Question ID:
2017_3374
Legal Act:
Regulation (EU) No 575/2013 (CRR) as amended
Topic:
Supervisory reporting - FINREP (incl. FB&NPE)
Article:
99
Paragraph:
2
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations:
Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (as amended)
Article/Paragraph:
Annex V Instructions Part 2 Template 1.3 para 19 (and Template 17.3)
Disclose name of institution / entity:
No
Type of submitter:
Credit institution
Subject Matter:
Reserves of Equity Accounted Entities
Question:

How should dividends received by the reporting entity from an equity accounted entity be classified in the equity rows of Template 1.3 and Template 17.3 ?

Background on the question:

The instructions for Template 1.3 Row 220 state that “’Reserves or accumulated losses of investments in subsidiaries, joint ventures and associates’ include the accumulated amount of income and expenses generated by the aforementioned investments through profit or loss in past years.” Does the reference to “income and expenses generated .. in the past years” mean that (i) any dividends paid should not impact the amount reported in row 220 in the consolidated return or (ii) should the amount reported in row 220 be reduced and an equivalent increase be reported as now belonging to the reporting entity ie: include in row 190 Retained Earnings ? (Same question applies for Template 17.3 rows 310 & 330). As the language of the instruction is open to interpretation it is not clear as to the purpose of the requirement hence we would appreciate clarification. We note paragraph 28 of the instructions which is clear that as regards the reporting entity’s balance sheet the “carrying amount of the investment shall be reduced for those accounted for under the equity method” but the requirement as for the reserves analysis is not specified. We note IAS reference 28.11 which explains the rationale for equity accounting but the IAS is silent on the how the information should be disclosed such that in practice banks may adopt different approaches.Accordingly, as IAS does not appear prescriptive and as the language of the Annex V instruction is open to interpretation we would appreciate clarification of the FinRep requirement.

Date of submission:
29/06/2017
Published as Final Q&A:
04/10/2019
EBA Answer:

Income and expenses from investments in subsidiaries, joint ventures and associates that are accounted for using the equity method shall be reported in in row 220 of Template F01.03.

This is stated in Annex V, Part 2.29 of the ITS on Supervisory Reporting:

“[…] Reserves or accumulated losses of investments in subsidiaries, joint ventures and associates accounted for using the equity method’ shall include the accumulated amount of income and expenses generated by the aforementioned investments through profit or loss in past years where they are accounted for using the equity method […]

Dividends received do not change the income or expenses generated in past years, and hence, do not change the amount reported in F 01.03 row 220. The same applies for F 17.03 r330.

Status:
Final Q&A