179
Financial Information and Risk Management
Türkiye İş Bankası A.Ş.
Notes to the Consolidated Financial Statements
for the Year Ended 31 December 2015
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.
Financial assets held for trading is presented in the balance sheet with their fair values are subject to valuation at fair values after the initial recognition. In cases where values that
form the basis for the fair value do not exist in active market conditions, it is accepted that the fair value is not reliably determined and “amortized cost”, calculated by the internal rate
of return method, is taken into account as the fair value.
Any gains or losses resulting from such valuation are recognized in the profit and loss accounts. As per the explanations of the Uniform Code of Accounts (UCA), any positive difference
between the historical cost and amortized cost of financial assets are recognized under the “Interest Income” account, and in case the fair value of the asset is over the amortized cost,
the positive difference is recognized in the “Gains on Securities Trading” account.
If the fair value is less than the amortized cost, the negative difference is recognized under the “Losses on Securities Trading” account. Any profit or loss resulting from the disposal of
those assets before their maturity date is recognized within the framework of the same principles.
a.2.
Financial Assets at Fair Value through Profit and Loss
Financial assets at fair value through profit and loss represent the financial assets at fair value through profit and loss at the initial recognition and those are not obtained for trading
purposes. Recognition of fair value differences of those assets are similar to the financial asset held for trading.
b. Financial Assets Available for Sale and Held to Maturity Investments
b.1.
Financial Assets Available for Sale
Financial assets available for sale represent non-derivative financial assets other than bank loans and receivables, held to maturity investments and financial assets at fair value
through profit and loss. Initial recognition and subsequent valuation of financial assets available for sale are performed based on the fair value including transaction costs. The
amount arising from the difference between cost and amortized value is recognized through income statement by using the internal rate of return. When determining the fair
values of available for sale securities, market prices are taken into consideration. If a price does not occur in an active market and fair value cannot be reliably determined, “Amortized
Value” is determined as the fair value using the internal rate of return. Unrealized gains and losses arising from changes in fair value of the financial assets available for sale are not
recognized in the income statement, they are recognized in the “Marketable Securities Revaluation Fund” until the disposal, sale, redemption or incurring loss of those assets. Fair
value differences accounted under equity arising from the application of fair value are reflected to the income statement when these assets are sold or when the valuation difference
is collected.
b.2.
Held to Maturity Investments
Held to maturity investments are the investments, for which there is an intention of holding until maturity and the relevant conditions for fulfillment of such intention, including the
funding ability, and for which there are fixed or determinable payments with fixed maturity; and which are recognized at fair value at initial recognition. Held to maturity investments
with the initial recognition at fair value including transaction costs are subject to valuation with their discounted cost value by using the internal rate of return method less provision
for any impairment, if any. Interest income from held to maturity investments are recognized in the income statement as an interest income.
There are no financial assets that are classified by the Group as held to maturity investments; however, they cannot be classified under this classification for two years for not
satisfying the requirements of the related classification.
3. Loans and Receivables
Loans and receivables represent unquoted financial assets in an active market that provide money, goods or services to the debtor with fixed or determinable payments.
Loans and receivables are initially recognized with their fair values including settlement costs and carried at their amortized costs calculated using the internal rate of return at the
subsequent recognition.
Retail and commercial loans that are followed under cash loans are accounted at original maturities, based on their contents.
Foreign currency indexed consumer and corporate loans are followed at TL accounts after converting into TL by using the opening exchange rates. At the subsequent periods,
increases and decreases in the loan capital are recognized under the foreign currency income and expense accounts in the income statement depending on foreign currency rates
being higher or lower than opening date rates. Repayments are calculated using the exchange rates at the repayment dates and exchange differences are recognized under the
foreign currency income and expense accounts in the income statement.
VIII. Impairment of Financial Assets
At each balance sheet date, the Group companies evaluate the carrying amount of its financial assets or a group of its financial assets to determine whether there is an objective
indication that those assets have suffered an impairment loss. If such indication exists, the Group determines the related impairment amount.
A financial asset or a group of financial assets is subject to impairment loss only if there is an objective indication that the occurrence of one or more than one event (“loss event”)
subsequent to the initial recognition of that asset has an effect on the reliable estimate of the expected future cash flows of the related financial asset and asset group. Irrespective
of their high probability of incurrence, future expected losses are not recognized.
Impairment losses attributable to the held to maturity investments are measured as the difference between the present values of estimated future cash flows discounted using the
original interest rate of financial asset and the book value of asset. The related difference is recognized as a loss and it decreases the book value of the financial asset. At subsequent
periods, if the impairment loss amount decreases, impairment loss recognized is reversed.
When an impairment occurs in the fair values of the “financial assets available for sale” of which value decreases and increases are recognized in equity, the accumulated profit/loss
that had been recognized directly in equity is transferred from equity to period profit or loss. If the fair value of the related asset increases in a subsequent period, the amount of
increases are recognized in equity.
