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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
Regular maintenance and repair costs incurred for tangible assets are recognized 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
4-15
6.66% - 25%
XIV. Investment Property
Investment properties are kind of properties held by the Group to earn rent or benefit from valuation increases. The investment properties of the Group were used to be measured
in the consolidated financial statements at acquisition costs less accumulated depreciation and impairment provisions. However, beginning from the third quarter of the current
year, accounting policy has changed to fair value method in accordance with “TAS 40 Investment Property”. A gain or loss arising from a change in fair value of investment property is
recognized in profit or loss for the related period which it rises.
In accordance with the TAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors” accounting policy of measurement of investment properties is applied retrospectively
and the financial statements of prior period are restated. The effects of aforementioned adjustments on financial statements are given in Section III. Note I.
XV. 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 Group’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.
There is one company which exclusively does finance leases (İş Finansal Kiralama A.Ş.) and one bank (Türkiye Sınai Kalkınma Bankası A.Ş.) which operates finance lease activities as per
provisional article No 4 of the Banking Law No 5411. Finance lease activities are operated according to the “Law on Financial Leasing, Factoring and Financing” No 6361.
In cases when the Group is the “lessor”, finance lease receivables are recognized by their fair values on the first entry date and in the reporting periods after the first entry date they
are carried at amortized cost by using the effective interest rate method. Interest income on finance lease is allocated to the accounting periods in order to reflect a fixed term interest
from the investments that are subject to leasing.
Operational lease transactions are recognized in line with the related agreement on an accrual basis.
XVI. Insurance Technical Income and Expense
In insurance companies premium income is obtained subsequent to the share of reinsurers in policy income is diminished.
Claims are recorded in expense on accrual basis. Outstanding loss provisions are recognized for the claims reported but not paid yet and for the claims that incurred but not reported.
Reinsurers’ share of claims paid and outstanding loss are offset in these provisions.
XVII. Insurance Technical Reserves
The Group’s insurance subsidiaries adopted TFRS 4 - Insurance Contracts (“TFRS 4”). TFRS 4 represents the completion of phase I and is a transitional standard until the recognition
and measurement of insurance contracts has more fully addressed. TFRS 4 requires that all contracts issued by insurance companies be classified as either insurance contracts or
investment contracts. Contracts with significant insurance risk are considered insurance contracts. Insurance risk is defined as risk, other than financial risk, transferred from the
holder of a contract to the issuer. TFRS 4 permits a company to continue with its previously adopted accounting policies with regard to recognition and measurement of insurance
contracts. Only in case of presentation of more reliable figures a change in accounting policy shall be carried out. Contracts issued by insurance companies without significant
insurance risk are considered investment contracts. Investment contracts are accounted for in accordance with TAS 39 “Turkish Accounting Standard for Financial Instruments:
Recognition and Measurement”.
Insurance technical provisions on the consolidated financial statements consist of, reserve for unearned premiums, reserve for unexpired risk, and provision for outstanding claims
and mathematical provisions.
Within the framework of the current insurance regulation, reserves accounted by insurance companies for unearned premium claims, unexpired risk reserves, outstanding claims and
life-mathematical reserves are presented in the consolidated financial statements.
The reserve for unearned premiums consists of the gross overlapping portion of accrued premiums for insurance contracts that are in effect to the subsequent period or periods of
balance sheet date on a daily basis without a commission or any other discount.
In case the expected loss premium ratio is over 95%, the unexpired risk reserves are recognized for the main branches specified by the Undersecretariat of Treasury. For each main
branch, the amount found by multiplying the ratio exceeding 95% by the net unearned premium provision, is added to the unearned premium provision of that main branch.
Reserve for outstanding claim is recognized for the accrued claims which are not paid in the current period or in the prior periods or for the claims realized with the expected costs but
not reported.
Mathematical reserve is recognized on actuarial bases in order to meet the requirements of policyholders and beneficiaries for life, health and personal accident insurance contracts
for a period longer than a year.
On the other hand, actuarial chain ladder method is used to estimate the reserve amount to be set aside in the current period by looking at the data of the past materialized losses. If
the reserve amount found as a result of this method exceeds the amount of reserve for the amount of uncertain indemnity, additional reserve must be set aside for the difference.
Reinsurance companies recognize for the outstanding claims that is declared by the companies, accrued and determined on account.
Insurance companies of the Group cede premium and risks in the normal course of business in order to limit the potential for losses arising from risks accepted. Insurance premiums
ceded to reinsurers on contracts that are deemed to transfer significant insurance risk are recognized as an expense in a manner that is consistent with the recognition of insurance
premium revenue arising from the underlying risks being protected.
Costs which vary and are directly associated with the acquisition of insurance and reinsurance contracts including brokerage, commissions, underwriting expenses and other
acquisition costs are deferred and amortized over the period of contract, consistent with the earning of premium.
