- EUR 3.0 billion[2] including the proforma effect of hedge accounting, compared with EUR 3.4 billion under FAP
- EUR 2.4 billion[3], excluding the effect of hedge accounting
Fortis CFO Gilbert Mittler comments:
'Fortis is today publishing its 2004 results under the new IFRS accounting framework. As we explained in January, Fortis decided early on to fully apply IFRS as from 1 January 2004 (including IAS 32/39 and IFRS 4) in order to provide its stakeholders with consistent and easily comparable financial information.
'Irrespective of accounting rules, Fortis has always had hedging strategies in place, using derivatives to mitigate the interest rate risk attached to certain of its commercial and financial activities.
'The economic result of this risk reduction strategy will be fully recognised in the 2005 accounts under IFRS, but is not visible in the 2004 accounts under IFRS as the final rules - only published in the last quarter of 2004 -- did not provide the possibility retroactively applying hedge accounting.
'For this reason, Fortis has also published the proforma 2004 net profit, as if existing hedging strategies had been recognised as from 1 January 2004. As from 2005 we have applied hedge accounting to reflect the underlying economic reality and, consequently, to reduce substantially accounting volatility.'
[1] FAP in accordance with applicable legal and regulatory requirements in Belgium.
[3] By excluding the effect of hedge accounting, Fortis recognises only the change in fair value of the hedging derivatives and not the change in fair value of the hedged items. This does not properly reflect economic reality in Fortis's results nor does it give a fair view of Fortis's risk profile.
