169 / 236
TÜRKİYE İŞ BANKASI A.Ş.
Notes to the Consolidated Financial Statements for the Year Ended
31 December 2014
169
İŞBANK
ANNUAL REPORT 2014
FINANCIAL INFORMATION AND
RISK MANAGEMENT
TFRS 3 “Business Combinations” standard prescribes no depreciation to be recognized for goodwill arising on the acquisitions on or after 31 March 2004, realizing positive goodwill as
an asset and application of impairment analysis as of balance sheet dates. In the same standard, it is also required from that date onwards that the negative goodwill, which occurs in
the case of the Group’s interest in the fair value of acquired identifiable assets and liabilities exceeds the acquisition cost to be recognized in profit or loss.
Details of positive goodwill arising from Group’s investments to its subsidiaries in investment basis are as follows:
Name of the Investment
Amount of the Positive Consolidation Goodwill
İş Finansal Kiralama A.Ş.
611
Türkiye Sınai Kalkınma Bankası A.Ş.
4,792
Anadolu Anonim Türk Sigorta Şirketi
1,767
CJSC İşbank
28,804
Total
35,974
Due to the Bank does not have any associates and subsidiaries, the special purpose entities established within the Bank’s securitization loan transactions are included to the financial
statements.
b. Basis of consolidation of associates:
An associate is a domestic or foreign entity which the Parent Bank participates in its capital and over which it has a significant influence but no control.
Significant influence is the power to participate in the financial and operating policy of the investee. If the Parent Bank holds qualified shares in the associate, it is presumed that the
Parent Bank has significant influence unless otherwise demonstrated. A substantial or majority ownership by another investor does not necessarily preclude the Parent Bank from
having significant influence.
Qualified share is the share that directly or indirectly constitutes ten or more than ten percent of an entity’s capital or voting rights and irrespective of this requirement, possession of
privileged shares giving right to appoint members of board of directors.
Equity accounting method is an evaluation method of associates by which the Parent Bank’s share in the associates’ equity is compared with the book value of the associate accounted
in the Parent Bank’s balance sheet. The difference is recognized in profit or loss in the consolidated income statement.
Accounting policies of Arap Türk Bankası A.Ş., the only associate that is included in the consolidated financial statements by using the equity accounting method are not different than
the Parent Bank’s.
c. Basis of consolidation of joint ventures:
The Parent Bank does not have any joint ventures to be consolidated.
d. Principles applied during share transfer, merger and acquisition:
None.
2. Presentation of unconsolidated subsidiaries, associates and equity securities included in the available-for-sale portfolio in consolidated financial
statements:
Equity securities recognized as subsidiaries, associates and financial assets available for sale are accounted in accordance with TAS 39 “Turkish Accounting Standard for Financial
Instruments: Recognition and Measurement” in the consolidated financial statements. 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). 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,
impairment losses, if any.
IV. Forward and Option Contracts and Derivative Instruments
Derivative transactions of the Group consist of foreign currency and interest rate swaps, forwards, foreign currency options and interest rate options. The Group 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 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. Fees 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”.