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Financial Information and Risk Management
Türkiye İş Bankası A.Ş.
Notes to the Consolidated Financial Statements
for the Year Ended 31 December 2015
The hedge accounting is discontinued when the hedging instrument expires, is exercised, sold or no longer effective. When discontinuing fair value hedge accounting, the cumulative
fair value changes in carrying value of the hedged item arising from the hedged risk are amortized and recognized in income statement over the life of the hedged item from that date
of the hedge accounting is discontinued.
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 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. In
management of Financial Statements, this strategy is parallel to and acts within legal limits.
The primary objectives related to balance sheet components 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 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
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 are 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.
While the Parent Bank and Türkiye Sınai Kalkınma Bankası A.Ş., one of the consolidated subsidiaries, use their own foreign currency exchange rates for their foreign currency
transactions, other institutions residing domestically use the CBRT rates for their foreign currency transactions.
Assets and liabilities of the foreign branches of the Parent Bank and financial institutions that have been established abroad 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. Incomes and expenses of foreign financial institutions are
converted into TL at average foreign currency rates as long as there is not a significant fluctuation in currency rates during the period. The exchange rate differences arising from the
conversion are recognized in the “Other Profit Reserves” account under the shareholders’ equity.
III. Information on the Consolidated Companies
1. Basis of Consolidation:
The consolidated financial statements have been prepared in accordance with the procedures listed in the “Communiqué Related to Regulation on the Preparation of the Consolidated
Financial Statements of Banks” published in the Official Gazette numbered 26340 dated 8 November 2006.
a. Basis of consolidation of subsidiaries:
A subsidiary is an entity that is controlled by the Parent.
Control is the power of the Parent Bank to appoint or remove from office the decision-taking majority of members of board of directors through direct or indirect possession of the
majority of a legal person’s capital irrespective of the requirement of owning minimum fifty-one per cent of its capital; or by having control over the majority of the voting right as a
consequence of holding privileged shares or of agreements with other shareholders although not owning the majority of capital.
As per the “Communiqué Related to the Preparation of Consolidated Financial Statements of Banks” published in the Official Gazette numbered 26340 dated 8 November 2006,
as at the current period, the Parent Bank has no subsidiaries, qualified as credit institutions or financial institutions, excluded from consolidation. Detailed information about the
consolidated subsidiaries is given in Section Five, Note I.h.3.
Under full consolidation method, the assets, liabilities, income and expenses and off-balance sheet items of subsidiaries are combined with the equivalent items of the Parent Bank
on a line-by-line basis. The book value of the Parent Bank’s investment in each of the subsidiaries and the Group’s portion of equity of each subsidiary are eliminated. All significant
transactions and balances between the Parent Bank and its consolidated subsidiaries are eliminated reciprocally. Non-controlling interests in the net income and in the equity of
consolidated subsidiaries are calculated separately from the Group’s net income and the Group’s shareholders’ equity. Non-controlling interests are presented separately in the
balance sheet and in the income statement.
Accounting policies used by the subsidiaries, that are included in the consolidated financial statements, are not different than the Parent Bank’s.
TFRS 3 “Business Combinations” standard prescribes no depreciation to be recognized for goodwill arising on the acquisitions on or after 31 March 2004, realizing positive goodwill as
an asset and application of impairment analysis as of balance sheet dates. In the same standard, it is also required from that date onwards that the negative goodwill, which occurs in
the case of the Group’s interest in the fair value of acquired identifiable assets and liabilities exceeds the acquisition cost to be recognized in profit or loss.
Details of positive goodwill arising from Bank’s investments to its subsidiaries in investment basis are as follows:
Name of the Investment
Amount of the Positive Consolidation Goodwill
İş Finansal Kiralama A.Ş.
611
Türkiye Sınai Kalkınma Bankası A.Ş.
4,792
Anadolu Anonim Türk Sigorta Şirketi
1,767
JSC İşbank
28,804
Total
35,974
Due to the Bank does not have any associates and subsidiaries, the special purpose entities established within the Bank’s securitization loan transactions are included to the financial
statements.
