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Financial Information and Risk
Management
İş Bankası
Annual Report 2013
TÜRKİYE İŞ BANKASI A.Ş.
Notes to the Unconsolidated Financial Statements
for the Year Ended 31 December 2013
2. Foreign Currency Transactions
In the statutory records of the Bank, transactions recognized in foreign currencies (currencies except for Turkish Lira) are converted
into Turkish Lira by using the prevailing exchange rates at the transaction dates. 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.
The financial statements of the foreign branches of the Bank are prepared in the currency of the primary economic environment
in which the entity operates (functional currency). The financial statements of foreign branches are expressed in TRY which is
the functional currency of the Bank and the presentation currency of the financial statements. Assets and liabilities of the foreign
branches of the Bank 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. The exchange rate differences arising from the conversion are
recorded in the “Other Profit Reserves” account under the shareholders’ equity.
III. Associates and Subsidiaries
Investments in associates and subsidiaries are recognized within the scope of “TAS 39-Financial Instruments: Recognition and
Measurement”. Investments in subsidiaries, whose shares are traded in an active market (stock market), are shown in the financial
statements with their fair values by taking into account their prices recorded in the related market (stock market). Investments in
subsidiaries and associates, whose shares are not traded in an active market (stock market), are followed at their cost of acquisition
and these assets are shown in the financial statements with their cost values after the deduction of, if any, impairment losses.
IV. Forward and Option Contracts and Derivatives Instruments
Derivative transactions of the Bank consist of foreign currency and interest rate swaps, forwards, foreign currency options and
interest rate options. The Bank has no derivative instruments decomposed from the main contract.
Derivative transactions 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 measured 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.
On off-balance sheet items table, options which generated assets for the 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 recorded as an interest income only when they are collected.
