Wealth Management & Swiss Bank reorganization
From 2010 onwards, the internal reporting of Wealth Manage- ment & Swiss Bank to the Group Executive Board was revised in order to better reflect the management structure and responsi- bilities. Segregated financial information is now reported for: – “Wealth Management”, encompassing all wealth manage-
ment business conducted out of Switzerland and in our Asian and European booking centers;
– “Retail & Corporate”, including services provided to Swiss re- tail private clients, small and medium enterprises and corpo- rate and institutional clients.
In line with this revised internal reporting structure and IFRS 8 Operating Segments, Wealth Management and Retail & Corporate are now presented in our external financial reports as separate business units and reportable segments. Prior periods presented have been restated to conform to the new presentation format.
Allocation of additional Corporate Center costs to reportable segments
From 2010 onwards, almost all costs incurred by the Corporate Center related to shared services and control functions are allo- cated to the reportable segments, which directly and indirectly receive the value of the services, either based on a full cost recov- ery or on a periodically agreed flat fee. The allocated costs are shown in the respective expense lines of the reportable segments in “Note 2a Segment reporting” in the “Financial information” section, and in the “UBS business divisions and Corporate Cen- ter” section of this report.
Up to and including 2009, certain costs incurred by the Corpo- rate Center were presented as Corporate Center expenses and not charged to the business divisions. This change in allocation policy has been applied prospectively and prior year numbers have not been restated.
The incremental charges to the business divisions made in 2010 mainly relate to control functions. If figures for each quarter of 2009 had been presented on the basis of the allocation meth- odology applied for 2010, the estimated impact on operating ex-
penses and performance before tax would have been as shown in the table below.
The “Corporate Center” column of the table in “Note 2a Seg- ment reporting” has been renamed “Treasury activities and other corporate items”.
➔Refer to “Note 1a) 33) Segment reporting” in the “Financial information” section of this report for more details
Cash collateral from derivative transactions and prime brokerage receivables and payables
From 2010 onwards, we have changed the presentation of cash collateral from derivative transactions and prime brokerage re- ceivables and payables to improve transparency.
Cash collateral receivables and payables on derivatives are pre- sented in the new balance sheet lines Cash collateral receivables on derivative instruments and Cash collateral payables on deriva- tive instruments by transferring the amounts out of Due from banks and Loans, and Due to banks and Due to customers, respec- tively. Prime brokerage receivables and prime brokerage payables have been transferred out of Due from banks and Loans to Other assets, and out of Due to banks and Due to customers to Other liabilities, respectively. These changes in presentation impacted neither our income statement nor total assets and liabilities. The respective tables, notes and other information in the “Financial information” section of this report were adjusted accordingly.
The table on the next page shows the reclassifications for 2009 and 2008.
Personnel expenses
In 2010, we reclassified certain elements of Other personnel expenses to Variable compensation – other in order to align the presentation with the new FINMA definition of variable com- pensation.
In addition, amounts previously reported under Salaries and variable compensation are presented for the first time on the fol- lowing separate lines: Salaries, Variable compensation – discre- tionary bonus, Variable compensation – other and Wealth Man- agement Americas: financial advisor compensation.
Corporate Center cost allocation impact on 2009 figures
Wealth Management & Swiss Bank
Wealth Management
Americas ManagementGlobal Asset Investment Bank
Total business
divisions Corporate Center CHF million ManagementWealth CorporateRetail &
Estimated increase in 2009 operating expenses and decrease in
Furthermore, we reclassified the pension costs related to bonus to Pension and other post-employment benefit plans. Pre- viously, those amounts were reported under Social security. Prior period amounts have been adjusted accordingly. The change in the presentation did not impact our personnel expenses. The related amounts are disclosed in the footnotes to “Note 6 Per- sonnel expenses” in the “Financial information” section of this report.
IFRS 9 Financial Instruments
In November 2009, the International Accounting Standards Board (IASB) issued IFRS 9 Financial Instruments, which includes revised guidance on the classification and measurement of financial as- sets. In October 2010, the IASB updated IFRS 9 Financial Instru- ments to include guidance on financial liabilities and derecogni- tion of financial instruments and amended IFRS 7 Financial Instruments: Disclosure to include disclosures about transferred financial assets. The publication of IFRS 9 Financial Instruments represents the completion of the first part of a multi-stage project to replace IAS 39 Financial Instruments: Recognition and Mea- surement.
The standard requires all financial assets to be classified on the basis of the entity’s business model for managing the financial assets, and the contractual cash flow characteristics of the finan- cial asset. A financial asset is to be accounted for at amortized cost only if the following criteria are met: (i) the objective of the business model is to hold the financial asset for the collection of the contractual cash flows; and (ii) the contractual cash flows under the instrument solely represent payments of principal and interest. If a financial asset meets the criteria to be measured at amortized cost, it can be designated at fair value through profit or loss under the fair value option, if doing so would significantly reduce or eliminate an accounting mismatch. Non-traded equity
instruments may be accounted for at fair value through other comprehensive income (OCI). Such a designation is available on initial recognition on an instrument-by-instrument basis and is irrevocable. There is no subsequent recycling of realized gains or losses from OCI to profit or loss. All other financial assets are mea- sured at fair value through profit or loss.
The accounting for and presentation of financial liabilities and for derecognition of financial instruments have been trans- ferred from IAS 39 Financial Instruments: Recognition and Measurement to IFRS 9 Financial Instruments. The guidance is unchanged with one exception: the accounting for financial liabilities designated at fair value through profit or loss. The re- quirements stipulated in IAS 39 Financial Instruments: Recogni- tion and Measurement regarding the classification and mea- surement of financial liabilities have been retained, including the related application and implementation guidance. The two ex- isting measurement categories for financial liabilities remain un- changed. The criteria for designating a financial liability at fair value through profit or loss also remain unchanged. For financial liabilities designated at fair value through profit or loss, changes in fair value due to changes in an entity’s own credit risk are di- rectly recognized in OCI instead of in profit or loss. There is no subsequent recycling of realized gains or losses from OCI to profit or loss. For financial liabilities that are required to be mea- sured at fair value through profit or loss, i.e. all derivatives and trading portfolio liabilities, all fair value movements will contin- ue to be recognized in profit or loss.
We are currently assessing the impact of the new standard on our financial statements. The effective date for mandatory adop- tion is 1 January 2013, with early adoption permitted. The IFRS 7 Financial Instruments: Disclosure amendments are applicable for annual accounting periods beginning on or after 1 July 2011. We did not adopt IFRS 9 Financial Instruments for the year ended 31 December 2010.
Cash collateral from derivative transactions and prime brokerage receivables and payables
31.12.09 31.12.08
CHF million reclassificationBefore Reclassification reclassificationAfter reclassificationBefore Reclassification reclassificationAfter
Due from banks 46,574 (29,770) 16,804 64,451 (46,757) 17,694
Cash collateral receivables on derivatives instruments 0 53,774 53,774 0 85,703 85,703
Loans 306,828 (40,351) 266,477 340,308 (48,852) 291,456
Other assets 7,336 16,347 23,682 9,931 9,906 19,837
Due to banks 65,166 (33,244) 31,922 125,628 (48,806) 76,822
Cash collateral payables on derivatives instruments 0 66,097 66,097 0 92,937 92,937
Due to customers 410,475 (71,212) 339,263 465,741 (103,102) 362,639
Strategy
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