TÜRKİYE İŞ BANKASI A.Ş.
Notes to the Consolidated 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 consolidated financial statements and 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 Regulatory and Supervisory Agency (“BRSA”) on
accounting and financial reporting.
Accounting policies and measurement principles used in the preparation of the consolidated financial statements are presented in detail
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 consolidated financial statements are to be distributed, and International Financial Reporting
Standards (“IFRS”), may have significant influence on the accompanying consolidated financial statements. Accordingly, the accompanying
consolidated 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 on Foreign Currency Transactions
1. The Group’s Strategy on Financial Instruments
The Group’s main financial activities comprise a wide range of activities such as banking, insurance and reinsurance services, brokerage
services, real estate portfolio management, financial lease, factoring services, portfolio management. The liabilities on the Group’s balance
sheet are mainly composed of relatively short-term deposits, parallel to general liability structure of the banking system, which is its
main field of activity. As for the non-deposit liabilities, funds are collected through medium and short-term instruments. 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 Parent Bank is one of the market maker banks) and by the use of liquidity facilities of the
Central Bank of Turkey (CBT). The liquidity of the Group 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 swaps.
Most of the funds collected bear fixed-interest, and by monitoring the developments in the sector fixed and floating rate placements are
made according to the yields of alternative investment instruments.
By taking into account the global and national economic outlook, market conditions, current and potential credit customers’ expectations
and tendencies, and risks such as; interest rate, liquidity, credit and currency risks, the Group’s placements are focused on high yielding and
low risk assets and safety principle has always been the top priority. Generally a pricing policy aiming at high return is implemented in the
long-term placements of the Group, and attention is paid to the maximum use of non-interest income generation opportunities.
Main growth targets for different asset classes are set by the long-term plans shaped along with budgeting; and the Parent 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 conditions.
Foreign currency, interest rate and price fluctuations in the markets are monitored instantaneously. While taking positions, in addition to the
legal limits, the Parent Bank’s own transaction and control limits are also effectively monitored in order to avoid limit overrides.
The Parent Bank’s asset-liability management is executed by the Asset-Liability Management Committee, within the risk limits specified 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
The financial statements of the Parent Bank’s branches and financial institutions that have been established abroad are prepared in
functional currency prevailing in the economic environment that they operate in; and when they are consolidated, they are presented in TL,
which is the functional currency of the Parent Bank and also the currency used in presentation of the financial statements.
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.