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International Bank for Reconstruction & Development – ‘QRTLYRPT’ for 9/30/14

On:  Wednesday, 11/12/14, at 4:48pm ET   ·   For:  9/30/14   ·   Accession #:  1193125-14-409432   ·   File #:  83-00003

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

11/12/14  Int’l Bank for Reconstructio… Dev QRTLYRPT    9/30/14    1:2.3M                                   Donnelley … Solutions/FA

Document/Exhibit                   Description                      Pages   Size 

 1: QRTLYRPT    Quarterly Report by an International Development    HTML   1.51M 
                          Bank                                                   

Table of Contents

International Bank for Reconstruction and Development

Management’s Discussion & Analysis

and

Condensed Quarterly Financial Statements

September 30, 2014

(Unaudited)

Table of Contents

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (IBRD)

CONTENTS

SEPTEMBER 30, 2014

MANAGEMENT’S DISCUSSION AND ANALYSIS

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: SEPTEMBER 30, 2014    1

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Box 1: Selected Financial Data

2    IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: SEPTEMBER 30, 2014

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This document should be read together with the International Bank for Reconstruction and Development’s (IBRD) Financial Statements and Management’s Discussion and Analysis (MD&A) for the fiscal year ended June 30, 2014 (FY14). IBRD undertakes no obligation to update any forward looking statements. Box 1 provides IBRD’s selected financial data as of, and for the three months ended, September 30, 2014 and 2013, as well as for the fiscal year ended June 30, 2014. Certain reclassifications of prior year’s information have been made to conform with the current year’s presentation. (For further details see Note A: Summary of Significant Accounting and Related Policies in the Notes to the Condensed Quarterly Financial Statements.)

Business Model

IBRD, an international organization owned by its 188 member countries, is the largest multilateral development bank in the world. The World Bank Group’s¹ (WBG), two main goals are to end extreme poverty and promote shared prosperity. To meet these goals, IBRD provides loans, guarantees, and technical assistance (including through reimbursable advisory services) for economic reform projects and programs. In addition, IBRD provides or facilitates financing through trust fund partnerships with bilateral and multilateral donors. IBRD’s ability to intermediate the funds it raises in international capital markets to its developing member countries is important in helping it achieve its development goals. IBRD’s financial goal is not to maximize profits, but to earn adequate income to ensure its financial strength and sustain its development activities.

IBRD derives its financial strength from its capital base, through the support of its shareholders as well as, its financial and risk management policies and practices. Shareholder support takes the form of capital subscriptions from members and their strong record in servicing their debt to IBRD. IBRD’s sound financial policies and practices have enabled it to maintain its capital adequacy, diversify its funding sources, hold a portfolio of liquid investments to meet its financial commitments, and limit its risks – including credit and market risks.

Basis of Reporting

Audited Financial Statements

IBRD’s financial statements conform with accounting principles generally accepted in the United States of America (U.S. GAAP), referred to in this document as the “reported basis.” All instruments in the investment and borrowing portfolios and all other derivatives, are carried at fair value, with changes in fair value reported in the income statement. IBRD’s loans are reported at amortized cost, except for loans with embedded derivatives, which are reported at fair value. Management uses the financial statements to derive allocable income and analyze fair value results.

Fair Value

IBRD makes extensive use of financial instruments, including derivatives, in its operations. The fair value of these instruments is affected by changes in market variables such as interest rates, exchange rates, and credit risk. Management uses fair value to assess the performance of the investment-trading portfolio; to monitor the results of the Equity Management Framework (EMF), where IBRD mainly uses derivatives to stabilize its allocable income; and to manage certain market risks, including interest rate risk and commercial counterparty credit risk.

Allocable Income

Management uses allocable income as a basis for making distributions out of net income. All unrealized mark-to-market gains and losses, with the exception of those relating to the investment portfolio, are excluded from reported net income to arrive at allocable income. Allocable income also reflects adjustments to exclude items such as pension and Board of Governors-approved transfers from reported net income (Table 1).

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Reported Net Income

For the first three months ended September 30, 2014 (FY15), IBRD had a net loss of $417 million, versus net income of $80 million during the same period in FY14. The major variance between the periods related to unrealized losses incurred on the non-trading portfolios.

Table 1: Condensed Statement of Net and Allocable Income

Allocable Income/Income Allocation

The primary drivers of IBRD’s allocable income are interest earned on the loan and investment portfolios (net of funding costs), revenue generated from IBRD’s equity, net non-interest expenses, and changes in the provision for losses on loans and other exposures² (Table 1 summarizes IBRD’s net income and provides a reconciliation to allocable income).

Allocable income was $556 million for the first three months of FY15, 16% lower than the same period in FY14. The major variances between the periods are explained below:

Provision for losses on loans and other exposures:

Allocable income for FY14 was $769 million. Of this amount, on August 7, 2014, the Executive Directors, recommended to IBRD’s Board of Governors the transfer of $635 million to the IDA and $134 million to Surplus.

4    IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: SEPTEMBER 30, 2014

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These transfers were approved by IBRD’s Board of Governors on October 10, 2014, and the transfer to IDA was made on October 14, 2014. In addition, IBRD’s Board of Governors approved a transfer of $15 million to the Global Infrastructure Facility from Surplus, by way of grant.

Table 2: Condensed Balance Sheet

Lending Highlights

IBRD’s principal assets are its loans to member countries.   For the first three months of FY15, loan commitments totaled $9.9 billion, $8.4 billion above the same period in FY14 (Table 3). Commitments during the period were exceptionally high due to a strong pipeline developed in the second half of FY14. This was attributed to the increase in the Single Borrower Limit (SBL), and the end of the transition period on September 30, 2014, for approving loans under the pricing terms that were in effect through June 30, 2014 (see the June 30, 2014, MD&A for a detailed discussion on the new pricing terms and the new measures implemented during FY14).   Gross disbursements during the first three months of FY15 were $5.4 billion, relatively unchanged compared to the same period in FY14 (Table 4).		Figure 2: Commitments and Gross Disbursements Trend In billions of U.S. dollars		Figure 3: Net Loans Outstanding In billions of U.S. dollars

As of September 30, 2014, IBRD’s net loans outstanding were $152 billion, an increase of $0.5 billion from June 30, 2014. The increase was mainly due to $3.3 billion in net loan disbursements made in the first three months of FY15, partially offset by currency translation losses of $2.8 billion, consistent with the 7.7% depreciation of the euro against the U.S. dollar.

Table 3: Commitments by Region – For the Fiscal Year-To-Date

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Table 4: Gross Disbursements by Region - For the Fiscal Year-To-Date

Investment Highlights

As of September 30, 2014, IBRD’s net investment portfolio totaled $40.9 billion, of which $39.8 billion represents the liquid asset portfolio (see Note C: Investments in the Notes to the Condensed Quarterly Financial Statements). The liquid asset portfolio was lower by $1.8 billion than on June 30, 2014, reflecting the impact of loan disbursements made during the first three months of FY15.   The objective of the liquid asset portfolio is to ensure the availability of sufficient cash flows, as reflected in the prudential minimum liquidity level, to meet all IBRD’s financial commitments. The prudential minimum liquidity level has been set at $26 billion for FY15, and the liquid asset portfolio was at 153% as of September 30, 2014, slightly above the targeted range of 100%-150%.		Figure 4: Liquidity Asset Portfolio In billions of U.S. dollars

The maturity profile of IBRD’s liquid asset portfolio reflects a high degree of liquidity, with $23.8 billion (or 60% of total volume) maturing within six months, of which $16.0 billion is expected to mature within one month.

Borrowing Highlights   IBRD issues debt securities to both institutional and retail investors in a variety of currencies. During the first three months of FY15, IBRD raised medium and long-term debt of $19.8 billion in 16 currencies.   As of September 30, 2014, the borrowing portfolio totaled $157.2 billion, an increase of $4.5 billion from June 30, 2014 (see Note E: Borrowings in the Notes to the Condensed Quarterly Financial Statements). This increase was mainly due to net new issuances of $6.2 billion to support the increase in loan disbursements. Of the new issuances, $5.7 billion remained unsettled as of September 30, 2014 and a receivable for the proceeds was recorded under Other Assets on the Condensed Balance Sheet. This was partly offset by currency translation gains of $2.2 billion, consistent with the depreciation of the euro against the U.S. dollar.		Figure 5: Borrowing Portfolio In billions of U.S. dollars

Capital Highlights

As a result of the General and Selective Capital Increase resolutions in fiscal year ended June 30, 2011, subscribed capital is expected to increase by $87 billion over a five-year period, of which $5.1 billion will be paid-in. As of September 30, 2014, $46.1 billion was subscribed (including shares subscribed under the Voice Reform for which no paid-in capital was required), resulting in additional paid-in capital of $2.7 billion, of which $209 million was received during the first three months of FY15.

6    IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: SEPTEMBER 30, 2014

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In an effort to maximize IBRD’s capacity to lend to member countries for development purposes, IBRD limits its exposure to market and counterparty credit risks. In addition, to ensure that the financial risks associated with its loans and other exposures do not exceed its risk-bearing capacity, IBRD uses a strategic capital adequacy framework as a key medium-term capital planning tool.

Capital Adequacy

IBRD’s capital adequacy is the degree to which its capital is sufficient to withstand unexpected shocks. IBRD’s Executive Directors monitor IBRD’s capital adequacy within a strategic capital adequacy framework and use the equity-to-loans ratio as a key indicator of capital adequacy.   IBRD’s equity-to-loans ratio decreased to 25.3% at September 30, 2014 from 25.7% on June 30, 2014, and was above the minimum ratio of 20% (Table 5). The decrease in the ratio during the quarter was mainly driven by the $3.3 billion in net loan disbursements. Since IBRD minimizes the exchange rate sensitivity of its balance sheet, the depreciation of the euro against the U.S. Dollar in the first three months of FY15 has not had an impact on the equity-to-loans ratio.		Figure 6: Equity-to-Loans Ratio (%)

Table 5: Equity-to-Loans Ratio

Management of Credit and Market Risks

Interest rate risk is the most significant risk faced by IBRD among the various types of market risks. IBRD’s exposure to currency and liquidity risks is minimal as a result of its risk management policies. In addition, IBRD faces two types of credit risk: country credit risk and counterparty credit risk.

Country Credit Risk

Country credit risk reflects potential losses arising from protracted arrears on payments from borrowers on loans and other exposures. IBRD manages this risk by applying individual country exposure limits. These limits take into account creditworthiness and performance of borrowers.

Portfolio Concentration Risk

Portfolio concentration risk, which arises when a small group of borrowers account for a large share of loans outstanding, is a key concern for IBRD. It is carefully managed, in part, by applying an exposure limit for the aggregate balance of loans outstanding, the present value of guarantees, the undisbursed portion of DDOs, and other eligible exposures that have become effective, to a single borrowing country. Under the current guidelines, IBRD’s exposure to a single borrowing country is restricted to the lower of an Equitable Access Limit (EAL) and the SBL. The effective SBL on September 30, 2014 was $20 billion for India and $19 billion for the other four SBL-eligible borrowing countries, lower than the EAL of $26 billion, as calculated on September 30, 2014.		Figure 7: Country Exposures as of September 30, 2014 In billions of U.S. dollars

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: SEPTEMBER 30, 2014    7

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The eight countries with the highest exposures accounted for about 60% of IBRD’s total exposure. As of September 30, 2014, all exposures for these individual borrowers were below the SBL (Figure 7). IBRD’s largest exposure to a single borrowing country as of September 30, 2014 was Mexico at $15.1 billion. In FY14, a surcharge of 50 basis points was introduced on balances above $17.5 billion for India and $16.5 billion for the other four SBL borrowing countries. As of September 30, 2014, no surcharge was applicable to any of the five countries.

Accumulated Provision on Loans and Other Exposure

As of September 30, 2014, only 0.3% of IBRD’s loans were in nonaccrual status and all were related to Zimbabwe. IBRD’s total provision for losses on accrual and nonaccrual loans accounted for 1.06% of the total loan portfolio (see Note D: Loans and Other Exposures in the Notes to the Condensed Quarterly Financial Statements).

Counterparty Credit Risk

Commercial Counterparty Credit Risk

Commercial counterparty credit risk is managed by applying eligibility criteria, volume limits for transactions with individual counterparties, and using mark-to-market collateral arrangements for swap transactions (Table 6). The effective management of this risk is vital to the success of IBRD’s funding, investment, and asset/liability management. The monitoring and managing of this risk is continuous, given the changing market environment.

IBRD’s overall commercial credit exposure decreased during the first three months of FY15, in line with the lower liquidity levels. The credit quality of IBRD’s portfolio remains concentrated in the upper end of the credit spectrum, with 80% of the portfolio rated AA or above, reflecting IBRD’s continued preference for highly rated securities and counterparties across all categories of financial instruments. Total commercial counterparty credit exposure, net of collateral held, was $42 billion as of September 30, 2014.

Table 6: Commercial Credit Exposure, Net of Collateral Held, by Counterparty Rating

8    IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: SEPTEMBER 30, 2014

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Non-Commercial Counterparty Credit Risk

In addition to the derivative transactions with commercial counterparties, IBRD also offers derivative-intermediation services to borrowing member countries, as well as affiliated and non-affiliated organizations, to help meet their development needs or to carry out their development mandates.

Credit Valuation Adjustment (CVA)

IBRD calculates a CVA that represents the fair value of its commercial counterparty credit risk and non-commercial counterparty credit risks from IFFIm and IDA in connection with derivative-intermediation activities. As credit risk is an essential component of fair value, IBRD includes a CVA in the fair value of derivatives to reflect counterparty credit risk. The CVA is a function of exposure, which is calculated by using the fair value of the derivative contracts, net of collateral received under credit support agreements, and the probability of counterparty default based on the Credit Default Swaps (CDS) spread and, where applicable, proxy CDS spreads. The CVA on IBRD’s balance sheet was $29 million as of September 30, 2014, and $34 million as of June 30, 2014.

Interest Rate Risk

Equity Management Framework

Under its current interest rate risk management strategy, IBRD seeks to match the interest rate sensitivity of its assets (loan and investment trading portfolios) with those of its liabilities (borrowing portfolio) by using derivatives such as interest rate swaps. These derivatives effectively convert IBRD’s financial assets and liabilities into variable-rate instruments. This strategy helps manage IBRD’s interest margin on the proportion of loans funded by debt, against interest rate volatility. The interest revenue on the remaining proportion of loans funded by equity, if left unmanaged, would be highly sensitive to fluctuations in short-term interest rates. To manage this exposure, IBRD uses an EMF, which seeks to manage the sensitivity of IBRD’s income from loans funded by equity to fluctuations in short-term interest rates. In particular, the EMF allows the flexibility of managing the duration of IBRD’s invested equity within a range of zero to five years based on market and macroeconomic conditions. During the three months ended September 30, 2014, certain long dated derivatives were liquidated resulting in a decline in the duration of IBRD’s equity to approximately 2 years compared with approximately 3 years as of June 30, 2014.

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: SEPTEMBER 30, 2014    9

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Fair Value Adjustments

An important element in achieving IBRD’s financial goals is its ability to minimize the cost of borrowing from capital markets for lending to member countries by using financial instruments, including derivatives. The fair value of these financial instruments is affected by changes in the market environment such as interest rates, exchange rates and credit risk.

Given IBRD’s intention to hold its primary assets and related funding to maturity (in its loan and borrowing portfolios), Management does not use fair value to reach decisions on income allocation. Rather, fair value is used mainly to assess the performance of the investment trading portfolio, to monitor the results of the EMF, and to manage certain market risks, including interest rate and commercial credit risk for derivative counterparties.

IBRD uses derivatives in its loan and borrowing portfolios to arrive at LIBOR-based floating rate instruments, as part of its risk management strategies. The sensitivity of these portfolios to interest rate movements, after the effect of derivatives is therefore low, resulting in relatively small unrealized gains/losses in income (Figure 8).

The following tables and figure reflects the sensitivity of IBRD’s fair value income to interest rates, with Table 7 also showing the sensitivity to credit. As shown in Table 7, on a fair value basis, if interest rates increase by one basis point, IBRD would experience a net unrealized loss of approximately $10 million on its non-trading portfolios as of September 30, 2014.

Table 7: Effect of Interest Rates and Credit on IBRD’s Fair Value Income

Figure 8 below provides a further breakdown of how the use of derivatives affects the overall sensitivity of the loan and borrowing portfolios. For example, for the borrowing portfolio, a one basis point increase in interest rates would result in net unrealized gains of $46 million on the bonds. These would be significantly offset by the $41 million of net unrealized losses on the related swaps, resulting in net unrealized gains of $5 million for the portfolio.

Figure 8: Sensitivity to Interest Rates as of September 30, 2014

(Dollar change in fair value corresponding to a one-basis-point upward parallel shift in interest rates)

In millions of U.S. dollars

Borrowing Portfolio		Loan Portfolio		EMF Portfolio		Investment Portfolio

10    IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: SEPTEMBER 30, 2014

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For the first three months of FY15, IBRD experienced net unrealized losses on a fair value basis of $1,532 million on its non-trading portfolios. See Table 8 below for details.

Table 8: Summary of Unrealized Gains/(Losses) on Non-Trading Portfolios^a

Effect of Interest Rates

During the three months ended September 30, 2014, IBRD terminated certain derivatives in the EMF portfolio and realized net gains of $581 million. The reclassification of these net gains to equity contribution on the statement of income (Table 1) resulted in net unrealized losses of $723 million. Excluding these net realized gains, there were net unrealized losses of $142 million, primarily due to the increase in interest rates during the period. As a result of the termination of the trades, the dollar change in fair value of the EMF portfolio corresponding to a one- basis-point upward shift in interest rates decreased from $11 million at June 30, 2014, to $8 million at September 30, 2014 (Figure 8).

Effect of Credit

The net unrealized losses on the borrowing and loan portfolios mainly reflect changes in credit. For the first three months of FY15, IBRD experienced $243 million of unrealized losses on the borrowing portfolio, of which $153 million was due to the tightening of its credit spreads. In addition, IBRD experienced $566 million of unrealized losses on the loan portfolio, of which $505 million was due to the net widening of CDS spreads for several of its borrowing member countries during the same period (see the June 30, 2014, MD&A for a detailed discussion on how the credit risk of each portfolio is managed).

Fair Value Results

As non-financial assets and liabilities are not reflected at fair value, IBRD’s equity is not intended to reflect fair value. Under the fair value basis, in addition to the instruments in the investment and borrowing portfolios, and all other derivatives, loans are reported at fair value and all changes in AOCI are also included in fair value net income. Tables 9 and 10 provide a reconciliation from the reported basis to the fair value basis for both the balance sheet and income statement.

Table 9: Condensed Balance Sheet on a Fair Value Basis

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Table 10: Reconciliation from Net Income to Income on a Fair Value Comprehensive Basis

Table 11: Fair Value Adjustments, net

Changes in Accumulated Other Comprehensive Income

In addition to the unrealized gains/losses on the non-trading portfolios, IBRD’s fair value net income also reflects changes in Accumulated Other Comprehensive Income (AOCI). The $613 million decrease in AOCI primarily relates to net negative currency-translation adjustments resulting from the 7.7% depreciation of the euro against the U.S. dollar during the period.

Table 12: Summary of Changes to AOCI (Fair Value Basis)

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IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: SEPTEMBER 30, 2014    13

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INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (IBRD)

CONTENTS

September 30, 2014

CONDENSED QUARTERLY FINANCIAL STATEMENTS

14    IBRD CONDENSED QUARTERLY FINANCIAL STATEMENTS: SEPTEMBER 30, 2014 (UNAUDITED)

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CONDENSED BALANCE SHEET

Expressed in millions of U.S. dollars

IBRD CONDENSED QUARTERLY FINANCIAL STATEMENTS: SEPTEMBER 30, 2014 (UNAUDITED)    15

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The Notes to Condensed Quarterly Financial Statements are an integral part of these Statements.

16    IBRD CONDENSED QUARTERLY FINANCIAL STATEMENTS: SEPTEMBER 30, 2014 (UNAUDITED)

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CONDENSED STATEMENT OF INCOME

Expressed in millions of U.S. dollars

The Notes to Condensed Quarterly Financial Statements are an integral part of these Statements.

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CONDENSED STATEMENT OF COMPREHENSIVE INCOME

Expressed in millions of U.S. dollars

CONDENSED STATEMENT OF CHANGES IN RETAINED EARNINGS

Expressed in millions of U.S. dollars

The Notes to Condensed Quarterly Financial Statements are an integral part of these Statements.

18    IBRD CONDENSED QUARTERLY FINANCIAL STATEMENTS: SEPTEMBER 30, 2014 (UNAUDITED)

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CONDENSED STATEMENT OF CASH FLOWS

Expressed in millions of U.S. dollars

The Notes to Condensed Quarterly Financial Statements are an integral part of these Statements.

IBRD CONDENSED QUARTERLY FINANCIAL STATEMENTS: SEPTEMBER 30, 2014 (UNAUDITED)    19

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NOTES TO CONDENSED QUARTERLY FINANCIAL STATEMENTS

NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING AND RELATED POLICIES

Basis of Preparation

These unaudited condensed quarterly financial statements should be read in conjunction with the June 30, 2014, audited financial statements and notes included therein. The condensed comparative information that has been derived from the June 30, 2014, audited financial statements has not been audited. In the opinion of management, the condensed quarterly financial statements reflect all adjustments necessary for a fair presentation of IBRD’s financial position and results of operations in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP).

Management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed quarterly financial statements and the reported amounts of income and expenses during the reporting periods. Due to the inherent uncertainty involved in making those estimates, actual results could differ from those estimates. Areas in which significant estimates have been made include, but are not limited to, the provision for losses on loans and other exposures, valuation of certain instruments carried at fair value, and valuation of pension and other postretirement plan-related liabilities. The results of operations for the first three months of the current fiscal year are not necessarily indicative of results that may be expected for the full year.

Certain reclassifications of the prior year’s information have been made to conform with the current year’s presentation. In particular, effective July 1, 2014, derivative assets and liabilities relating to the Loan portfolio, which were previously included in the line items Borrowing derivative assets, Borrowing derivative liabilities and Other derivative liabilities on IBRD’s Condensed Balance Sheet, are now shown separately under derivative assets and derivative liabilities. As a result, Borrowing derivative assets, Borrowing derivative liabilities and Other derivative liabilities as of June 30, 2014 have decreased by $2,784 million, $4,933 million and $199 million, respectively. Derivative assets and derivative liabilities relating to loans increased by $2,784 million and $5,132 million, respectively.

Furthermore, for the Condensed Statement of Income, interest, net and unrealized gains and losses associated with these derivatives, which were previously shown under Borrowings, net are now included under Loans, net. As a result, for the three months ended September 30, 2013, total revenue decreased by $76 million, with the offset reported as a decrease in total expenses.

For the Condensed Statement of Cash Flows, the impact of these derivative instruments, which were previously shown under the Net derivatives-borrowings line item, under financing activities, is now shown as a separate line item under investing activities. As a result, for the three months ended September 30, 2013, Net derivatives-borrowings increased by $1 million while Net derivatives-loans decreased by $1 million.

There was no effect on IBRD’s total assets, total liabilities, equity, reported net income or unrestricted cash balances from these reclassifications.

Accounting and Reporting Developments

In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Act) became law. The Act seeks to reform the U.S. financial regulatory system by introducing new regulators and extending regulation over new markets, entities, and activities. The implementation of the Act is dependent on the development of various rules to clarify and interpret its requirements. As the rules are being developed, IBRD continues to assess the impact on its business. As of September 30, 2014, IBRD believes that the Act has not had any significant effect on its business.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The ASU provides a common framework for revenue recognition for U.S. GAAP, and supersedes most of the existing revenue recognition guidance in US GAAP. The core principle of the guidance is that an entity recognizes revenue when it transfers control of promised goods and services to customers in an amount that reflects consideration to which the entity expects to be entitled. The ASU also requires additional quantitative and qualitative disclosures to enable financial statement users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. For IBRD, the ASU will be effective from the quarter ending September 30, 2017. IBRD is currently evaluating the impact of this ASU on its financial statements.

In June 2014, the FASB issued ASU 2014-11, Transfers and Servicing (Topic 860): Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures. The ASU requires repurchase-to-maturity transactions and some repurchase financing arrangements to be accounted for as secured borrowings. It also requires additional disclosures about certain transactions accounted for as sales and about the nature of collateral pledged for

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transactions accounted for as secured borrowings. For IBRD, the ASU will be effective from the quarter ending March 31, 2015. IBRD is currently evaluating this ASU, but does not expect the ASU to have a significant impact on its financial statements since all IBRD’s repurchase agreements are already accounted for as secured borrowings.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements (Subtopic 205-40): Going Concern - Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The ASU provides guidance on management’s responsibilities in evaluating the entity’s ability to continue as a going concern and for the related financial statement disclosures. Until now guidance related to this topic was provided under U.S. auditing standards, which do not govern management’s disclosures. Under this ASU, each reporting period, management should evaluate whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued. For IBRD, the ASU will be effective from the quarter ending September 30, 2016. IBRD is currently evaluating the impact of this ASU.

NOTE B—CAPITAL STOCK

The following table provides a summary of changes in IBRD’s authorized and subscribed shares during the three months ended September 30, 2014 and the fiscal year ended June 30, 2014:

The following table provides a summary of the changes in subscribed capital, uncalled portion of subscriptions and paid-in capital during the three months ended September 30, 2014 and the fiscal year ended June 30, 2014: