Harmonisation of accounting standards: disclosure policies and practices of european commercial banks
par Michael Forzeh Fossung
Gothenburg University - Master of Science (MSc) Accounting 2002
With regards to the measurement practices, all banks use the historic cost as a basis for valuation of fixed assets. Tangible fixed assets are also depreciated on a straight-line basis in all the banks, although the number of years may differ among different banks. Most of the banks used the fair values to value financial current assets, except Foreningsparbanken and Dresdner Bank who used the `lower of cost and market value'.
In all the banks, transferable derivatives were either valued at fair or market values. Goodwill was frequently amortized with variations based mostly on the number of years in which they were amortized. Frequently, the time frame used is between 10 to 20 years, as seen in the table.11(*) However, Föreningsparbanken specified no basis for reporting goodwill.
Research and development costs have not been addressed in most banks. However, FöreninsSparbanken records research and development costs when the amount is reasonable, while Dutsche Bank capitalizes research and development costs only on information technology. 12(*)
Looking at the all the banks consolidation policies, full consolidation is mostly carried out where the parent owns more than 50 % or where the bank has more shareholdings and exercises significant influence on the policies of the subsidiary or associate in question. Acquisition was mostly through the purchase method of accounting. Translation of foreign currency financial statement is mostly conducted using the current rate method. The only exception is the Deustche Bank, which uses the spot-mid-rate. Translation differences are either carried forward to equity, or to the profit and loss accounts, or to the reserves, with each having different effects on the balance sheets results. Shares in associated companies are treated using the equity method in all cases.
There are significant differences with regards to the accounting policies used by the different banks. The two German banks use the International Accounting Standards (IAS) published by the International Accounting Standards Committee (IASC).
The two Swedish banks use the regulations and general advice of the Swedish Financial Supervisory Authority, and the recommendations of the Swedish Financial Accounting Standard Council.
Both British banks use the Company Act and the UK GAAP, and also the applicable accounting standards of the accounting standards board.
* 11 See `Summary of Findings' table below.
* 12 The Bank has a principle of recording research and development costs if the amount is reasonable (material)
* 13 NA is used to mean `Not Available' i.e. the annual report does not make specific disclosure in the area.
* 14 Spot Mid-rates on the respective balance sheet date (reporting date method).
* 15 Percentage of holdings in Associated Company varies with countries and banks.
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