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İş Bankası
Annual Report 2013
Financial Information and Risk Management
TÜRKİYE İŞ BANKASI A.Ş.
Notes to the Consolidated Financial Statements
for the Year Ended 31 December 2013
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.
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. 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.
