FINANCIAL INFORMATION AND RISK MANAGEMENT
TÜRKİYE İŞ BANKASI A.Ş.
Notes to the Unconsolidated Financial Statements for the Year Ended
31 December 2012
ANNUAL REPORT 2012
The financial statements of the foreign branches of the Bank are prepared in the currency of the primary economic environment in which
the entity operates (functional currency). The financial statements of foreign branches are expressed in TRY which is the functional
currency of the Bank and the presentation currency of the financial statements. Assets and liabilities of the foreign branches of the Bank
are converted into TL by using the prevailing exchange rates at the balance sheet date. Income and expenses are converted by at exchange
rates at the dates of the transactions. The exchange rate differences arising from the conversion are recorded in the “Other Profit Reserves”
account under the shareholders’ equity.
III. Associates and Subsidiaries
Investments in associates and subsidiaries are recognized within the scope of “TAS 39-Financial Instruments: Recognition and
Measurement”. Investments in subsidiaries, whose shares are traded in an active market (stock market), are shown in the financial
statements with their fair values by taking into account their prices recorded in the related market (stock market). Investments in
subsidiaries and associates, whose shares are not traded in an active market (stock market), are followed at their cost of acquisition and
these assets are shown in the financial statements with their cost values after the deduction of, if any, impairment losses.
IV. Forward and Option Contracts and Derivatives Instruments
Derivative transactions of the Bank consist of foreign currency and interest rate swaps, forwards, foreign currency options and interest rate
options. The Bank has no derivative instruments decomposed from the main contract.
Derivative transactions are carried at their fair values at the contract dates and the receivables and payables arising from these transactions
are followed under off-balance sheet accounts. Derivative transactions are measured at their fair values in the reporting periods following
their recording and the valuation differences are shown under the accounts, “Derivative Financial Assets Held for Trading” and “Derivative
Financial Liabilities Held for Trading”, depending on the difference being positive or negative. Although some derivative transactions are
qualified as economical hedging items, they do not meet all the definition requirements of hedge accounting items. Therefore, under the
Turkish Accounting Standard No: 39 “Financial Instruments: Recognition and Measurement” (TAS 39), these derivative instruments are
recognized as held for trading. The valuation differences arising from the valuation of derivative transactions are associated with the income
On off-balance sheet items table, options which generated assets for the Bank are presented under “call options” line and which generated
liabilities are presented under “put options” line.
V. Interest Income and Expenses
Interest income and expenses are recognized on an accrual basis using the effective interest method (the rate that equals the future
cash flows of a financial asset or liability to its present net book value) in conformity with TAS 39 “Financial Instruments: Recognition and
In accordance with the related legislation, realized and unrealized interest accruals of the non-performing loans are reversed and interest
income related to these loans are recorded as an interest income only when they are collected.
VI. Fees and Commission Income and Expenses
Fees and commission income and expenses are recorded either on accrual basis or by using the effective interest rate method. Income
earned in return for services rendered contractually or due to operations like sale or purchase of assets on behalf of a third party real person
or corporate body are recognized in income accounts in the period of collection.
VII. Financial Assets
Financial assets are comprised of cash, contractual rights to obtain cash or another financial asset from or to exchange financial instruments
with the counterparty, or the capital instrument transactions of the counterparty. According to the Bank management’s purpose of holding,
the financial assets are classified into four groups as “Financial Assets at Fair Value through Profit And Loss”, “Financial Assets Available for
Sale”, “Held to Maturity Investments” and “Loans and Receivables”.
1. Cash and Banks
Cash consists of cash in vault, foreign currency cash, money in transit, cheques purchased and precious metals. Foreign currency cash and
banks are shown in the balance sheet by their amounts converted into TL at the foreign exchange rate on the balance sheet date. The
carrying values of both the cash and banks are their estimated fair values.
2. Marketable Securities
a. Financial Assets at Fair Value through Profit And Loss
a.1. Financial Assets Held for Trading
Financial assets held for trading are those acquired for the purpose of generating profit from short termmarket fluctuations in prices or
similar elements, or securities which are part of a portfolio set up to realize short term profit regardless of the purpose of acquisition.