Information concerning financial instruments (IFRS 9)

With the application of IFRS 9 (Financial Instruments) as of January 1, 2018, there have been changes affecting the classification of financial instruments as well as changes affecting the calculation of impairments of receivables.

For DB Group, the first-time application has had an impact within the framework of determining anticipated bad debts. In addition, all investments as well as all receivables which are sold on within the framework of factoring agreements will be classified “at fair value” in future.

a) Classification of financial assets

Within the framework of IFRS 9, the number of categories previously applicable under IAS 39 has been reduced from four to three. A distinction is still made as to whether the valuation effects from other comprehensive income are reclassified to the income statement or remain in shareholders’ equity.

Financial assets (€million)	Fair value (recog- nized in the income statement)	Fair value (not recog- nized in the income statement)	Amortized cost of purchase
As of Dec 31, 2017	5	2	9,333
Reclassification of other investments	+24	+14	–38
Reclassification of receivables earmarked for factoring	+353	–	–353
As of Jan 1, 2018	382	16	8,942

b) Measurement of financial assets

For the measurement of financial instruments, IFRS 9 specifies that expected losses are now recognized within the framework of risk provisioning.

For trade receivables, the expected credit losses were determined on a collective basis using an impairment matrix; these expected losses amounted to €19 million as of June 30, 2018.

For receivables from financing as well as other receivables, the expected impairment requirement for major items was also determined in relation to specific receivables. Risk provisioning of €5 million was created for this purpose as of June 30, 2018.

The change in the process of determining expected credit losses resulted in a one-off positive effect of €24 million in DB Group; this was disclosed separately in equity (see consolidated statement of changes in equity).

c) Hedge accounting

With regard to the recognition of hedges, there have been additions in the field of designation possibilities as well as a closer link between hedge accounting and risk management. There is also the need to implement extended accounting and measurement logic. In DB Group, this is relevant particularly for a differentiated treatment of the currency basis spreads which, under IFRS 9, will no longer be an element of the underlying of a hedge. Any resultant ineffectiveness is, where necessary, recognized in the income statement. With IFRS 9, the quantitative limits for the effectiveness test are no longer applicable.