VP BANK AG INTERIM

Risk Management

risk management Art. 24e Par. 1 Point 2 FL-BankO Principles of accounting and valuation Inadditiontoindividualvaluationallowances,VP BankLtd creates lump-sum individual valuation allowances as well as general lump-sum valuation allowances to cover latent General principles creditrisks. Accounting and valuation principles follow the prescrip- A review of collectability is undertaken at least annually for tionsoftheLiechtensteinPersonsandCompaniesAct, allnon-performingloans. aswellastheLiechtensteinBankingActanditsrelated Ordinance. Debentures and other interest-bearing securities, equity shares and other non-interest-bearing securi- Recording of transactions ties Inaccordancewiththevaluationpolicieslaiddown,all Trading portfolios of securities and precious metals are businesstransactionsarerecordedintheBank’saccounts valued at the quoted market price as of the balance-sheet asoftheirtradingdate.Forwardcontractsarerecorded date. under off-balance-sheet transactions as of their settlement Portfolios of securities and precious metals are valued at orvaluedate. thelowerofcostormarketandinterest-bearingsecurities, Income and expenditure in foreign currencies are trans- inpart,alsoinaccordancewiththeaccrualmethod. lated into Swiss francs at their respective daily rates; assets Inaccordancewiththeaccrualmethod,thepremiumor and liabilities are translated at the rates prevailing at year- discount on acquisition is deferred and accreted or amor- end.Foreign-exchangegainsandlossesresultingfrom tised,respectively,overthetermofthesecurityuntilmatu- translationarerecordedintheincomestatement. rity.Theinterestportionofrealisedgainsorlossesfrom premature disposal or redemptions are deferred and Financial statements of foreign branches expressed in a releasedtoincomeovertheremainingterm(i.e.untilthe foreign currency are translated at the exchange rate pre- originalfinalmaturity).Interestincomearisingoninter- vailingatthebalance-sheetdate(balance-sheetpositions) est-bearingsecuritiesisreflectedinthecaption“interest oratanannualaverageexchangerate(income-statement income“,anddividendincomeinthecaption“current positions).Translationdifferencesarerecordedinthe incomefromsecurities“.Pricegains/lossesarer