3. Consolidation policies
Subsidiaries are any entities controlled by the Bank. The control exists, when the Bank has direct or indirect influence on the financial and operating policies of an entity so as to obtain benefits from its activities. In order to confirm control over a specified entity in accordance with the guidelines given in IFRS 10, all of the following conditions have to be fulfilled simultaneously:
- holding an existing right (power) to manage the relevant activities of the unit on an ongoing basis (activities that significantly affect return from a specific involvement with a given unit),
- exposure to variable returns or holding rights to variable returns,
- having the ability to use the existing rights (power) to affect its returns from a given involvement.
The conditions indicated herein above are not deemed fulfilled if the existing rights are of the protective nature only, i.e. are defined as rights securing Bank’s interests related to a given involvement.
Assessment in this regard takes account of all the facts and circumstances related to a given involvement, including in particular:
- legal form and economic nature of the Bank’s involvement with a given unit,
- purpose, action model, legal form and ownership structure of the unit,
- identification of the relevant activities and the decision-taking manner in terms of these activities,
- verification whether the rights held by the Bank ensure that the relevant activities of the unit may be managed on an ongoing basis,
- verification of the existing rights of other entities involved with the unit and its activities,
- financing structure/ structure of sourcing financing for the unit,
- legal form of the returns on investment and exposure to their variability and relationship with the existing rights,
- identification of the barriers/ conditions/ practical possibilities to exercise the existing rights,
- other/ additional contractual arrangements/ covenants.
The control reassessment is done each time if the facts and circumstances indicate a change to the terms and conditions being the basis for the analysis of a specific involvement, however at least once a year.
The financial statements of subsidiaries are included in the consolidated financial statements from the date of acquisition until the date on which the parent ceases to control the subsidiary, if applicable.
If the control ceases, the Bank:
- no longer recognises the assets and liabilities of the unit that formerly was a subsidiary in the consolidated financial statements,
- recognises any gains or losses associated with the loss of control events attributable to the former controlling interest.
Retained investments are recognised at fair value as at the control loss date, which is the date of initial recognition of the investment in the Bank’s books, depending on the conditions, as:
- interest in joint arrangements, or
- interest in associates, or
- financial assets classified and measured based on the purpose of holding thereof.
3.2. Joint arrangements
Joint arrangements according IFRS 11 are arrangements whereunder the control over the object thereof is divided between individual parties to the arrangement and the decisions concerning the relevant activities require a unanimous consent of the parties to that arrangement.
Such arrangements can be performed in the following forms:
- joint operation – in a situation when the parties to the arrangement have rights to the items of assets and obligations due to liabilities under the arrangements, or
- joint venture – in a situation when the parties to the arrangement have rights to the net assets of the arrangement object.
Control assessment takes account of all the conditions, facts and circumstances (including in particular those provided for in item 3.1. Subsidiaries), provided that the analyses prove that none of the parties exercise control on their own.
When the joint control under joint arrangements is established, the Bank recognises the following in its financial statements:
- items of assets and liabilities as well as revenues and expenses related to the joint operation at the value corresponding to the Bank’s interest in the joint operation (in line with the proportionate consolidation principles),
- interests in joint ventures at the acquisition price as at the date of recognition in the books, and then it is settled on an equity basis.
Reassessment of the joint control is performed each time if the facts and circumstances change.
Change of terms and conditions concerning the joint arrangements together with recognition in the Bank’s books of the joint venture, which used to be identified as a joint operation is now recognised at fair value as at the time when the terms and conditions are changed, determined as a total carrying amount of assets and liabilities, which went through proportionate consolidation accounting for the goodwill resulting from the purchase price.
In situation where change of terms and conditions necessitates recognition of joint operation in Bank’s books, which used to be identified as joint venture, the Bank:
- excludes from the books the investment which used to be recognised under equity method and
- recognises items of assets and liabilities as well as revenues and expenses related to the joint operation at the value corresponding to the Bank’s interest in the joint operation considering potential goodwill.
Any and all differences due to previous recognition of the investment under equity method construed as relation of net assets and liabilities together with goodwill to the investment value:
- the positive difference is offset by goodwill and the resultant value is recognised in the retained earnings,
- the negative difference is adjusted on retained earnings as at the beginning of the period directly preceding the period presented in the financial statements.
Should it be identified that the joint control ceased, the Bank:
- continues to recognise its interest in the joint operation provided that it still holds rights to the items of assets and obligations under liabilities,
- identifies the consequences of events associated with the loss of joint control on the principles provided for in item 3.1. Subsidiaries.
3.3. Consolidations of companies
3.3.1. Legal consolidation of subsidiaries
When settling the transactions of consolidating the Bank with its subsidiary (subject to joint control), the Group applies the approach consistent with the terms and conditions of the approach whereunder shares are consolidated under the Accounting Act of 29 September 1994,following implementation of IAS 8 guidelines.
Under this approach, individual items of relevant assets and liabilities of the consolidated subsidiary are included in the standalone financial statements of the Bank according to values recognized in the consolidated financial statements of the dominant entity as at the consolidation date. The consolidation does not affect the comparable data; thus the data do not require any change.
3.3.2. Assumption of control over an entity subject to common control under IFRS 3.The Group applies the method discussed in item 3.3.1. herein above also to recognise
the fact of control assumption over the entity subject to common control under IFRS 3 in the consolidated financial statements.
The Group adopted the approach whereunder comparable data are not adjusted when control is assumed over an entity subject to common control under IFRS 3.
3.3.3. Assumption of control over an entity other than the ING Group member
The takeover approach is applied when settling the purchase of entities from non-associated parties. At the takeover date, the Group recognizes, separately from goodwill, purchased identifiable assets and taken over identifiable liabilities, taking into account recognition criteria and all non-controlling interests in the taken over entity.
Associates are all entities over which the Group has significant influence but not control, generally accompanying a share of between 20% and 50% of the voting rights.
The consolidated financial statements include the Group’s share in profits or losses of associates according to its share in net assets of associates, from the date of obtaining significant influence until the date, the significant influence ceases.
Investments in associates are initially accounted at purchase price and then accounted for using the equity method. The Group’s investment in associates includes goodwill (net of any accumulated impairment loss) identified on acquisition. The share of the Group in the profits (losses) of associates since the date of acquisition is recognised in the income statement, whereas its share in changes in other reserves since the date of acquisition – in other reserves. The carrying amount of the investment is adjusted by the total changes of different items of equity after the date of their acquisition.
When the share of the Group in the losses of an associate becomes equal or greater than the share of the Group in that associate, the Group discontinues the recognition of any further losses or creates provision only to such amount, it has assumed obligations or has settled payments on behalf of the respective associate.
Investments in associates meeting the criteria of classification as assets held for sale are recognised as per the rules described in item Non-current assets held for sale and discontinued operations (item 9.3).
3.5. Transactions eliminated in consolidation process
Intragroup balances and gains and losses or revenues and costs resulting from intragroup transactions are eliminated in full in the consolidated financial statements.