178 İşbank
Annual Report 2015
Türkiye İş Bankası A.Ş.
Notes to the Consolidated Financial Statements
for the Year Ended 31 December 2015
b. Basis of consolidation of associates:
An associate is a domestic or foreign entity which the Parent Bank participates in its capital and over which it has a significant influence but no control.
Significant influence is the power to participate in the financial and operating policy of the investee. If the Parent Bank holds qualified shares in the associate, it is presumed that the
Parent Bank has significant influence unless otherwise demonstrated. A substantial or majority ownership by another investor does not necessarily preclude the Parent Bank from
having significant influence.
Qualified share is the share that directly or indirectly constitutes ten or more than ten percent of an entity’s capital or voting rights and irrespective of this requirement, possession of
privileged shares giving right to appoint members of board of directors.
Equity accounting method is an evaluation method of associates by which the Parent Bank’s share in the associates’ equity is compared with the book value of the associate accounted
in the Parent Bank’s balance sheet. The difference is recognized in profit or loss in the consolidated income statement.
Accounting policies of Arap Türk Bankası A.Ş., the only associate that is included in the consolidated financial statements by using the equity accounting method are not different than
the Parent Bank’s. Detailed information about Arap Türk Bankası A.Ş. is given in Section Five Note I.g.2.
c. Basis of consolidation of joint ventures:
A joint venture is an agreement in which the Group has joint control, whereby the Group has rights to the net assets of the arrangement, rather than rights to its assets and obligations
for its liabilities.
The Bank does not have any jointly controlled entities which are financial institutions in nature and to be consolidated in the financial statements by the equity method.
d. Principles applied during share transfer, merger and acquisition:
None.
2. Presentation of unconsolidated subsidiaries, associates and jointly controlled entities in consolidated financial statements:
In the consolidated financial statements, unconsolidated subsidiaries, associates and jointly controlled entities are accounted in accordance with TAS 27 – Consolidated and Separate
Financial Statements and TAS 28 - Investments in Associates and Joint Ventures”. Subsidiaries, associates and jointly controlled entities are categorized into two groups; equity
shares which are traded in an active market (stock market) and equity shares which are not traded in an active market. Equity shares which are traded in an active market (quoted) are
recognized with respect to their market values. Unquoted equity shares are recognized in historical cost basis less impairment, if any.
IV. Forward, Option Contracts and Derivative Instruments
Derivative transactions of the Group consist of foreign currency and interest rate swaps, forwards, foreign currency options and interest rate options. The Group has no derivative
instruments decomposed from the main contract.
The derivative instruments including both economic hedges and derivatives specified as hedging items are classified as either “derivatives held for trading” or “derivatives held for
hedging” as per the Turkish Accounting Standard (“TAS 39”) “Financial Instruments: Recognition and Measurement”.
Derivative instruments held for trading 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 valued 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 statement.
Derivatives are designated as “derivative financial instruments held for hedging” if all necessary conditions are met to evaluate those as financial instruments for hedge accounting.
Those derivatives are recognized initially at fair value; and subsequent to initial recognition, derivatives are measured at fair value, and notional amounts are recognized in off-balance
sheet. Changes in fair value are recognized in “derivative financial assets held for hedging” and “derivative financial liabilities held for hedging” and therein recognized in profit or loss.
On off-balance sheet items table, options which generated assets for the Parent 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 Measurement”.
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 recognized
as an interest income only when they are collected.
VI. Fees and Commission Income and Expenses
Fees and commission income and expenses are recognized either on accrual basis or by using the effective interest 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 Parent 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, and 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.
