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Financial Information and Risk
Management
İş Bankası
Annual Report 2013
TÜRKİYE İŞ BANKASI A.Ş.
Notes to the Consolidated Financial Statements
for the Year Ended 31 December 2013
Derivative transactions are carried at their fair values at the contract dates and the receivables and payables arising in 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.
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 recorded as an interest income only when they are collected.
VI. Fee and Commission Income and Expenses
Fees and commission income and expenses are recorded 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, 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. The carrying values of both the cash and banks are their estimated fair values.
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 and is 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 recorded in the profit and loss accounts. In frame of legal regulations, 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.
