NOTES TO FINANCIAL STATEMENTS PURPOSE AND AFFILIATED ORGANIZATIONS The International Bank for Reconstruction and Development (IBRD) is an international organization which commenced operations in 1946. The principal purpose of IBRD is to promote sustainable economic development and reduce poverty in its member countries, primarily by providing loans, guarantees and related technical assistance for specific projects and for programs of economic reform in developing member countries. The activities of IBRD are complemented by those of three affiliated organizations, the International Development Association (IDA), the International Finance Corporation (IFC), and the Multilateral Investment Guarantee Agency (MIGA). Each of these organizations is legally and financially independent from IBRD, with separate assets and liabilities, and IBRD is not liable for their respective obligations. Transactions with these affiliated organizations are disclosed in the notes that follow. IDA’s main goal is to reduce poverty through promoting sustainable economic development in the less developed countries who are members of IDA, by extending grants, development credits, guarantees and related technical assistance. IFC’s purpose is to encourage the growth of productive private enterprises in its member countries through loans and equity investments in such enterprises without a member’s guarantee. MIGA was established to encourage the flow of investments for productive purposes between member countries and, in particular, to developing member countries by providing guarantees against noncommercial risks for foreign investment in its developing member countries. IBRD is immune from taxation pursuant to Article VII, Section 9, Immunities from Taxation, of IBRD’s Articles of Agreement. NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING AND RELATED POLICIES IBRD’s financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP). The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from these estimates. Significant judgment has been used in the valuation of certain financial instruments, the determination of the adequacy of the accumulated
provisions for losses on loans and other exposures (deferred drawdown options-DDOs, irrevocable commitments, exposures to member countries’ derivatives and guarantees), the determination of net periodic cost from pension and other postretirement benefits plans, and the present value of benefit obligations. Certain reclassifications of the prior years’ information have been made to conform with the current year’s presentation. In particular, effective July 1, 2011, as part of the move toward a more integrated reporting of IBRD’s trust fund activities and as permitted under U.S. GAAP, certain income and the related expenses pertaining to IBRDexecuted trust funds are now presented on a gross basis; previously these amounts were presented on a net basis. For the fiscal years ended June 30, 2011 and June 30, 2010, the impact of this change was an increase in Other income of $300 million, and $271 million, respectively, and corresponding increases in Administrative expenses. In line with the change in reporting of trust fund related expenses, IBRD also changed the presentation of income and expenses jointly earned and incurred with IDA, respectively. Previously, IBRD allocated IDA’s share of both income and expenses through Administrative expenses on a net basis. Under the new presentation, IBRD now reflects IDA’s share of these amounts on a gross basis. For the fiscal years ended June 30, 2011 and June 30, 2010, the impact of this change was a decrease in Other income of $193 million, and $173 million, respectively, and corresponding decreases in Administrative expenses. These changes in presentation had no effect on IBRD's income before fair value adjustment on non-trading portfolios, net and Board of Governors-approved transfers, or Net income (loss) for the fiscal years ended June 30, 2011 and June 30, 2010. In addition, IBRD now recognizes on its balance sheet all undisbursed contributions made by third party donors to IBRD-executed trust funds. The impact of this change in presentation on the June 30, 2011 balance sheet was an increase in Miscellaneous assets of $340 million and a corresponding increase in Accounts payable and miscellaneous liabilities, but no effect on IBRD’s Equity or cash from operating activities. On August 9, 2012, the Executive Directors approved these financial statements for issue.
Translation of Currencies: IBRD’s financial statements are expressed in terms of U.S. dollars for the purpose of summarizing IBRD’s financial position and the results of its operations for the convenience of its members and other interested parties.
IBRD FINANCIAL STATEMENTS: JUNE 30, 2012
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