Mizuho Bank Europe Annual Report 2018

49 2018 ANNUAL REPORT at cost less accumulated depreciation and any accumulated impairment. Depreciation is charged over the estimated useful lives, using straight-line method, over a period of 5 years. The assets’ residual values and estimated useful lives are reviewed at the end of each annual reporting period. 3g. Derivatives recorded at cost MBE makes use of derivative instruments with the purpose to manage exposures to interest rate and foreign currency risk. As a result the interest rate and foreign currency risk of the hedged items are mitigated. For the valuation of these derivatives, MBE applies the cost price hedge accounting method. The cost price hedge relations are evaluated on a yearly basis for its effectiveness on all critical characteristics: start date, maturity date, nominal amount, cash flow schedule and interest details. The amounts to be received and paid resulting from the foreign currency component of the cross currency swaps being revalued to a reporting currency equivalent are shown on balance under ‘other assets’ in case the position shows a positive value and under ‘other liabilities’ in case the position shows a negative value. 3h. Derivatives recorded at fair value through profit and loss MBE has also taken positions in derivatives with the expectation of profiting from favorable movements in prices and rates. These derivatives are recognized as financial assets or financial liabilities held for trading and are recorded in the balance sheet at fair value. Changes in fair value of derivatives are recognized in the result on financial operations. The credit valuation adjustment (CVA) and the debit valuation adjustment (DVA) are incorporated into the valuation of the derivatives to reflect the risk of default of the counterparty and MBE respectively. The CVA/DVA adjustment has been recorded under the derivatives as financial assets and financial liabilities. The net impact thereof is an expense and amounts to € 131,000 (2017: an income of € 130,000). 3i. Corporate income taxes (a) Current income tax Corporation tax is calculated on the basis of the commercial profit, taking into account permanent differences between fiscal and commercial profit. The current income tax payable (receivable) is calculated on the basis of the applicable tax law in the applicable country and is recognized as an expense (income) for the period, using tax rates that have been enacted or substantially enacted by the end of the reporting period. (b) Deferred income tax The deferred tax assets (liabilities) are determined on the basis of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the calculation of taxable profit. Deferred tax assets are calculated based on tax rates that have been enacted or substantially enacted by the end of the reporting period. Deferred tax assets are recognized when it is probable that future taxable profit will be available against which these temporary differences can be utilized. 3j. Other assets Other assets are measured at cost less a provision for impairment. They comprise of the revaluation of the derivatives recorded at cost, taxes receivable and amounts receivable, other than prepayments and accrued interest. The revaluation of the derivatives recorded at cost includes derivatives such as hedge swaps, FX and money market transactions. These amounts are recoverable within one year. A provision for impairment is established when there is objective evidence that the bank will not be able to collect all amounts due according to the original terms of the receivables. 3k. Prepayments and accrued interest Prepayments and accrued interest are measured at cost. These amounts are recoverable within one year. A provision for impairment is established when there is objective evidence that the bank will not be able to collect all amounts due according to the original terms of the receivables. 3l. Amounts owed to banks This comprises of current accounts and deposits taken from banks. Current accounts and overnight deposits are due on demand. 3m. Amounts owed to customers This comprises of current accounts and