ING Group amends accounting approach for NN Group anchor investment transaction
Amsterdam, 11 January 2016
- Change refers only to accounting for pre-IPO anchor investments in NN Group
- EUR 1 billion write-off now recognized at 2015 deconsolidation instead of at 2014 IPO
- Amendment has no impact on ongoing operating results, capital or dividend plans
ING Group announced today that it will change its accounting approach with regards to the anchor investment transaction related to the divestment of NN Group made in 2014. This change will be reflected in ING Group’s 2015 Full Year reporting and comparative figures. The amendment has no impact on ING Bank, ING’s Bank’s Underlying net result or on ING’s ongoing operating results, capital or dividend plans.
Today’s announcement follows a recommendation by the Netherlands Authority for the Financial Markets (AFM) regarding the accounting approach for the anchor investment transaction. In accounting for the anchor investment transaction, ING Group recognized a provision through shareholders’ equity for a foreseeable loss at the time of the NN Group IPO in July 2014. The AFM has informed us that this accounting approach is not in accordance with IFRS. In consultation with EY, ING Group has decided to amend the accounting and will now recognize the write-off in the profit & loss account at the time of deconsolidation, in May 2015.
In April 2014, during the divestment process of NN Group, ING secured investments from three anchor investors into NN Group, ahead of its intended IPO by issuing subordinated notes. At the time of the NN Group IPO in July 2014, these notes became mandatorily exchangeable for NN Group shares. The difference between the market value of these NN Group shares and the book value was recognised through a provision as a direct reduction of ING Group’s shareholders’ equity of approximately EUR 1.0 billion.
In May 2015 ING reduced its stake in NN Group to 42.4% and deconsolidated NN Group. As previously disclosed, at the point of deconsolidation, the difference between the market value and the book value (net of revaluation reserves) of the entire remaining stake in NN Group was written off through the profit & loss account. For the anchor investment transaction, this difference had already been taken as a provision in 2014 directly in shareholders’ equity. Therefore the provision for the second and third tranche of the anchor investment was utilised, reducing by EUR 1.0 billion the total charge to ING’s 2015 second quarter profit & loss account.
Following recent discussions with the AFM, ING has determined that the foregoing accounting approach should be amended. The accounting for the impact of the anchor investment transaction and disclosure of the further quantitative impact of the divestment of NN Group in ING Group’s 2014 financial report is not in accordance with accounting standards IFRS 10.23, IFRS 10.B96 and IAS 1.17(c), nor can the accounting of the anchor investment transaction be based on IAS 8.10 and IAS 8.11. IFRS 10.23 and IFRS 10.B96 do not allow for changes directly booked in shareholders’ equity without an actual change in ownership. Based on IAS 8 (“Accounting Policies, Changes in Accounting Estimates and Errors”) ING will make a revision in the ING Group 2015 Full Year results and will adjust comparative figures. The estimated impact for prior periods is set forth in the table below:
The amendment has no consequences for the accounting approach of other transactions which were part of ING’s divestment programme. The amendment will be reflected in ING Group’s 2015 Full Year reporting and comparative figures which are scheduled to be published on 4 February 2016. Given the aforementioned amendment, ING will evaluate the process and the impact on internal controls over its financial reporting.
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IMPORTANT LEGAL INFORMATION
Certain of the statements contained herein are not historical facts, including, without limitation, certain statements made of future expectations and other forward-looking statements that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements.
Actual results, performance or events may differ materially from those in such statements due to, without limitation: (1) changes in general economic conditions, in particular economic conditions in ING’s core markets, (2) changes in performance of financial markets, including developing markets, (3) consequences of a potential (partial) break-up of the euro, (4) ING’s implementation of the restructuring plan as agreed with the European Commission, (5) changes in the availability of, and costs associated with, sources of liquidity such as interbank funding, as well as conditions in the credit markets generally, including changes in borrower and counterparty creditworthiness, (6) changes affecting interest rate levels, (7) changes affecting currency exchange rates, (8) changes in investor and customer behaviour, (9) changes in general competitive factors, (10) changes in laws and regulations, (11) changes in the policies of governments and/or regulatory authorities, (12) conclusions with regard to purchase accounting assumptions and methodologies, (13) changes in ownership that could affect the future availability to us of net operating loss, net capital and built-in loss carry forwards, (14) changes in credit ratings, (15) ING’s ability to achieve projected operational synergies and (16) the other risks and uncertainties detailed in the Risk Factors section contained in the most recent annual report of ING Groep N.V. Any forwardlooking statements made by or on behalf of ING speak only as of the date they are made, and, ING assumes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information or for any other reason.
This document does not constitute an offer to sell, or a solicitation of an offer to purchase, any securities in the United States or any other jurisdiction. The securities of NN Group have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), and may not be offered or sold within the United States absent registration or an applicable exemption from the registration requirements of the Securities Act.