rather than equity.
The non-controlling interest in the IFRS profit for the year is therefore included in the interest expense for the year.
F Extraordinary charges
Under IFRS, extraordinary charges are not allowed. The balance is reclassified into Change in impairment on loans and advances and provisions for guarantees, net of reversals.
G Credit loss expense
Additional loan provision recognised in the past under EU Accounting Directives. This year loan provisions brought in line under EU Accounting Directives and IFRS and hence this reduction in provision under IFRS reversed through P&L.
