Türkiye İş Bankası A.Ş.
Notes to the Unconsolidated Financial Statements
for the Year Ended 31 December 2015
103
Financial Information and Risk Management
Leasehold improvements are amortized in equal amounts considering their useful life. However, in any case the useful life cannot exceed leasing term. When the lease period is not certain or
longer than 5 years, the amortization period is recognized as 5 years.
The difference between the sales proceeds arising from the disposal of tangible assets or the inactivation of a tangible asset and the book value of the tangible assets are recognized in the
income statement.
Regular maintenance and repair costs incurred for tangible assets are recorded as expense.
There are no restrictions such as pledges, mortgages on tangible assets.
The depreciation rates used in amortization of tangible assets and their estimated useful lives are as follows:
Estimated Economic Life (Year)
Depreciation Rate
Buildings
4-50
2% - 25%
Safe Boxes
2-50
2% - 50%
Other Movables
2-25
4% - 50%
Leased Assets
4-5
20% - 25%
XIV. Leasing Transactions
Assets acquired under financial leases are carried at the lower of their fair values or amortized value of the lease payments. Leasing payables are recognized as liabilities in the balance sheet
while the interest payable portion of the payables is recognized as a deferred amount of interest. Finance lease payments are separated as financial expense and principal amount payment,
which provides a decrease in finance lease liability, thus helps a fixed rate interest on the remaining principal amount of the debt to be calculated. Within the context of the Bank’s general
borrowing policy, financial expenses are recognized in the income statement. Assets held under financial leases are recognized under the property, plant and equipment (movable properties)
account and are depreciated by using the straight line method.
The Bank does not participate in the financial leasing transactions as a “lessor”.
Operational lease transactions are recognized in line with the related agreement on an accrual basis.
XV. Provisions and Contingent Liabilities
As of the end of the reporting period, a past event is deemed to give rise to a present obligation if, taking account of all available evidence, it is more likely than not that a present obligation
exists, the entity recognizes a provision in the financial statements. As of the end of the reporting period where it is more likely that no present obligation exists at the end of the reporting
period, the entity discloses a contingent liability, unless the possibility of an outflow of resources embodying economic benefits is remote.
In the financial statements, a provision is made for an existing commitment resulted from past events if it is probable that the commitment will be settled and a reliable estimate can be made
of the amount of the obligation.
Provisions are calculated based on the best estimates of management on the expenses to incur as of the balance sheet date to fulfill the liability by considering the risks and uncertainties
related to the liability.
In case the provision is measured by using the estimated cash flows required to fulfill the existing liability, the book value of the related liability is equal to the present value of the related cash
flows.
If the amount is not reliably estimated and there is no probability of cash outflow from the Bank to settle the liability, the related liability is considered as “contingent” and disclosed in the
notes to the financial statements.
XVI. Contingent Assets
The contingent assets usually arise from unplanned or other unexpected events that give rise to the possibility of an inflow of economic benefits to the Bank. Since showing the contingent
assets in the financial statements may result in the accounting of an income, which will never be generated, the related assets are not included in the financial statements. Nevertheless, the
developments related to the contingent assets are constantly evaluated and if it has become virtually certain that an inflow of economic benefits will arise, the asset and the related income
are recognized in the financial statements of the period in which the change occurs.
XVII. Liabilities Regarding Employee Benefits
1. Severance Indemnities and Short-Term Employee Benefits
According to the related regulation and the collective bargaining agreements, the Bank is obliged to pay termination benefits for employees who retire, die, quit for their military service
obligations, who have been dismissed as defined in the related regulation or (for the female employees) who have voluntarily quit within one year after the date of their marriage. Within the
scope of “TAS 19-Employee Benefits”, the Bank allocates seniority pay provisions for employee benefits by estimating the present value of the probable future liabilities. According to TAS 19,
the actuarial gains and losses occurred is recognized under equity. The Bank also allocates provision for the unused paid vacation.
2. Retirement Benefit Obligations
Türkiye İş Bankası A.Ş. Emekli Sandığı Vakfı (“İşbank Pension Fund”), of which each Bank employee is a member, has been established according to the provisional Article 20 of the Social
Security Act No. 506. As per provisional article numbered 23 of the Banking Law numbered 5411, it is ruled that Bank pension funds, which were established within the framework of Social
Security Act, will be transferred to the Social Security Institution, within 3 years after the publication of such law. Methods and principles related to transfer have been determined as per the
Cabinet decision dated 30 November 2006 numbered 2006/11345. However, the related article of the act has been cancelled upon the President’s application dated 2 November 2005, by the
Supreme Court’s decision dated 22 March 2007, numbered E.2005/39, K.2007/33, which was published on the Official Gazette dated 31 March 2007 and numbered 26479 and the execution
decision was ceased as of the issuance date of the related decision.
After the justified decree related to cancelling the provisional article 23 of the Banking Lawwas announced by the Constitutional Court on the Official Gazette dated 15 December 2007 and
numbered 26731, Turkish Grand National Assembly started to work on establishing new legal regulations, and after it was approved at the General Assembly of the TGNA, the Law numbered
5754 “Emendating Social Security and General Health Insurance Act and Certain Laws and Decree Laws”, which was published on the Official Gazette dated 8 May 2008 and numbered 26870,
came into effect. The new law decrees that the contributors of the Bank pension funds, the ones who receive salaries or income from these funds and their rightful beneficiaries will be
transferred to the Social Security Institution and will be subject to this Lawwithin 3 years after the release date of the related article, without any need for further operation. The three-year
transfer period can be prolonged for maximum 2 years by the Cabinet decision. However related transfer period has been prolonged for 2 years by the Cabinet decision dated 14 March 2011,
which was published on the Official Gazette dated 9 April 2011 and numbered 27900. In addition, by the Law “Emendating Social Security and General Health Insurance Act”, which was
published on the Official Gazette dated 8 March 2012 and numbered 28227, this period of 2 years has been raised to 4 years after that related transfer period has been prolonged for one
more year by the Cabinet decision dated 08 April 2013, which was published on the Official Gazette dated 3 May 2013 and numbered 28636 also this period has revalidated one more year by
the Cabinet decision dated 24 February 2014, which was published on the Official Gazette dated 30 April 2014 and numbered 28987. The Council of Ministers has been lastly authorized to
determine the transfer date in accordance with the last amendment in the first paragraph of the 20th provisional article of Law No.5510 implemented by the Law No. 6645 on Amendment of
the “Occupational Health and Safety Law and Other Laws and Decree Laws” published in the Official Gazette dated 23 April 2015 and numbered 29335.
On the other hand, the application made on 19 June 2008 by the Republican People’s Party to the Constitutional Court for the annulment and motion for stay of some articles, including the
first paragraph of the provisional article 20 of the Law, which covers provisions on transfers, was rejected in accordance with the decision taken at the meeting of the afore-mentioned court
on 30 March 2011.
