Annual Report 2010 - Muenchener Hypothekenbank eG

münchener hypothekenbank eg | annUaL report 2010 notes The Münchener hypothekenbank eg annual financial statement as of december 31, 2010 was prepared in accordance with the provisions of the german Commercial Code (hgB), in conjunc- tion with the accounting regulation for banks and financial service institutions (RechKredv), and in accordance with the rules contained in the Cooperatives Act (geng) and the Pfand- brief Act (PfandBg). All claims are stated at nominal amounts in accordance with Art. 340e (2) of the german Commercial Code. The difference between the amounts disbursed and the nominal amount is shown under deferred items. All identifiable individual credit risks are covered by specific value adjustments and provisions set up against claims for repayment of principal and payment of interest. Contingent risks are covered by general value ad- justments. in addition, provisions for risks pursuant to Art. 340f of the german Commercial Code have also been made. Securities held in the liquidity portfolio are strictly valued at the lower of cost or market principle. The present value corresponds to the current exchange or market price. Securities held as fixed assets, which were mainly acquired in the course of the Bank’s public-sector lending business, are valued at their cost of purchase. discounts and premiums are recognised as interest income or expense over the terms of the securities. Securities associated with swap agreements are valued together with these agreements, as a single item. To the extent that they are used to hedge risks, derivatives are not valued individually. unscheduled depreciation pursuant to Art. 253 (3) 3s of the german Commercial Code (hgB) was not taken for market price related changes in the value of securities as we do not believe that the reduction in value will be permanent. in accordance with the rules pertaining to the valuation of assets, participations and holdings in affiliated companies are valued at their cost of purchase. depreciation is taken on those assets where the reduction in value is expected to be long-term. intangible assets and tangible assets are valued at cost or pro- duction costs less accumulated depreciation. Planned depreci- ation was taken in accordance with normal useful lifetimes. Minor value assets were treated in accordance with tax rules. Existing deferred taxes arising due to temporary differences between values calculated for trading and tax purposes are cleared. A backlog of deferred tax assets is not recorded in the balance sheet. Liabilities are shown at their settlement value. Zero bonds are carried in the accounts at the issuing price plus earned interest based on the yield at the time of purchase in accordance with the issuing conditions. The difference between the nominal amount of liabilities and the amount disbursed is shown under deferred items. Based on the principles of prudent business prac- tice, provisions have been made for uncertain liabilities in the amount of settlement value of these liabilities. Provisions with a remaining term of more than one year were discounted using the commensurate average rate of market interest rates. Provisions made for pension obligations are calculated using the Projected unit Credit Method, a discount rate of 5.15 per- cent, and a 2.50 percent rate of salary growth, as well as a 2.0 percent rate of pension growth. The calculation is made on the basis of “guideline tables 2005 g” prepared by Prof. Klaus heubeck. in accordance with the terms of Art.253 (2) 2s of the hgB, the average market rate of interest is used for discount purposes with an assumed remaining term to maturity of 15 years. Necessary additions to pension reserves due to the con- version will be booked immediately as an expense. interest expenses from silent participations were carried under the interest expenses item for the first time in the year under review. The previous year’s figures were adjusted to ensure comparability. Per the terms of Art. 256a of the german Commercial Code, monetary assets and liabilities denoted in foreign currencies are translated at the European Central Bank’s exchange rate valid on the balance sheet date. income realised from the translation of particularly covered foreign currency positions is shown on the income statement. Costs and income are valued at the individual daily exchange rate. The previous year’s figures were not adjusted due to the changes in balance sheet and valuation requirements per the german Balance Sheet Law Modernisation Act (BilMog). gENERAL INfORmATION ON AccOUNTINg POLIcIES NOTES 2010