TÜRKİYE İŞ BANKASI A.Ş.
Notes to the Unconsolidated Financial Statements for the Year Ended
31 December 2012
ANNUAL REPORT 2012
SECTION THREE: EXPLANATIONS ON ACCOUNTING POLICIES
I. Basis of Presentation
1. Basis of Presentation
The unconsolidated financial statements, related notes and explanations in this report are prepared in accordance with the Turkish
Accounting Standards (“TAS”), Turkish Financial Reporting Standards (“TFRS”), “Regulation on Accounting Applications for Banks and
Safeguarding of Documents and other communiqués and interpretations of Banking Regulation and Supervision Agency (“BRSA”) on
accounting and financial reporting.
Accounting policies applied and valuation methods used in the preparation of the financial statements are expressed in detail below.
2. Additional paragraph for convenience translation to English
The differences between accounting principles, as described in the preceding paragraphs, and the accounting principles generally accepted
in countries, in which the accompanying financial statements are to be distributed, and International Financial Reporting Standards (“IFRS”),
may have significant influence on the accompanying financial statements. Accordingly, the accompanying financial statements are not
intended to present the financial position and results of operations in accordance with the accounting principles generally accepted in such
countries and IFRS.
II. Strategy for Use of Financial Instruments and Foreign Currency Transactions
1. The Bank’s Strategy on Financial Instruments
The Bank’s main activities comprise private, retail, commercial and corporate banking, money market and securities market operations, as
well as activities related to international banking services.
In conformity with the general liability structure of the banking system, the Bank’s liabilities are mainly composed of short-term deposits
and other medium and long-term liabilities. The liquidity risk that may arise from this liability structure can be easily controlled through
deposit continuity, as well as widespread network of the correspondent banks, market maker status (The Bank is one of the market maker
banks) and by the use of liquidity facilities of the Central Bank of Turkey (“CBT”). As a result, the liquidity of the Bank and the banking system
can be easily monitored. On the other hand, foreign currency liquidity requirements are met by the money market operations and currency
Most of the funds collected bear fixed-interest, and by monitoring the sectoral developments and the yields of alternative investment
instruments, fixed and floating rate placements are made.
Safety principle has always been the top priority in placements and the placements are focused on high yielding and low risk assets by
considering their maturity structure. Accordingly, a pricing policy aiming at high return is implemented in the long-term placements and
attention is paid to the maximum use of non-interest income generation opportunities. The Bank determines its lending strategy by
taking into consideration the international and national economic data and expectations, market conditions, current and potential credit
customers’ expectations and tendencies, and risks such as; interest rate, liquidity, currency and credit risks. Furthermore, in conformity with
this strategy, the Bank acts within the legal limits in terms of asset-liability management.
Main growth targets for different asset classes are set by the long-term plans shaped along with budgeting; and the Bank takes the required
positions against the short-term currency, interest rates and price fluctuations in accordance with these plans and the course of the market
Foreign currency, interest rate and price fluctuations in the markets are monitored instantaneously. While taking positions, in addition to the
legal limits, the Bank’s own transaction and control limits are also effectively monitored in order to avoid limit overrides.
The Bank’s asset-liability management is executed by the Asset-Liability Management Committee, within the risk limits determined by the
Board of Directors, in order to keep the liquidity risk, interest rate risk, currency risk and credit risk within certain limits depending on the
equity adequacy and to maximize profitability.
2. Foreign Currency Transactions
In the statutory records of the Bank, transactions accounted in foreign currencies (currencies except for Turkish Lira) are converted into
Turkish Lira by using the prevailing exchange rates at the transaction dates. Foreign currency monetary assets and liabilities on the balance
sheet are converted into Turkish Lira by using the prevailing exchange rates at the balance sheet date. Non-monetary items in foreign
currencies carried at fair value are converted into Turkish Lira by the rates at the date of which the fair value is determined. Exchange
rate differences arising from the conversions of monetary foreign currency items and the collections of and payments in foreign currency
transactions are reflected to the income statement.
In accordance with “TAS 21-Effects of Changes In Foreign Exchange Rates”, net investments in non-domestic companies are considered as
non-monetary items, measured on the basis of historical cost and converted into Turkish Currency at the currency rates at the transaction
date, and also in accordance with “TAS 29-Financial Reporting In Hyperinflationary Economics”, the inflation adjusted value is calculated by
using the inflation indices prevailing between the date of transaction and final date that the inflation adjustment is applied, 31 December
2004, and it is accounted by allocating provision amounts for any permanent impairment losses.