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Rothschild & Co | Annual Report 2017
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1. Overview
4. Financial statements
3.
Management report
2. Business review
Deferred tax assets, including the tax effects of income tax losses available for carry forward, are only recognised where it is probable that future taxable
profits will be available against which the temporary differences can be utilised. Deferred tax liabilities are provided on temporary differences arising from
investments in subsidiaries and associates, unless the timing of the reversal of the temporary difference is controlled by the Group and it is probable that
the difference will not reverse in the foreseeable future.
20 Dividends
Dividends on ordinary shares are recognised in equity in the period in which they are approved by the Company’s shareholders at the Annual General
Meeting or, in the case of interim dividends, when they are paid by the Company after decisions of the Managing Partner, R&Co Gestion.
21 Fiduciary activities
The Group acts as custodian and in other fiduciary capacities that result in the holding or placing of assets on behalf of customers. These assets and the
income arising therefrom are excluded from these financial statements, as they are not assets or income of the Group.
22 Provisions and contingent liabilities
Provisions are recognised only when the Group has a present obligation (legal or constructive) as a result of past events. In addition, it must be probable
that a transfer of economic benefits will be required to settle the obligation, and it must also be possible to make a reliable estimate of the amount of the
obligation.
Contingent liabilities are possible obligations arising from past events whose existence will be confirmed by one or more uncertain future events not wholly
within the Group’s control, or present obligations that are not recognised either because it is not probable that an outflow of resources will be required to
settle the obligation or the amount of the obligation cannot be reliably estimated. Contingent liabilities are disclosed unless the possibility of a transfer of
economic benefits is remote.
IV Financial risk management
A. Governance
The risks relating to financial instruments, and the way in which these are managed by the Group, are described below. A description of the Group’s
governance environment is provided in the Corporate Governance section of the annual report (page 73).
B. Credit risk
1 Credit rating
The Group reviews credit exposures on financial assets on a quarterly basis and for this purpose they are classified as follows:
Category 1 Exposures which are considered to be fully performing.
Category 2 Exposures where the payment of interest or principal is not currently in doubt, but which require closer observation than usual, due
perhaps to some deterioration in the position of the client. Examples include: poor trading results; difficult conditions in the client’s
market sector; competitive or regulatory threats; or the potential impact from currency or other factors.
Unimpaired RGA receivables which are past due over 90 days are included in this category.
Category 3 Exposures where there has been further deterioration in the position of the client compared to Category 2. Although the exposure
is not considered to be impaired, the relationship requires close monitoring by the front office team.
Category 4 Exposures that are considered to be impaired and which carry a provision against part of the loan (unless collateral exists which
exceeds the exposure’s carrying value). At least some recovery is expected to be made.
Category 5 Exposures that are considered to be impaired and which carry a full provision. No significant recovery of value is expected.
All Group companies map their own credit monitoring to these categories for the purposes of Group reporting.
Credit risk management is explained in the Report of the Chairman on internal control and risk management procedures implemented within the Group for
the nine months ended 31 December 2017 (page 66).