182 İşbank
Annual Report 2015
Türkiye İş Bankası A.Ş.
Notes to the Consolidated Financial Statements
for the Year Ended 31 December 2015
XVIII. 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 Group to settle the liability, the related liability is considered as “contingent” and disclosed in
the notes to the financial statements.
XIX. 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 Parent Bank and the Group.
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.
XX. Liabilities Regarding Employee Benefits
1. Severance Indemnities and Short-Term Employee Benefits
According to the related regulation and the collective bargaining agreements, the Parent Bank and consolidated Group companies (excluding the subsidiaries residing outside Turkey)
are 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 Parent Bank allocates seniority
pay provisions for employee benefits by estimating the present value of the probable future liabilities. According to TAS 19, all actuarial gains and losses occurred are recognized
under equity. As the legislations of the countries in which the Parent Bank’s non-resident subsidiaries operate do not require retirement pay provision, no provision liability has been
recognized for the related companies. In addition, provision is also allocated for the unused paid vacation.
2. Retirement Benefit Obligations
İşbank Pension Fund (Türkiye İş Bankası A.Ş. Emekli Sandığı Vakfı), of which each employee of the Parent Bank is a member, has been established according to the provisional Article 20
of the Social Security Act numbered 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 Institution Law, 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, Nr.E.2005/39, K.2007/33, which was published on the Official Gazette dated
31 March 2007 and numbered 26479 and the execution decision were 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.
The above mentioned law also states that;
• Through a commission constituted by the attendance of one representative separately from the Social Security Institution, Ministry of Finance, Turkish Treasury, State Planning
Organization, Banking Regulation and Supervision Agency, Savings Deposit Insurance Fund, one from each pension fund, and one representative from the organization employing
pension fund contributors, related to the transferred persons, the cash value of the liabilities of the pension fund as of the transfer date will be calculated by considering their
income and expenses in terms of the lines of insurance within the context of the related Law, and technical interest rate of 9.8%will be used in the actuarial calculation of the
value in cash
• And that after the transfer of the pension fund contributors, the ones who receive salaries or income from these funds and their rightful beneficiaries to the Social Security
Institution, these persons’ uncovered social rights and payments, despite being included in the trust indenture that they are subject to, will be continued to be covered by the
pension funds and the employers of pension fund contributors.
In line with the new law, the Bank had an actuarial valuation as of 31 December 2015. The amount of actuarial and technical deficit which was measured according to aforementioned
report, reflected to the year-end financial statements. The actuarial assumptions used in the related actuarial report are given in Section Five Note II-i. Besides the Parent Bank,
Milli Reasürans T.A.Ş. and Türkiye Sınai Kalkınma Bankası A.Ş. also had actuarial audits as of 31 December 2015 for their pension funds. According to actuarial report, the amount of
actuarial and technical deficit which was measured according this report and reflected to the year-end financial statements, was kept in the financial statements for the current
period fromMilli Reasürans T.A.Ş. According to actuarial report of Türkiye Sınai Kalkınma Bankası, there is not any additional operational or actuarial liability from Türkiye Sınai Kalkınma
Bankası to the Group at 31 December 2015.
Up to now, there has not been any deficit in İşbank Members’ Supplementary Pension Fund, which has been founded by the Bank as per the provisions of the Turkish Commercial Code
and Turkish Civil Code and which provides subsequent retirement benefits; and the Parent Bank has made no payment for this purpose. It is believed that the assets of this institution
are capable of covering its total obligations, and that it shall not constitute an additional liability for the Parent Bank. Those are also valid for the supplementary pension funds of the
employees of Anadolu Anonim Türk Sigorta Şirketi, Milli Reasürans T.A.Ş. and Türkiye Sınai Kalkınma Bankası A.Ş, which are among the other financial institutions of the Group.
