ING main colour palette ING secondary colour palette Map colours FillLine Henk Uunk Manager Financial Accounting & Reporting ING Lease Holding N.V. 5 November 2007 Lessor Accounting Revenue Recognition and Performance Measurement Leaseurope One day Business Seminar

ING Lease Holding / Leaseurope 5 Nov Page 1 Lessor Accounting Content 1.Introduction 2.Expectations on Revenue Recognition and Performance Measurement 3.Examples 4.Revenue Recognition 5.Performance Management 6.Conclusions 7.Questions and Closing remarks

ING Lease Holding / Leaseurope 5 Nov Page 2 Lessor Accounting Introduction Leasing is people’s business Lease people are pragmatic Leasing is a pragmatic business

ING Lease Holding / Leaseurope 5 Nov Page 3 Lessor Accounting Introduction -2- Leasing is a pragmatic business, thus: - Full focus on the customer - Straight forward product, on-balance at Lessor Leases are arranged upfront: Lessee :- fixed period - flexibility in lease rentals Lessor :- matched funding (interest and liquidity) - asset-play at end of lease: supplier / vendor / lessee / open market

ING Lease Holding / Leaseurope 5 Nov Page 4 Lease Accounting Introduction -3- Upfront arranged and with a clear view on the CASH FLOW of the whole transaction + A CONSTANT PERIODIC RATE OF RETURN

ING Lease Holding / Leaseurope 5 Nov Page 5 Lessor Accounting Expectations - Cash Flow + Constant Periodic Rate of Return; therefore: - Is Revenue recognition for the lessor a constant ? - Cash Flow + Constant Periodic Rate of Return + Asset-play; therefore: - How is Performance of the lessor affected: -dependant on periodic valuation issues or -would performance only be affected at end-of-lease? - Are Service elements affecting performance ?

ING Lease Holding / Leaseurope 5 Nov Page 6 Lessor Accounting Examples

ING Lease Holding / Leaseurope 5 Nov Page 7 Lessor Accounting Examples -2-

ING Lease Holding / Leaseurope 5 Nov Page 8 Lessor Accounting Revenue Recognition Known CASH FLOW + known CONSTANT PERIODIC RATE OF RETURN thus: Revenue recognition for the lessor is a constant for the lessor ? Finance lease:Focus on Finance  Debtor quality Operating lease: Focus on Asset and Services  Value assessment + continuity of providing services

ING Lease Holding / Leaseurope 5 Nov Page 9 Lessor Accounting Revenue recognition -2-

ING Lease Holding / Leaseurope 5 Nov Page 10 Lessor Accounting Revenue recognition -3-

ING Lease Holding / Leaseurope 5 Nov Page 11 Lessor Accounting Revenue recognition -4-

ING Lease Holding / Leaseurope 5 Nov Page 12 Lessor Accounting Performance Measurement Cash Flow + Constant Periodic Rate of Return + Asset-play; therefore: How is Performance of the lessor affected: - dependant on periodic valuation issues or - would performance only be affected at end-of-lease ? Are Service elements affecting performance ?

ING Lease Holding / Leaseurope 5 Nov Page 13 Lessor Accounting Performance Measurement -2- Are Service elements affecting performance ? Service elements are vital to the performance ! Again using the example of Car leasing: interest margins can be merely circumstantial and, due to competition, may be close to nil, with overall profit dependant on the surcharges on other service elements. Market in fact dictates overall prices and the lessor is free to choose which element to offer at low charge. A rebate given to a customer can be regarded as a profit-give-away or as a reassessed Residual value. Mind you: an Operating Lease is RENT, not Finance. The test on whether a lease is an Operating Lease therefore can become highly academic and disclosing interest percentages … ?

ING Lease Holding / Leaseurope 5 Nov Page 14 Lessor Accounting Performance Measurement -3- Any other elements relevant for Performance ? Think of After-tax results ! Again an item where one of the essentials of leasing is disrespected! Semi-government bodies, hospitals, etc, with the full consent of local tax authorities, benefit from using lease transactions to the benefit of (local) communities. IFRS needs to be fundamentally redesigned to overcome the problem of transactions that before-tax never will be profitable.

ING Lease Holding / Leaseurope 5 Nov Page 15 Lessor Accounting Conclusions There are various issues identified during this presentation that IFRS should fundamentally reconsider: - Should all leases be put on-balance as only around 5% lead to classification discussions ? - Should IAS 16 be applied to lease transactions (negative revenue recognition at beginning of lease transaction) for lessor accounting? -Can an Operating Lease be tested effectively whereas we know that surcharges on service elements are discretionary applied by lessors ? -Impairment testing should be considered on portfolio level by IFRS, else actual practise will overrule IFRS -After-tax is a fundamental issue in certain tax areas; IFRS is distorting market conditions rather than guiding the market.

ING Lease Holding / Leaseurope 5 Nov Page 16 Lessor Accounting Questions and Closing remarks Before allowing your questions, let me make some Closing remarks: A fundamental reconsideration of IAS 17 should not rule out that Leased Assets will become a separate item in the balance sheet. Disclosures on lease transactions may be more informative than putting all leases on-balance. When not creating a separate item of Leased assets in the balance sheet, disclosures on leased assets should not be onerous (compared to other assets). - = -