The la Caixa Group: Statutory Documentation for 2009

Transcription

1 The la Caixa Group Statutory Documentation for 2009

2 2009 The la Caixa Group: Statutory Documentation for 2009

3 CAJA DE AHORROS Y PENSIONES DE BARCELONA - LA CAIXA Avenida Diagonal, Barcelona, Spain Telephone: (34) Fax: (34) Telex: CAVEA E and CAIX E Website

4 CONTENTS Auditors Report 5 Financial statements 6 Balance sheets 6 Income statements 8 Statements of recognised income and expense 9 Consolidated statements of changes in equity 10 Cash flow statements 12 Notes to the financial statements 13 Directors Report 172

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6 2009 la Caixa Annual Report 5

7 Financial statements of the la Caixa Group Balance sheets at 31 December 2009 and 2008, before allocation of profit (Notes 1 to 43), in thousands of euros CAJA DE AHORROS Y PENSIONES DE BARCELONA AND COMPANIES COMPOSING THE LA CAIXA GROUP Assets (*) Cash and balances with central banks (Note 9) 5,119,371 11,793,029 Trading portfolio (Note 10) 6,997,601 5,190,199 Debt instruments 5,948,756 4,434,571 Equity instruments 25,727 12,174 Trading derivatives 1,023, ,454 Memorandum item: Loaned or advanced as collateral 617,459 1,416,788 Other financial assets at fair value profit profit or loss 185, ,883 Debt instruments 78,422 81,944 Equity instruments 107,289 85,939 Available-for-sale financial assets (Note 11) 43,561,476 31,047,429 Debt instruments 35,716,885 24,088,451 Equity instruments 7,844,591 6,958,978 Memorandum item: Loaned or advanced as collateral 8,353,896 1,183,922 Loans and receivables (Note 12) 181,324, ,666,341 Loans and advances to credit institutions 8,152,726 9,716,323 Loans and advances to customers 171,137, ,491,915 Debt instruments 2,034,812 2,458,103 Memorandum item: Loaned or advanced as collateral 50,992,291 50,202,603 Changes in the fair value of hedged items in portfolio hedges of interest rate risk 51,462 67,899 Hedging derivatives (Note 13) 9,329,194 7,987,663 Non-current assets held for sale (Note 14) 2,193, ,671 Investments (Note 15) 12,019,129 8,566,782 Associates 6,274,611 7,190,581 Jointly controlled entities 5,744,518 1,376,201 Reinsurance assets (Note 16) 38,121 35,922 Tangible assets (Note 17) 5,252,199 5,220,033 Property, plant and equipment 4,270,867 4,856,442 Property, plant and equipment for own use 3,318,012 3,801,563 Leased out under an operating lease 586, ,462 Assigned to welfare projects (Note 26) 366, ,417 Investment property 981, ,591 Intangible assets (Note 18) 1,398,933 1,433,740 Goodwill 865, ,543 Other intangible assets 533, ,197 Tax assets 2,140,263 2,086,842 Current 306, ,543 Deferred (Note 27) 1,834,073 1,796,299 Other assets (Note 19) 2,260,787 1,981,928 Stocks 1,499, ,158 Other 761,313 1,495,770 Total Assets 271,872, ,827,361 Memorandum items Contingent liabilities (Note 28) 9,143,084 9,191,125 Contingent commitments (Note 28) 52,485,161 53,827,401 (*) Presented for comparison purposes only. Translation of consolidated financial statements originally issued in Catalan and prepared in accordance with IFRSs as adopted by the European Union (see Notes 1 and 43). In the event of a discrepancy, the Catalan-language version prevails. Notes 1 to 43 and Appendices 1 to 6, attached, form a full part of the consolidated Balance sheet for the financial year ended 31 December la Caixa Annual Report 6

8 Balance sheets at 31 December 2009 and 2008, before allocation of profit (Notes 1 to 43), in thousands of euros CAJA DE AHORROS Y PENSIONES DE BARCELONA AND COMPANIES COMPOSING THE LA CAIXA GROUP Liabilities and Equity (*) Liabilities Trading portfolio (Note 10) 1,414,525 1,442,066 Trading derivatives 1,067, ,204 Short positions 347, ,862 Other financial liabilities at fair value through profit or loss (Note 21) 195, ,963 Customer deposits 195, ,963 Financial liabilities at amortised cost (Note 20) 214,077, ,625,084 Deposits from central banks 2,010, ,876 Deposits from credit institutions 20,510,071 13,033,684 Customer deposits 134,840, ,193,271 Marketable debt securities 43,395,589 46,623,091 Subordinated liabilities 9,923,122 6,526,303 Other financial liabilities 3,397,386 2,992,859 Changes in the fair value of hedged items in portfolio hedges of interest rate risk 1,263, ,371 Hedging derivatives (Note 13) 7,576,687 6,321,972 Liabilities under insurance contracts (Note 21) 19,354,368 18,256,387 Provisions (Note 22) 2,924,915 3,194,638 Provisions for pensions and similar obligations 2,335,612 2,306,394 Provisions for taxes and other legal contingencies 133, ,001 Provisions for contingent liabilities and commitments 110, ,209 Other provisions 345, ,034 Tax liabilities 1,575,785 1,385,924 Current 93,566 95,715 Deferred (Note 27) 1,482,219 1,290,209 Welfare fund (Note 26) 849, ,483 Other liabilities (Note 19) 1,236, ,039 Total Liabilities 250,469, ,905,927 Equity Own funds (Note 5) 16,696,055 15,619,013 Capital or endowment fund (Note 23) 3,006 3,006 Issued 3,006 3,006 Reserves (Note 23) 15,183,405 13,813,730 Accumulated reserves (losses) 13,454,264 12,280,428 Reserves (losses) of entities accounted for using the equity method 1,729,141 1,533,302 Profit attributable to the Group 1,509,644 1,802,277 Valuation adjustments (Note 24) 1,612, ,974 Available-for-sale financial assets 1,886, ,838 Cash flow hedges (9,167) (17,940) Exchange differences (191,203) 16,687 Entities accounted for using the equity method (73,126) (246,611) Minority interests 3,094,540 2,653,447 Valuation adjustments (Note 24) 398, ,997 Other (Note 25) 2,696,515 2,480,450 Total Equity 21,403,331 18,921,434 Total Liabilities and Equity 271,872, ,827,361 (*) Presented for comparison purposes only. Translation of consolidated financial statements originally issued in Catalan and prepared in accordance with IFRSs as adopted by the European Union (see Notes 1 and 43). In the event of a discrepancy, the Catalan-language version prevails. Notes 1 to 43 and Appendices 1 to 6, attached, form a full part of the consolidated Balance sheet for the financial year ended 31 December la Caixa Annual Report 7

9 Income statements for the years ended 31 December 2009 and 2008 (Notes 1 to 43), in thousands of euros CAJA DE AHORROS Y PENSIONES DE BARCELONA AND COMPANIES COMPOSING THE LA CAIXA GROUP (*) Interest and similar income (Note 30) 9,096,524 12,400,992 Interest expense and similar charges (Note 31) (5,164,967) (8,893,100) Net interest income 3,931,557 3,507,892 Income from equity instruments (Note 32) 399, ,617 Results of entities accounted for using the equity method 839, ,642 Fee and commission income (Note 33) 1,530,464 1,497,063 Fee and commission expense (Note 33) (227,820) (247,186) Gains/losses on financial assets and liabilities (net) (Note 34) 13,527 89,408 Trading portfolio (36,703) 36,348 Financial instruments not measured at fair value through profit or loss 25,025 15,788 Other 25,205 37,272 Exchange differences (net) (Note 34) 117,681 73,894 Other operating income (Note 35) 1,190,281 1,197,962 Income from insurance and reinsurance contracts issued 711, ,659 Sales and income from the provision of non-financial services 211, ,466 Other 267, ,837 Other operating expenses (Note 35) (608,379) (249,956) Expenses of insurance and reinsurance contracts (413,153) (97,871) Changes in stocks (61,591) (45,735) Other (133,635) (106,350) Gross income 7,186,751 6,981,336 Administrative expenses (3,083,874) (3,049,409) Staff costs (Note 36) (2,190,896) (2,112,575) Other general administrative expenses (Note 37) (892,978) (936,834) Depreciation and amortisation (Notes 17 and 18) (481,246) (479,060) Provisions (net) (Note 22) 97,399 (412,591) Impairment losses on financial assets (net) (Note 38) (1,902,214) (976,711) Loans and receivables (1,840,089) (796,136) Other financial instruments not measured at fair value through profit or loss (62,125) (180,575) Profit from operations 1,816,816 2,063,565 Impairment losses on other assets (net) (Note 39) (304,040) (13,313) Goodwill and other intangible assets (360) (2,964) Other assets (303,680) (10,349) Gains (losses) on disposal of assets not classified as non-current assets held for sale (Note 40) 4,792 26,478 Negative goodwill in business combinations 0 0 Gains (losses) on non-current assets held for sale not classified as discontinued operations (Note 41) 350,417 (2,463) Profit before tax 1,867,985 2,074,267 Income tax (Note 27) (35,206) (10,989) Mandatory transfer to welfare funds 0 0 Profit for the year from continuing operations 1,832,779 2,063,278 Profit from discontinued operations (net) 0 0 Consolidated profit for the year 1,832,779 2,063,278 Profit attributable to the Parent 1,509,644 1,802,277 Profit attributable to minority interests (Note 25) 323, ,001 (*) Presented for comparison purposes only. Translation of consolidated financial statements originally issued in Catalan and prepared in accordance with IFRSs as adopted by the European Union (see Notes 1 and 43). In the event of a discrepancy, the Catalan-language version prevails. Notes 1 to 43 and Appendices 1 to 6, attached, form a full part of the consolidated Statement of recognised income and expense for the financial year ended 31 December la Caixa Annual Report 8

10 Statements of recognised income and expense (*) for the years ended 31 December 2009 and 2008 (Notes 1 to 43), in thousands of euros CAJA DE AHORROS Y PENSIONES DE BARCELONA AND COMPANIES COMPOSING THE LA CAIXA GROUP (**) A. Consolidated profit for the year 1,832,779 2,063,278 B. Other recognised income and expense (Note 24) 1,188,790 (3,166,276) Available-for-sale financial assets 1,867,606 (3,934,624) Revaluation gains (losses) 2,185,657 (4,041,579) Amounts transferred to income statement (318,051) 106,955 Cash flow hedges (95) (37,627) Revaluation gains (losses) (28,220) (35,322) Amounts transferred to income statement 28,125 (2,305) Hedges of net investments in foreign operations 0 0 Exchange differences (270,517) 49,216 Revaluation gains (losses) (270,701) 49,216 Amounts transferred to income statement Non-current assets held for sale 0 0 Actuarial gains (losses) on pension plans 0 0 Entities accounted for using the equity method 214,713 (456,562) Revaluation gains (losses) 214,713 (456,562) Other recognised income and expense 0 0 Income tax (622,917) 1,213,321 C. Total recognised income and expense (A+B) 3,021,569 (1,102,998) Attributable to the Parent 2,473,406 (650,130) Attributable to minority interests 548,163 (452,868) (*) See Note (**) Presented for comparison purposes only. Translation of consolidated financial statements originally issued in Catalan and prepared in accordance with IFRSs as adopted by the European Union (see Notes 1 and 43). In the event of a discrepancy, the Catalan-language version prevails. Notes 1 to 43 and Appendices 1 to 6, attached, form a full part of the consolidated Statement of recognised income and expense for the financial year ended 31 December la Caixa Annual Report 9

11 Consolidated statements of changes in equity (*) for the years ended 31 December 2009 and 2008 (Notes 1 to 43), in thousands of euros CAJA DE AHORROS Y PENSIONES DE BARCELONA AND COMPANIES COMPOSING THE LA CAIXA GROUP EQUITY ATTRIBUTABLE TO THE PARENT 2009 CAPITAL/ ENDOWMENT FUND ACCUMULATED RESERVES (LOSSES) OWN FUNDS RESERVES (LOSSES) OF ENTITIES ACCOUNTED FOR USING THE EQUITY METHOD PROFIT FOR THE YEAR ATTRIBUTABLE TO THE PARENT VALUATION ADJUSTMENTS MINORITY INTERESTS TOTAL EQUITY Initial balance at 31/12/2008 3,006 12,280,428 1,533,302 1,802, ,974 2,653,447 18,921,434 Adjustments due to changes in accounting policy Adjustments made to correct errors 0 Adjusted initial balance 3,006 12,280,428 1,533,302 1,802, ,974 2,653,447 18,921,434 Total recognised income/(expense) 1,509, , ,163 3,021,569 Other changes in equity 0 1,173, ,839 (1,802,277) 0 (107,070) (539,672) Distribution of dividends and other payments to shareholders (125,909) (125,909) Transactions with own equity instruments (net) 0 Transfers between equity items 750, ,928 (1,302,277) 0 Optional transfer to welfare funds (500,000) (500,000) Other increases/ (decreases) in equity 423,487 (356,089) 18,839 86,237 Final balance at 31/12/2009 3,006 13,454,264 1,729,141 1,509,644 1,612,736 3,094,540 21,403,331 (*) See Note Translation of consolidated financial statements originally issued in Catalan and prepared in accordance with IFRSs as adopted by the European Union (see Notes 1 and 43). In the event of a discrepancy, the Catalan-language version prevails. 0 Notes 1 to 43 and Appendices 1 to 6, attached, form a full part of the consolidated Statement of total changes in equity for the financial year ended 31 December la Caixa Annual Report 10

12 Consolidated statements of changes in equity (*) for the years ended 31 December 2009 and 2008 (Notes 1 to 43), in thousands of euros CAJA DE AHORROS Y PENSIONES DE BARCELONA AND COMPANIES COMPOSING THE LA CAIXA GROUP EQUITY ATTRIBUTABLE TO THE PARENT 2008 (**) CAPITAL/ ENDOWMENT FUND ACCUMULATED RESERVES (LOSSES) OWN FUNDS RESERVES (LOSSES) OF ENTITIES ACCOUNTED FOR USING THE EQUITY METHOD PROFIT FOR THE YEAR ATTRIBUTABLE TO THE PARENT VALUATION ADJUSTMENTS MINORITY INTERESTS TOTAL EQUITY Initial balance at 31/12/2007 3,006 10,684,872 1,242,418 2,487,953 3,101,381 3,433,686 20,953,316 Adjustments due to changes in accounting policy Adjustments made to correct errors Adjusted initial balance 3,006 10,684,872 1,242,418 2,487,953 3,101,381 3,433,686 20,953,316 Total recognised income/(expense) 1,802,277 (2,452,407) (452,868) (1,102,998) Other changes in equity 0 1,595, ,884 (2,487,953) 0 (327,371) (928,884) Distribution of dividends and other payments to shareholders (133,230) (133,230) Transfers between equity items 1,294, ,038 (1,987,953) 0 Increases/(decreases) due to business combinations 0 Optional transfer to welfare funds (500,000) (500,000) Other increases/ (decreases) in equity 300,641 (402,154) (194,141) (295,654) Final balance at 31/12/2008 3,006 12,280,428 1,533,302 1,802, ,974 2,653,447 18,921,434 (**) Presented for comparison purposes only. Translation of consolidated financial statements originally issued in Catalan and prepared in accordance with IFRSs as adopted by the European Union (see Notes 1 and 43). In the event of a discrepancy, the Catalan-language version prevails. 0 0 Notes 1 to 43 and Appendices 1 to 6, attached, form a full part of the consolidated Statement of total changes in equity for the financial year ended 31 December la Caixa Annual Report 11

13 Cash flow statements (*) for the years ended 31 December 2009 and 2008 (Notes 1 to 43), in thousands of euros CAJA DE AHORROS Y PENSIONES DE BARCELONA AND COMPANIES COMPOSING THE LA CAIXA GROUP (**) A. Cash flows from operating activities (7,925,145) 12,582,185 Consolidated profit for the year 1,832,779 2,063,278 Adjustments made to obtain cash flows from operating activities 3,503,629 1,574,045 Depreciation and amortisation 481, ,060 Other adjustments 3,022,383 1,094,985 Net increase/decrease in operating assets 14,401,856 3,933,473 Trading portfolio 1,807,402 2,099,408 Other financial assets at fair value through profit or loss 17,828 (87,363) Available-for-sale financial assets 12,131,505 7,299,071 Loans and receivables (1,815,520) (8,294,580) Other operating assets 2,260,641 2,916,937 Net increase/decrease in operating liabilities 1,105,097 12,867,346 Trading portfolio (27,541) 589,472 Other financial liabilities at fair value through profit or loss 11,767 (87,950) Financial liabilities at amortised cost (306,384) 10,663,915 Other operating liabilities 1,427,255 1,701,909 Collections/payments of income tax 35,206 10,989 B. Cash flows from investing activities (4,400,626) (5,196,998) Payments 5,076,357 5,406,797 Tangible assets 965,601 1,025,145 Intangible assets 75, ,470 Investments 2,018,565 3,294,791 Subsidiaries and other business units 0 290,932 Non-current assets and associated liabilities held for sale 2,016, ,459 Collections 675, ,799 Tangible assets 492,459 97,373 Investments 4,212 23,200 Non-current assets and associated liabilities held for sale 179,060 89,226 C. Cash flows from financing activities 5,651, ,144 Payments 4,207,070 4,653,997 Subordinated liabilities 1,000,000 0 Other payments related to financing activities 3,207,070 4,653,997 Collections 9,858,786 5,150,141 Subordinated liabilities 4,397,586 0 Other collections related to financing activities 5,461,200 5,150,141 D. Effects of changes in exchange rates 397 (2,313) E. Net increase (decrease) in cash and cash equivalents (A+B+C+D) (6,673,658) 7,879,018 F. Cash and cash equivalents at the beginning of the period 11,793,029 3,914,011 G. Cash and cash equivalents at the end of the period 5,119,371 11,793,029 Memorandum items Components of cash and cash equivalents at the end of the period Cash 1,398,841 1,480,452 Cash equivalents at central banks 3,720,530 10,312,577 Total cash and cash equivalents at the end of the period 5,119,371 11,793,029 (*) See Note (**) Presented for comparison purposes only. Notes 1 to 43 and Appendices 1 to 6, attached, form a full part of the consolidated Cash flow statement for the financial year ended 31 December la Caixa Annual Report 12

14 Notes to the financial statements of the la Caixa Group for the financial year 2009 INDEX TO THE NOTES PAGE 1. Description of the Institution and other information 15 Description of the Institution 15 Basis of presentation 15 Responsibility for the information and for the estimates made 19 Comparison of information and variations in the scope of consolidation 19 Investments in credit institutions 19 Minimum reserve ratio 20 Deposit Guarantee Fund 20 Events subsequent to closure Accounting policies and measurement bases Business combinations and basis of consolidation Financial instruments Derivatives and hedges Foreign currency transactions Recognition of income and expenses Transfers of financial assets Impairment of financial assets Offsetting Financial guarantees Leases Investment funds, pension funds and other assets under management Personnel expenses and post-employment benefit obligations Income tax Tangible assets Intangible assets Stocks Non-current assets held for sale Insurance transactions Provisions and contingent liabilities Statement of recognised income and expense Statement of total changes in equity Cash flow statements Welfare projects Risk management Credit risk Market risk Liquidity risk Operational risk Compliance risk Capital adequacy management Own funds and allocation of profit Purchase and sale of ownership interests in the capital of subsidiaries Business segment reporting Remuneration of key directors and executives Cash and deposits with central banks Trading portfolio (assets and liabilities) Available-for-sale financial assets Loans and receivables Loans and advances to credit institutions Loans and advances to customers Debt instruments Impairment losses Hedging derivatives (assets and liabilities) Non-current assets held for sale Investments la Caixa Annual Report 13

15 16. Reinsurance assets Tangible assets Intangible assets Other assets and liabilities Financial liabilities at amortised cost Deposits from credit institutions Customer deposits Marketable debt securities Subordinated liabilities Other financial liabilities Liabilities under insurance contracts Provisions Endowment fund and reserves Valuation adjustments Minority interests Welfare projects Tax matters Contingent liabilities and commitments Other significant disclosures Third-party funds managed by the Group Asset securitisations Securities deposits and investment services Financial assets derecognised due to impairment Geographical distribution of volume of business Interest and similar income Interest expense and similar charges Income from equity instruments Fee and commission income and expense Gains/losses on financial assets and liabilities (net) Other operating income and expenses Staff costs Other general administrative expenses Impairment losses on financial assets (net) Impairment losses on other assets (net) Gains (losses) on disposal of assets not classified as non-current assets held for sale Gains (losses) on non-current assets held for sale not classified as discontinued operations Transactions with related parties Other disclosure requirements Customer ombudsman and customer care service Environmental information Information required by the Mortgage Market Law 156 Appendix 1. Public Financial Statements of la Caixa 158 Appendix 2. la Caixa Group Subsidiaries 164 Appendix 3. Joint ventures of the la Caixa Group (jointly controlled entities) 168 Appendix 4. Associates of the la Caixa Group 169 Appendix 5. Income tax credits for reinvestment of profits 170 Appendix 6. Companies filing joint tax returns la Caixa Annual Report 14

16 Notes to the financial statements for the year ended 31 December 2009 CAJA DE AHORROS Y PENSIONES DE BARCELONA AND COMPANIES COMPOSING THE LA CAIXA GROUP As required by current legislation governing the content of consolidated financial statements, these Notes to the financial statements complete, extend and discuss the consolidated balance sheet, consolidated income statement, consolidated statement of changes in equity and consolidated cash flow statement, and form a unit together with them, in order to present fairly the consolidated equity and consolidated financial position of the la Caixa consolidated Group at 31 December 2009, and the consolidated results of its operations, the changes in consolidated equity and the consolidated cash flows during the year ended at this date. 1. Description of the Institution and other information Description of the Institution As a savings bank and in accordance with its Bylaws, Caja de Ahorros y Pensiones de Barcelona (herein after, la Caixa or the Institution) is a private-law, non-profit financial institution providing beneficent welfare services, and is separate from any other company or entity. Its corporate purpose is to encourage all authorised forms of savings, to carry out beneficent welfare projects and to invest the related funds in safe and profitable assets of general interest. As a credit institution, subject to the rules and regulations issued by the Spanish and EU economic and monetary authorities, la Caixa conducts universal banking activities, and provides substantial retail banking services. la Caixa is the parent of a group of subsidiaries that offer other products and services and which compose, together with it, a single decision-making unit. Therefore, la Caixa is obliged to prepare, in addition to its own individual financial statements, a set of consolidated financial statements of the Caja de Ahorros y Pensiones de Barcelona Group (hereinafter, the la Caixa Group or the Group), which also includes interests in joint ventures and investments in associates. Criteria CaixaCorp, SA is the subsidiary that manages and controls almost the entire equity portfolio of the la Caixa Group. In a bid to enhance transparency in the relations between Criteria CaixaCorp, SA and its majority shareholder la Caixa, on 19 September 2007 the two entities drew up an Internal Relationship Protocol, available for consultation on the web pages of Criteria CaixaCorp, SA ( and the CNMV National Securities Market Commission ( The aforementioned Protocol follows the recommendations of the Unified Code on Good Governance of 22 May 2006, and its purpose is to regulate the relationship between la Caixa, Criteria CaixaCorp, SA and all the other la Caixa Group subsidiaries. Basis of presentation The Group s consolidated financial statements were prepared in accordance with International Financial Reporting Standards (hereinafter, IFRSs) as adopted by the European Union through EU Regulations, in accordance with Regulation No 1606/2002 of the European Parliament and of the Council of 19 July 2002 and subsequent amendments, and in due consideration of Bank of Spain Circular 4/2004 of 22 December on Public and Confidential Financial Reporting Rules and Formats for Credit Institutions, which constitutes the adaptation of the IFRSs adopted by the European Union to the Spanish credit institution sector. Circular 4/2004 was amended by Bank of Spain Circular 6/2008 of 26 November. In particular, the Group has applied the Standards and Interpretations adopted by the European Union which came into force as of 1 January la Caixa Annual Report 15

17 The financial statements were prepared on the basis of the accounting records kept by la Caixa and by the other Group entities and include certain adjustments and reclassifications required to unify the policies and criteria used by the Group companies with those of la Caixa. Appendix 1 to these Notes includes the balance sheet, income statement, statement of changes in equity and cash flow statement of la Caixa for 2009 and Standards and interpretations issued by IASB which came into force in 2009 IFRS 8 Operating Segments. This standard, which replaces IAS 14 Segment Reporting, requires an entity to report on the financial performance of its business segments on the basis of the information used internally by Management to assess segment performance. Revision of IAS 23 Borrowing Costs. The revised standard eliminates the option of the immediate recognition as an expense of borrowing costs relating to assets that take a substantial period of time to get ready for use or sale. Revision of IAS 1 Presentation of Financial Statements. The impacts of this standard will basically be at presentation and breakdown level. Amendment to IFRS 2 Share-based Payment. This amendment clarifies the concepts of vesting conditions and cancellations in share-based payments. Amendment to IAS 1 and IAS 32 Financial Instruments Puttable at Fair Value and Obligations Arising on Liquidation. Under this amendment, certain financial instruments which in accordance with IAS 32 Financial Instruments: Presentation must be classified as financial liabilities may be classified as equity provided they meet certain requirements. Amendment to IFRS 7 Improving Disclosures about Financial Instruments. This clarifies and expand the disclosures required in respect of fair value measurements and liquidity risk in the wake of the recent financial crisis. Amendment to IFRIC 9 and IAS 39 Embedded Derivatives. The amendment clarifies the accounting treatment of embedded derivatives by entities that choose to reclassify certain financial instruments outside the fair value through profit or loss category, indicating that these must be assessed and, if necessary, separately accounted for in financial statements. IFRIC 13 Customer Loyalty Programmes. This interpretation indicates how to recognise the entity s obligations to provide customers with free or discounted goods or services in the form of points or using other systems. IFRIC 14 and IAS 19 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction. This interpretation provides general guidance on how to assess the limit in IAS 19 Employee Benefits on the amount of the surplus that can be recognised as an asset la Caixa Annual Report 16

18 Amendment to IAS 27 and IFRS 1 Cost of Investments in Subsidiaries, Jointly Controlled Entities and Associates. In a parent s separate financial statements, investments in subsidiaries, jointly controlled entities and associates must be accounted for either at cost or in accordance with IAS 39 Financial Instruments: Recognition and Measurement. Standards and interpretations issued by IASB but not yet in force At the date of preparation of these consolidated financial statements, the following standards and interpretations had been published by the IASB but had not yet come into force, either because their effective date is subsequent to the date of the consolidated financial statements or because they had not yet been approved by the European Union. STANDARDS AND INTERPRETATIONS TITLE MANDATORY APPLICATION DATE: Approved for EU use Revision of IFRS 3 Business combinations 1 July 2009 Amendment to IAS 27 Consolidated and separate financial statements 1 July 2009 Amendment to IAS 39 Items recognisable as hedges 1 July 2009 Amendment to IAS 32 Financial instruments: presentation 1 February 2010 IFRIC 12 (1) Service concession arrangements 1 April 2010 IFRIC 15 (1) Agreements for the construction of real estate 1 January 2010 IFRIC 16 Hedges of a net investment in a foreign operation 1 July 2009 IFRIC 17 (1) Distribution of non-cash assets to owners 1 November 2009 IFRIC 18 (1) Transfer of assets from customers 1 November 2009 Not approved for EU use IFRIC 9 Financial instruments: classification and measurement 1 January improvement plans Non-urgent IFRS improvements Various (mainly 1 January 2010) Amendment to IFRS 2 Share-based payments 1 January 2010 Revision of IAS 24 Related party disclosures 1 January 2011 Amendment to IFRIC 14 Prepayments of a minimum funding requirement 1 January 2011 IFRIC 19 Extinguishing financial liabilities with equity instruments (1) Date of application as per approval in the EU Official Journal, which differs from the original IASB date. 1 January 2010 Revision of IFRS 3 Business Combinations and amendment to IAS 27 Consolidated and Separate Financial Statements. The amendments introduce significant changes in several matters relating to accounting for business combinations which, in general, place greater emphasis on the use of fair value. By way of example, acquisition costs must be expensed, as opposed to the current accounting treatment of recognising them as an increase in the cost of the business combination, and in step acquisitions the acquirer must re-measure its investment prior to the date on which control is obtained at fair value through profit or loss. Management expects that application of the revision of IFRS 3 will have a number of effects on the assessment of assets and income in relation to the sale of an ownership interest, still pending determination, in Sociedad General de Aguas de Barcelona, SA and the purchase of Adeslas, due to be completed in 2010 (see Note 15). Amendment to IAS 39 Financial Instruments. Recognition and Measurement. The amendment clarifies two specific issues in relation to hedge accounting: (a) in which cases inflation may be identified as a hedged risk and (b) when purchased options can be designated as a hedging instrument la Caixa Annual Report 17

19 IFRS 9 Financial Instruments. Classification and Measurement. IFRS 9 will eventually replace the section of IAS 39 which currently deals with classification and measurement. There are some major differences with respect to the current standard. For instance, approval of a new classification model based on only two categories of amortised cost and fair value; the elimination of the current Held-tomaturity Investments and Available-for-sale Financial Assets classifications; analysis of impairment only in terms of assets carried at amortised cost and non-separation of embedded derivatives in finance contracts. Amendment to IFRS 2 Share-based Payment. This amendment includes the aspects dealt with in IFRIC 8 and IFRIC 11 in IFRS 2, and so these interpretations will be derogated when their contents are included in the standard. This item clarifies that entities in receipt of services from employees or suppliers must recognise these transactions, regardless of the fact that it may be another entity within the group which settles payment, and regardless of whether payment is in cash or share-based. Amendment to IAS 32 Financial Instruments: Presentation. This amendment clarifies the classifciation of rights issues for purchase of shares (rights, options or warrants) denominated in foreign currency. The amendment stipulates that when these rights are employed to purchase a fixed number of shares they must be classified as equity regardless of the currency in which the fixed amount is denominated, provided the requisites of the standard are met. Revision of IAS 24 Related Party Disclosures. This introduces two new features: (a) partial exemption from certain disclosures when there is a link in the case of entities dependent on or related to the State (or equivalent government institution) and (b) revision of the definition of a related party, with clarification of certain relationships which were previously not explicit in the standard. Adoption of IFRIC 12 Service Concession Arrangements and consequent amendment to IFRS 1, IFRIC 14 and SIC 29. This explains how concession entities are to apply current IFRSs in the accounting treatment of the rights and obligations undertaken in concession arrangements. IFRIC 15 Agreements for the Construction of Real Estate. This interpretation addresses the accounting for revenue and expenses associated with the construction of real estate, in order to clarify whether an agreement for the construction of real estate falls within the scope of IAS 11 Construction Contracts or IAS 18 Revenue. Adoption of IFRIC Interpretation 16 Hedges of a Net Investment in a Foreign Operation. Under this interpretation, the only risk that can be hedged is the risk between the functional currency of the foreign operation and the parent entity s functional currency. It also clarifies that hedging instruments in a hedge of a net investment may be held by any entity within the group, and addresses how an entity should determine the amounts to be reclassified from equity to profit/loss on disposal of the foreign operation. IFRIC 17 Distributions of Non-cash Assets to Owners. This interpretation requires an entity to recognise an obligation to distribute a non-cash dividend at the fair value of the asset to be distributed and to recognise any difference with respect to the carrying amount of the asset in profit or loss. IFRIC 18 Transfers of Assets from Customers. This clarifies the divergent practice in accounting for entities which receive from customers an item of property, plant and equipment, concluding that in cases where the item of property satisfies the definition of an asset from the point of view of the entity receiving it, it must recognise the asset at its fair value on the date of transfer, with credit recognised as revenue as stipulated by IAS 18 Revenue la Caixa Annual Report 18

20 IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments. The interpretation sets forth accounting treatment from the point of view of the debtor of total or partial extinguishing of a financial liability through the issue of equity instruments to the creditor. Responsibility for the information and for the estimates made The financial statements of la Caixa and the consolidated financial statements of the la Caixa Group for 2009 were prepared by the Board of Directors at a meeting held on 4 February These financial statements and the financial statements of the consolidated Group companies have not yet been approved by the General Assembly of the Parent and by the Annual General Meetings of the consolidated entities, respectively. However, the Board of Directors of la Caixa considers that they will be approved without any changes. The financial statements of la Caixa and the consolidated financial statements of the la Caixa Group for 2008 were approved by the General Assembly held on 23 April 2009 and are presented solely for comparison purposes with the figures for The financial statements were prepared on the basis of judgments and estimates made by the Senior Executives of la Caixa and of the consolidated entities, which relate, inter alia, to the fair value of certain assets and liabilities, impairment losses, the measurement of goodwill and intangible assets, the useful life of tangible and intangible assets, actuarial hypotheses for the measurement of post-employment benefit obligations, preretirement scheme liabilities, and the equity or profit and loss of the companies accounted for using the equity method. These estimates relate to both the amounts recognised on the balance sheet and on the income statement for Although these estimates were made on the basis of the best available information, future events might make it necessary to change these estimates in coming years. Changes in accounting estimates would be applied prospectively, recognising the effects of the change in estimates on the consolidated balance sheet and income statement. The accounting standards established by the IFRSs are generally compatible with those established by Bank of Spain Circular 4/2004 and are described in Note 2. No accounting policies differing from such standards which may have a material effect have been applied. Comparison of information and variations in the scope of consolidation IFRSs require uniform disclosure of information in the consolidated financial statements. In 2009 there were no amendments with respect to the accounting regulations applicable that affected comparison of information between financial years. The main variations to the scope of consolidation are set out in Note 6. Investments in credit institutions In accordance with the provisions of Royal Decree 1245/1995 of 14 July, there follows a list of stakes equal to or greater than 5% of the capital or voting rights in a credit institution held by the la Caixa Group in 2009 and Investments in credit institutions that are subsidiaries of the la Caixa Group at 31 December 2009 are set forth in Appendix 2. Investments in credit institutions CREDIT INSTITUTIONS Banco BPI, SA 30.10% 29.38% Boursorama, SA 20.85% 20.95% Grupo Financiero Inbursa 20.00% 20.00% The Bank of East Asia, LTD 9.81% 9.86% Erste Group Bank, AG 10.10% 4.90% 2009 la Caixa Annual Report 19

21 At 31 December 2009 and 2008, there was no Spanish or foreign credit institution, or group comprising a credit institution, holding a stake equal to or greater than 5% of the capital or voting rights in any of the credit institutions that are subsidiaries of the la Caixa Group. Minimum reserve ratio At 31 December 2009 and 2008, and throughout the financial years 2009 and 2008, la Caixa complied with the minimum ratios required by applicable Spanish regulations. Deposit Guarantee Fund la Caixa makes annual contributions to the Savings Banks Deposit Guarantee Fund, the institution responsible for guaranteeing the deposits in cash and securities placed with savings banks. In 2009 and 2008, the contributions were 0.4 per thousand of the calculation basis, which consisted of the guaranteed deposits plus 5% of the market value of the guaranteed security deposits. The amounts accrued are included under Other Operating Expenses on the consolidated income statement (see Note 35). Events subsequent to closure On 14 January 2010 Criteria CaixaCorp, SA subscribed 120,837,000 new shares in The Bank of East Asia, LTD, issued through an increase of share capital with an investment of 3,698 million Hong Kong dollars (approximately EUR 331 million). The new shares and the pre-existing shares bring the total interest of Criteria CaixaCorp, SA in The Bank of East Asia, LTD to 14.99%. 2. Accounting policies and measurement bases The accounting policies and measurement bases applied in preparing the la Caixa Group s consolidated financial statements for 2009 were as follows: 2.1. Business combinations and basis of consolidation In accordance with IFRSs, business combinations are defined as the unification of two or more entities within one single entity or group of entities. Acquirer is defined as an entity which, at the date of acquisition, gains control of another entity. At the acquisition date, the acquirer recognises in its financial statements or consolidated financial statements, as appropriate, the assets, liabilities and contingent liabilities of the acquiree measured at fair value. The acquirer must also compare the cost of the business combination with the proportion acquired of the fair value of the assets, liabilities and contingent liabilities of the acquiree. If the difference is positive, the acquirer must recognise goodwill in assets; if negative, the acquirer must recognise income. Subsidiaries Paragraph 4 of IAS 27 Consolidated and Separate Financial Statements defines control as the power to govern the financial policy and activity of an entity so as to obtain profits from its activities. Subsidiaries are defined as entities with which la Caixa makes up a decision-making unit because it directly or indirectly owns 50% or more of the voting rights or, if it owns a lower percentage, it has agreements with other shareholders of these companies granting it a majority of the voting rights. Special purpose entities are also considered to be subsidiaries. Appendix 2 to these Notes contains significant information on these companies la Caixa Annual Report 20

22 The la Caixa Group considers as subsidiaries the securitisation special-purpose vehicles created on or after 1 January 2004 in which la Caixa retains the risks inherent to their assets. All the la Caixa Group companies owned more than 50% are considered to be subsidiaries. One exception is Repinves, SA, which is 67.60% owned by the Criteria CaixaCorp, SA Group and is considered to be a jointly controlled entity as a result of a shareholder agreement whereby decisions must be taken on a joint basis. Repinves, SA is a portfolio company which holds a 5% ownership interest in Repsol-YPF, SA, of which 3.39% relates to the Criteria CaixaCorp, SA Group. The financial statements of the subsidiaries are consolidated, without exceptions on the grounds of activity, with those of la Caixa using the full consolidation method, which consists of the aggregation of similar assets, liabilities and equity, income and expenses shown in their individual financial statements. The carrying amount of direct and indirect investments in the share capital of the subsidiaries is eliminated at the proportion of the equity interest in the subsidiaries held through these investments. All other balances and transactions between the consolidated entities are eliminated on consolidation. The share of third parties in the la Caixa Group s equity and profit for the year is shown under Minority Interests on the consolidated balance sheet and Profit Attributable to Minority Interests on the consolidated income statement, respectively (see Note 25). The results of subsidiaries acquired during the year are consolidated from the date of acquisition. The results of companies that cease to be subsidiaries are consolidated until the date on which they cease to be Group subsidiaries. Note 6 contains disclosures of the most significant acquisitions and disposals of subsidiaries in 2009 and Jointly controlled entities The la Caixa Group defines jointly controlled entities which are not subsidiaries and which it controls jointly with other shareholders under a contractual agreement. In accordance with IAS 31, as a general rule the la Caixa Group uses the equity method for jointly controlled entities (see the Associates section below). As a particular case, companies whose activity is to hold other companies are proportionately consolidated, and accordingly the balance sheet and income statement balances of jointly controlled entities, and any relevant eliminations, are added to the consolidated financial statements only at the proportion of the la Caixa Group s ownership interests therein. The Group considers that the application of this exception provides a fairer presentation of the Group s equity position, since in this way its assets reflect significant interests in jointly controlled entities, associates or available-forsale financial assets. Appendix 3 to these Notes contains relevant financial information on these companies. Associates Associates are entities over which la Caixa directly or indirectly exercises significant influence but which are not subsidiaries or jointly controlled entities. Significant influence is in most cases presumed to exist when the la Caixa Group owns 20% or more of the voting rights of the investee. Exceptionally, investees in which more than 20% of the voting rights are held but which form part of the la Caixa Group s venture capital activity are not considered to be associates la Caixa Annual Report 21

23 Moreover, entities in which less than 20% of voting rights are held are not considered to be associates of the la Caixa Group, except in cases where investment and strategic cooperation agreements or a presence on the Governing Bodies of the entities demonstrate significant influence. In the consolidated financial statements, investments in associates are accounted for using the equity method, i.e. at the proportion of the Group s equity interest in the share capital of the investee, after consideration of the dividends received therefrom and other equity eliminations. The profits and losses arising from transactions with an associate are eliminated to the extent of the Group s equity interest in the share capital of the associate. Appendix 4 to these Notes contains significant information on these companies Financial instruments Definitions A financial instrument is a contract whereby a financial asset emerges in an entity, with the simultaneous emergence of a financial liability or a capital instrument in another entity. A capital instrument or equity instrument is a legal transaction which demonstrates or reflects a residual holding in the assets of the entity that issues these, after deduction of all liabilities. A derivative is a financial instrument the value of which changes in response to observable market values (such as interest rates, exchange rates, credit ratings and indexes), which does not require any initial investment or the investment is small in relation to financial instruments with a similar response to changes in market conditions and, in general, is future-liquid. A hybrid financial instrument is a contract which simultaneously contains a main contract other than a derivative along with a financial derivative, known as an embedded derivative, which is not individually transferable and makes certain cash flows on the hybrid contract vary in the same way as the contract considered in isolation. A composite financial instrument is a contract which simultaneously creates a financial liability and an equity instrument for the issuer. Initial recognition Financial instruments are initially recognised on the consolidated balance sheet when the Group becomes a party to the contract giving rise to them, under the terms and conditions thereof. Loans and deposits, i.e. the most common financial assets and liabilities, are recognised on the date from which the legal right to receive or the legal obligation to pay cash, respectively, arises. Financial derivatives are generally recognised on the trade date. Financial asset purchases and sales arranged through conventional contracts which may not be settled net are recognised from the date on which the rewards, risks, rights and duties incident to ownership are for the purchaser. Depending on the type of financial asset purchased or sold, this date may be the trade date or the settlement or delivery date. In particular, transactions carried out in the spot currency market and transactions carried out on debt instruments traded in secondary Spanish securities markets are recognised on the settlement date, whereas transactions carried out on equity instruments traded in secondary Spanish securities markets are recognised on the trade date la Caixa Annual Report 22

24 Derecognition of financial instruments A financial asset is fully or partially derecognised on the consolidated balance sheet when the contractual rights to the cash flows from the financial asset expire or when the asset is transferred. Transfer of the asset must result in a transfer of substantially all of the risks and rewards of the asset or a transfer of control thereof, if cases where these have not been transferred (see Note 2.6). A financial liability is fully or partially derecognised on the balance sheet when the related obligations are extinguished or when it is acquired by the Group. Fair value and amortised cost Upon initial recognition, all financial instruments are recognised on the consolidated balance sheet at fair value which, unless there is evidence to the contrary, is the transaction price. Thereafter, at a specified date, the fair value of a financial instrument is the amount for which it could be delivered, in the case of an asset, or settled, in the case of a liability, in a transaction carried out between knowledgeable willing parties on an arm s-length basis. Specifically, financial instruments are classified under one of the following categories according to the methodology used to determine their fair value: Level 1: by reference to quoted prices in active markets. Level 2: using valuation techniques in which the hypotheses considered relate to directly or indirectly observable market data or quoted prices in active markets for similar instruments. Level 3: using valuation techniques in which some of the main hypotheses are not borne out by observable market data. The most common objective reference used to determine the fair value of a financial instrument is the quoted price in an active market (Level 1) and, therefore, the fair value of a financial instrument is determined using the price that would be paid for it on an organised, transparent and deep market ( quoted price or market price ). This level generally includes quoted debt instruments, quoted equity instruments, derivatives traded in organised markets and investment funds. If a market price does not exist for a financial instrument classified as Level 2, its fair value is estimated by reference to the price established in recent transactions involving similar instruments and, in the absence thereof, by reference to valuation models which have been sufficiently tested by the international financial community, taking account of the specific features of the instrument to be valued and, most particularly, the various types of risk associated with the instrument. Accordingly, the fair value of OTC derivatives and financial instruments (debt instruments and equity instruments) traded in organised markets lacking depth or transparency is determined using methods recognised by the financial markets, such as net present value (NPV), where each flow is discounted and estimated in due consideration of the market to which it belongs and of the index to which it refers, or option pricing models based on observable market parameters (Black 76 for caps, floors and swaptions; Black-Scholes for equity options and exchange rates; Black-Normal for inflation options). The fair value of a small number of instruments classified as Level 3 for the measurement of which there are no directly observable market data is determined using alternative techniques, including requests for pricing addressed to the seller or the use of market parameters with a risk profile that may be easily compared to that of the instrument to be measured. The breakdown by methods used to calculate the fair value of financial instruments held by the la Caixa Group at 31 December 2009 and 2008 is as follows: 2009 la Caixa Annual Report 23