Liabilities

Section 1 – Due to banks – item 10

1.1 Due to banks: breakdown

Type of operations/Components of group 31.12.2012 31.12.2011
1. Due to Central banks 521.899 1.861.829
2. Due to banks 35.424 139.905
2.1 Current accounts and on demand deposits 29.630 7.790
2.2 Term deposits 5.267 120.971
2.3 Loans - 8.568
2.3.1 Repurchase agreements - -
2.3.2 Other - 8.568
2.4 Debt from buyback commitments on treasury equity instruments - -
2.6 Other payables 527 2.576
Total 557.323 2.001.734
Fair value 557.323 2.001.734
 

Payables due to central banks refer to re-financing operations with the Eurosystem carried out by using both some of the debt securities held in the portfolio and securities obtained from the “IFIS Collection Services” self-securitisation of trade receivables.

The fair value of payables due to banks is in line with the related carrying amount, considering the fact that interbank deposits are short- or very short-term.

1.4 Specifically hedged payables due to banks 

A loan payable with a value of 527 thousand Euro is included under due to banks, and it is specifically hedged against cash flow risk. The hedging instrument is an interest rate swap which as at 31 December 2012 is recognised at fair value under liabilities for 3 thousand Euro.

Section 2 – Due to customers – item 20

2.1 Due to customers: breakdown

Type of operations/Components of group 31.12.2012 31.12.2011
1. Current accounts and on demand deposits 407.219 494.482
2. Term deposits 2.659.898 1.100.469
3. Loans 4.043.585 53.514
3.1 Repurchase agreements 4.039.330 49.127
3.2 Other 4.255 4.387
4. Debt from buyback commitments on treasury equity instruments -
5. Other payables 8.306 8.759
Total 7.119.008 1.657.224
Fair value 7.122.166 1.658.861
 

Current accounts and demand deposits at 31 December 2012 include 386.278 thousand Euro in funding from the rendimax demand deposit account, while the sub-heading fixed-term deposits includes 2.659.894 thousand Euro in funding from the fixed-term rendimax account and rendimax like.

Repurchase agreements were signed with Cassa di Compensazione e Garanzia as counterparty and are backed by government bonds.

It should be noted that Banca IFIS does not carry out "term structured repo" transactions.

Other loans refer to payables for finance leases; they are recognised by using the financial method set out in IAS 17 to measure the leased property that housed the former Toscana Finanza’s registered office and has become the headquarter of the non-performing loans (NPL) division after the merger, as detailed in paragraph 2.5 below.

Other payables refer to payables to invoice sellers, in relation to tax or non-performing receivables with deferred price settlement.

2.5 Payables for finance leases

  31.12.2012 31.12.2011
Payables for finance leases 4.255 4.387
 

The payables described above relate to the real estate lease the former company Toscana Finanza SpA entered into in 2009 for the property located in Florence which housed the company's registered office and is now the headquarter of the non-performing loans (NPL) division. The contract entered into with Centro Leasing S.p.A. is valid for 18 years (from 01.03.2009 to 01.03.2027) and provides for the payment of 216 monthly instalments of 28.490 Euro, including the principal, interest and an option to buy the asset at the end of the contract for 1.876.800 Euro.

Section 4 – Financial liabilities held for trading - item 40

4.1 Financial liabilities held for trading: breakdown

Type of operation/Components of group 31.12.2012 31.12.2011
NV FV FV * NV FV FV *
Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
Cash liabilities                    
1. Due to banks - - - - - - - - - -
2. Due to customers  - - - - - - - - - -
3. Debt securities - - - - - - - - - -
3.1 Bonds - - - - - - - - - -
3.1.1 Structured - - - - X - - - - X
3.1.2 Other - - - - X - - - - X
3.2 Other securities - - - -   - - - -  
3.2.1 Structured - - - - X - - - - X
3.2.2 Other - - - - X - - - - X
Total A - - - - - - - - - -
B. Derivative instruments                    
1. Financial derivatives - - 389     - 201 399  
1.1 Held for trading X - - 389 X X - 201 399 X
1.2 Related to fv option X - - - X X - - - X
1.3 Other X - - - X X - - - X
2. Credit derivatives   - - -     - - -  
2.1 Held for trading X - - - X X - - - X
2.2 Related to fv option X - - - X X - - - X
2.3 Other X - - - X X - - - X
Total B   - - 389 - - - 201 399  
Total (A+B) X - - 389 X X - 201 399 X
Key FV = Fair value FV* = Fair value calculated excluding changes in value due to changes in the issuer’s creditworthiness compared to the date of issuance. NV = Nominal or notional amount

 

Section 6- Hedging derivatives - item 60

6.1 Hedging derivatives: composition by type of hedge and by hierarchical levels

  Fair value 31.12.2012 NV
31.12.2012
Fair value 31.12.2011  NV
31.12.2011
L1 L2 L3 L1 L2 L3
A) Financial derivatives - - 3 527 - - 34 2.576
1) Fair value - - - - - - - -
2) Cash flows - - 3 527 - - 34 2.576
3) Foreign investments - - - - - - - -
B. Credit derivatives - - - - - - - -
1) Fair value - - - - - - - -
2) Cash flows - - - - - - - -
Total - - 3 527 - - 34 2.576
Key NV = nominal amount L1 = level 1 L2 = level 2 L3 = level 3

This item refers to one interest rate swap hedging against cash flow risk on a loan payable.

6.2 Hedging derivatives: composition by hedged portfolios and type of hedge

Transaction/Hedge types Fair value Cash flows Foreign investment 
Micro-hedge Macro-hedge Micro-hedge Macro-hedge
Interest rate risk Currency risk Credit risk Price risk Multiple risks
1. AFS financial assets  -  -  -  -  - X  - X X
2. Loans and receivables  -  -  - X  - X  - X X
3. HTM financial assets X  -  - X  - X  - X X
4. Portfolio  -  -  -  -  -  -  -  - X
5. Others X X X X X X X X  -
Total assets - - - - - - - - -
1. Financial liabilities 3  -  - X  - X  - X X
2. Portfolio  -  -  -  -  -  -  -  - X
Total liabilities 3 - - - - - - -
1. Expected transactions X X X X X X  - X X
2. Financial assets and liabilities portfolio X X X X X X X  -  -
 

Section 8 – Tax liabilities – item 80

Please refer to section 14 under assets.

Section 10 – Other liabilities – item 100

10.1 Other liabilities: composition

  31.12.2012 31.12.2011
Accrued expenses and deferred income 17.430 8.111
Due to the Tax Office and Social Security agencies 8.783 5.825
Due to suppliers 6.421 5.550
Sums available to customers 5.171 3.024
Due to personnel 2.326 2.137
Other payables 75.442 20.952
Total 115.573 45.599

Accrued expenses and deferred income largely consists of management and guarantee fees for receivables acquired in factoring transactions. They are recognised in profit or loss based on their maturity.

Payables dues to the Tax Office and Social Security agencies include 5.151 thousand Euro in withholding tax on interests paid to customers, in particular with regard to the online rendimax savings account.

Other payables refer mainly to 39.006 thousand Euro of items due to customers that have not been charged yet, and to the amount of 741 thousand Euro of non-cash items due to customers, but that are not due yet. They also include 30.302 thousand Euro in payables due to the parent company, La Scogliera S.p.A., arising from the application of group taxation (tax consolidation) as per article 117 et seq of Presidential Decree no. 917/86 and representing Banca IFIS’s current corporate tax (IRES) payables, net of tax advances paid during the year and corporate tax (IRES) receivables accrued in previous years. The result in terms of taxable income takes into account the offsetting of the parent company’s tax losses in accordance with the relevant regulations and based on specific agreements between the Group’s companies.

Section 11 – Post-employment benefits – item 110

11.1 Post-employment benefits: annual changes

  31.12.2012 31.12.2011
A. Opening balance 1.449 1.060
B. Increases 272 627
B.1 Allocations for the year 50 122
B.2 Other increases 222 505
C. Reductions 156 238
C.1 Payments made 151 160
C.2 Other reductions 5 78
D. Closing balance 1.565 1.449
Total 1.565 1.449
 

Other increases” includes the impact of the discounting of the provision accrued up to 31 December 2006 and still held in the company.

Payments made, instead, represent the benefits paid to employees during the year.

Pursuant to the requirements of ESMA in the document “European common enforcement priorities for 2012 financial statements” of 12 of November 2012, the discount rate used was the interest rate based on the yield of benchmark AA European corporate bonds with maturity over 10 years. At 31 December 2011, the Italian Government yield curve, duly adjusted for interim maturities, was used for discounting. The discount rate was changed in light of the current economic scenario, characterised by the heightened volatility of Italian government bonds. The impact of this change is included in "other increases".

11.2 Other information

Under IASs/IFRSs, a company’s liabilities regarding benefits that will be paid to employees at the conclusion of the employer/employee relationship (post-employment benefits) should be recognised based on actuarial calculations of the amount that will be paid at maturity.

Specifically, these allocations must take into account the amount already earned over the period at the reporting date, projecting it into the future in order to calculate the amount that will be paid at the conclusion of the employer/employee relationship. This amount must then be discounted to take into account the time that will pass until payment.

Following the coming into force of the 2007 Finance Law, which brought the reform regarding supplementary pension plans - as per Legislative Decree no. 252 of 5 December 2005 - forward to 1 January 2007, the employee was given a choice as to whether to allocate the post-employment benefits earned as from 1 January 2007 to supplementary pension funds or to maintain them in the company, which would then transfer it to a dedicated fund managed by INPS (the Italian National Social Security Institute).

This reform has led to changes in the accounting of such benefits as for both the benefits earned up to 31 December 2006 and those earned from 1 January 2007.

In particular:

- benefits earned as from 1 January 2007 constitute a defined-contribution plan, whether the employee has chosen to allocate them to a supplementary pension fund or to INPS’s Treasury Fund. Those benefits shall be calculated according to contributions due without applying actuarial methods;

- benefits earned up to 31 December 2006 continue to be considered as a defined-benefit plan, and as such are calculated on an actuarial basis which, however, unlike the calculation method applied until 31 December 2006, no longer implies that the benefits be proportionally attributed to the period of service rendered: the employee’s service is considered entirely accrued due to the change in the accounting nature of benefits earned as from 1 January 2007.

Section 12 – Provision for risks and charges – item 120

12.1 Provisions for risks and charges: composition

Items/Components 31.12.2012 31.12.2011
1 Pensions and other post retirement benefit obligations - 407
2. Other provisions for risks and charges 1.549 -
  2.1 Legal disputes 1.355 -
  2.2 Staff expenses - -
2.3 Other 194 -
Total 1.549 407

Company's pensions and post-retirement benefit obligations

The amount of the provision for risks and charges at 31 December 2011 was due to the business combination with the Toscana Finanza Group which took effect on 30 June 2011. It largely consisted of the "Provision for directors' severance pay", which was fully drawn on during 2012.

Legal disputes

Based on its legal consultants’ opinions, the Company allocated 1 million Euro at 31 December 2012 in view of a probable dispute with a former customer's receiver. The latter sued the Bank, demanding that the factoring contract be declared null and void, that sales could not be objected, and pursuant to Article 67, Para. 1 and 2 of the Bankruptcy Law and Article 2901 of the Italian Civil Code, that sales occurred during the year and in the six-month period before bankruptcy be revoked, for an amount of 4.923 thousand Euro. The Bank appeared as a plaintiff to challenge these claims. During the lawsuit proceedings the Bank proposed settlement to the receiver with a discharge payment and cancellation of the 1 million Euro amount due.

Supported by the legal opinion of its lawyers, the Bank also made a provision of 330 thousand Euro at 31 December 2012 for the settlement, which is considered likely, of a dispute with an account debtor which sued the Bank and asked for revenues amounting to 859 thousand Euro to be returned, since they were related to non-existing receivables.

Other (tax disputes)

On 25 July 2008 The Italian Revenue Agency – Regional Department of Veneto started a check relating to the tax year 2005. This check ended on 5 December 2008 with the issuance of a report of verification, which revealed two findings, both connected to the correct determination of the ceiling for the deduction of receivables pursuant to Article 106, Para. 3, of Presidential Decree 917/86, for a total of 1.447 thousand Euro. Moreover, considering that the ceiling mechanism sets limits for deducting impairment losses on receivables and that the surplus (arising from the difference between the ceiling and net impairments) is deductible on a straight-line basis over the next eighteen years, the application of the criterion indicated in the aforementioned report of verification would imply a tax benefit for the Bank in the years following 2005.

The aforementioned report of verification included also a notification regarding an alleged case of tax evasion as set out in Article 37-bis of Presidential Decree 600/73 regarding the write-down in 2003 of the equity investment in Immobiliare Marocco S.p.A. (which merged into the Issuer with deed dated 19 October 2009). This investment was deducted in fifths in the following years based on the losses recognised by this company pursuant to Articles 61 and 66 of Presidential Decree 917/86 (in force up to 31 December 2003). On 2 February 2009 the Agency sent a verification notice to the Bank, requesting clarification on the write-down. The Bank promptly replied to it.

Again in reference to the notification of the alleged tax evasion, on 3 December 2009 the Bank received a verification notice relating to the year 2004, in which the Revenue Agency revised the income for the year 2004 subject to the corporate tax (IRES), applying the anti-evasion provision as set out in Article 37-bis of Presidential Decree 600/73 for a total of 837 thousand Euro, with a higher tax liability relating to the tax year in question of approximately 276 thousand Euro plus interest and sanctions.

On 21 June 2010, the Bank received a verification notice referring to the following year, in which the Revenue Agency revised the income for the year 2005 subject to the corporate tax (IRES), applying the anti-evasion provision as set out in Article 37-bis of Presidential Decree 600/73, for a total amount of 837 thousand Euro, with a higher tax liability relating to the tax year in question of approximately 276 thousand Euro plus interest and penalties. The same verification notice relating to the year 2005 recorded as deferred tax assets the amount relating to the redetermination of the ceiling for deducting losses on receivables concerning the above-mentioned findings, for a total of 1.447 thousand Euro, with higher taxes of around 478 thousand due in relation to the year 2005, interests and penalties excluded.

Subsequently, by the end of 2010 the Bank received a notice cancelling under the appeal process the verification notices issued for 2005.

On 22 February 2011 the appeal regarding the verification notice for the tax year 2004 was discussed before the first level Provincial Tax Commission of Venice. On 29 June 2011, the Provincial Tax Commission of Venice rejected the appeal. On 7 November 2011, the Bank was served a notice of payment for the amounts enrolled on the tax register following the sentence of the court of first instance, pursuant to the laws on tax verification and collection, totalling 423 thousand Euro. Banca IFIS paid those amounts on 29 December 2011. Subsequently, the company filed an appeal with the Regional Tax Commission against this sentence. On 25 September 2012 the appeal was heard before the second-degree Regional Tax Commission of Venice. On 18 October 2012 the Commission’s sentence was issued: it accepted the appeal by Banca IFIS SpA and La Scogliera SpA and, fully reversing the first-degree sentence, it proceeded to cancel the verification notices for 2004 which had been challenged and ordered the Revenue Agency to reimburse the costs for the two-level proceedings to the appellant.

As a consequence of the second-instance sentence, the Revenue Agency is required to return the sums paid by the Bank following the negative outcome of the first appeal. These have been recorded among receivables in the Bank’s accounts for an amount of 423 thousand euro.

On 22 August 2012 the Bank received a verification notice for 2005 that is closely related to the notices received during 2010 and subsequently cancelled under appeal process by the end of the same year. The verification notice, besides containing the same points and therefore the sums requested (in terms of taxes and penalties) included in the previous notice that was then cancelled, considers as tax avoidance some security trading and lending transactions and challenges the de

duction of sums such as non-deductible capital losses and manufactured dividends for a total of 6.293 thousand euro. The higher tax overall due in relation to this latter finding totals 2.076 thousand euro, plus interest and penalties.

Therefore the overall amount subjected to taxation in the verification notice totals 8.576 thousand euro, with higher taxes for the year under review of 2.830 thousand euro. The verification notice, which has now passed the ordinary deadline for its issue which was 31 December 2010, was sent on the basis of the Tax Office assumption that doubling of deadlines provided for by the law can be applied to this case, i.e. it represents a criminal offence.

In relation to this verification notice, the Bank applied for composition proceedings with the aim of finding out whether the Office was willing to reconsider its stance, but the application was rejected; the Revenue Agency preferred to continue with the dispute by appealing to the Court of Cassation regarding the verification notice for 2004, effectively forcing the Bank to file a counter-appeal with the Court on 29 January 2013, within the legal time limits; the analysis of the Revenue Agency’s appeal exposes the weakness of their case, already apparent in the previous hearings. Therefore, the tax consultants assisting the Bank in the proceedings believe the chance of defeat is unlikely. Therefore, the Bank did not make any provisions for the tax dispute risk concerned.

The appeal against the verification notice for 2005 was filed on 11 February 2013.

Before examining in detail the individual findings and the assessment errors made by the Revenue Agency, the appeal focuses on the reasons why the judges should completely annul the notice. Serious material errors were made, to the point that they completely invalidate the act: the criminal charge, which seeks to have the statute of limitations doubled and that the Public Prosecutor completely rejected by ordering a non-suit; a series of verification notices served and then cancelled under the appeal process; and several legal errors contained in the last act issued.

Besides this, the defence case, which had already been set out in the application for composition proceedings, has been expanded and explained in detail. The fragility of the challenge to the write-down on the equity investment in Immobiliare Marocco was highlighted once again, and made even more apparent by the victory in the court of second instance regarding 2004 and which, at this point, would cover all the subsequent years.

Then, the appeal sets out the reasons why the challenges to the calculations of the ceiling for the deduction of receivables are wrong, both as far as the method adopted and interpretation provided by the tax officials in the report of verification are concerned, and even more so in light of the subsequent amendments and supplements to the laws regulating the principles for determining the income of long-time and first-time adopters of IAS.

As for the claims related to securities trading, the appeal highlighted that the transactions concerned produced positive results for the Bank, net of taxes, and they were not completely risk-free or entered into guaranteeing right from the start the conditions to neutralise any profit or loss from the transaction. The cross call and put options only had the effect of limiting the risk of losses and the potential extra profit, and in any case did not rule them out completely, as was hastily claimed in the verification notice. Above all, the challenged transactions simply applied the regime in force at the time, without eluding the law or its underlying principles; in fact, the system established with the 2004 reform envisages a double regime for stock transfers. Therefore, there is nothing strange in short-term equity trading on equity investments which do not qualify for participation exemption, with dividends received partially exempt from tax and deductible capital losses.

 

In any case, the Bank asked to recalculate the challenged amounts, which did not take into account the positive components which, as taxable income, are included in the determination of income.

In regard to the above, the tax consultants hired to resolve the dispute have stated that they reasonably believe it possible to validly defend the Bank’s case, and that therefore the chance of defeat is unlikely.

Furthermore, it is necessary to consider the letter dated 8/8/2012 in which the Bank of Italy clarified that intermediaries, should they have to pay the tax authorities a certain amount following the enrolment in the tax register of higher taxes and the relevant interest and penalties, must assess whether or not it represents a contingent asset as defined by IAS 37. On the basis of this accounting standard, the asset should not be recognised whenever the profit on the same is not all but certain, and the amounts paid to the tax authorities must therefore be recognised at cost and not as tax receivables.

Following the filing of the appeal against the verification notice for 2005, it is likely that the Bank will have to pay the provisional amounts enrolled on the tax register(1) which could be requested before the first instance sentence only on the challenges which are not considered as tax avoidance, which can be estimated at 1/3 of the higher taxes and interest (in particular, the higher taxes that may be due as a result of defeat of the challenges related to the determination of the ceiling for the deduction of receivables).

In light of the above, a 159 thousand Euro allocation is made to the provision for tax dispute risks for higher taxes and a 35 thousand Euro one for interest, for a total of 194 thousand Euro against the likely provisional enrolment on the tax register following the appeal, pursuant to Bank of Italy's Circular dated 8 August 2012. The Bank will not make any provision for the risk of defeat in the ongoing tax dispute.

(1) The provisional amounts enrolled on the tax register are those made on the basis of a verification notice that is not final, since it has been challenged. An appeal filed against a verification notice does not suspend its execution; pending the sentences of first and second instance, part of the verified income tax, plus interest and part of the penalties, can be collected. In particular, as regards the income tax and value added tax, after the verification notice has been served, the Office can enrol on the tax register 1/3 of the verified taxes and interests. In relation to the charges relating to the anti-avoidance provision as set out in art. 37 bis of Presidential Decree 600/73, the amounts due before first instance sentence cannot be enrolled on the tax register (para. 6, art. 37 bis, Presidential Decree 600/73). Subsequent to the sentences of the tax commissions, further fractions of the amounts due become payable, based on the grounds of the decision and the level of the judicial body.

12.2 Provisions for risks and charges annual changes

Items/Components 31.12.2012
Pensions and post retirement benefit obligations Other provisions
A. Opening balance 407 -
B. Increases - 1.549
B.1 Provisions for the year - 1.549
B.2 Changes due to the passage of time - -
B.3 Differences due to discount-rate changes - -
B 4 Other increases - -
C. Decreases 407 -
C.1 Use during the year 407 -
C.2 Differences due to discount-rate changes - -
C.3 Other decreases - -
D. Closing balance - 1.549

Section 15 – Equity attributable to owners of the parent company – items 140, 160, 170, 180, 190, 200 and 220

15.1 Share capital and treasury shares: composition

Voce   31.12.2012 31.12.2011
190 Share capital (in thousands of Euro) 53.811 53.811
  Number of ordinary shares 53.811.095 53.811.095
  Nominal amount of ordinary shares 1 euro 1 euro
200 Treasury shares (in thousands of Euro) 1.340 3.968
  Number of treasury shares 259.905 997.190
 

15.2 Share capital – number of parent company shares: annual changes

Voci/Tipologie Ordinarie Altre
A. Shares held at the beginning of the year 53.811.095 -
   - fully paid-up 53.811.095 -
   - not fully paid-up - -
A.1 Treasury shares (-) (997.190) -
A.2 Outstanding shares: opening balance 52.813.905 -
B. Increases 1.652.380 -
B.1 New issues - -
   - paid: - -
   - business combinations - -
   - conversion of bonds - -
   - exercise of warrants - -
   - Other - -
 - free: - -
   - in favour of employees - -
   - in favour of directors - -
   - Other - -
B.2 Sale of treasury shares 1.652.380 -
B.3 Other increases - -
C. Reductions 915.095 -
C.1 Annulments - -
C.2 Buybacks of treasury shares 915.095 -
C.3 Company sell-offs - -
C.4 Other reductions - -
D. Outstanding shares: closing balance 53.551.190 -
D.1 Treasury shares (+) 259.905 -
D.2 Shares held at the end of the year 53.811.095 -
   - fully paid-up 53.811.095 -
   - not fully paid-up - -
 

15.3 Share capital: other information

Share capital is composed of 53.811.095 ordinary shares with a nominal value of 1 euro each, bearing no rights, liens and obligations, including those relating to dividend distribution and capital redemption.

15.4 Retained earnings: other information

Items/Components 31.12.2012 31.12.2011
Legal reserve 10.762 10.762
Extraordinary reserve 67.551 57.725
Other reserves 6.058 2.783
Total income-related reserves 84.371 71.270
Buyback reserve 1.340 3.968
Future buyback reserve 18.660 16.032
Total item 170 -reserves 104.371 91.270

Other information

1. Commitments and guarantees granted

Transactions 31.12.2012 31.12.2011
1) Financial guarantees 31.433 4.941
  a) Banks 8.814 4.714
  b) Customers 22.619 227
2) Commercial guarantees - -
  a) Banks - -
  b) Customers - -
3) Irrevocable commitment to grant funds 207.721 599.346
  a) Banks 187.879 570.000
      i) Certain use 187.879 570.000
     ii) Uncertain use - -
  b) Customers 19.842 29.346
     i) Certain use -  
     ii) Uncertain use 19.842 29.346
4) Commitments underlying credit derivatives: Sale of protection - -
5) Assets used as collateral by third parties - -
6) Other commitments 33.004 40.892
Total 272.158 645.179

Financial guarantees granted to customers essentially refer to guarantees granted in favour of invoice sellers for collected tax receivables.

“Irrevocable commitment to grant funds to Banks” refers for 187,5 million Euro to debt securities purchased and still not settled as at 31 December 2012.

Gruppo Banca IFIS
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