Notes to the Financial Statements 2019
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HALKBANK A.D., BEOGRAD Financial Statements Year Ended December 31, 2019 HALKBANK A.D. BEOGRAD CONTENTS Page Financial Statements: Statement of the Financial Position 2 Income Statement 3 Statement of Other Comprehensive Income 4 Statement of Changes in Equity 5 Statement of Cash Flows 6 Notes to the Financial Statements 7 - 107 HALKBANK A.D., BEOGRAD NOTES TO THE FINANCIAL STATEMENTS December 31, 2019 All amounts expressed in thousands of RSD, unless otherwise stated. 1. BANK’S ESTABLISHMENT AND ACTIVITY 1.1. Establishment Halkbank a.d., Beograd, formerly known as Čačanska banka, has been operating since July 1, 1956, and during its operations and development it has changed its legally registered name and organizational form several times. In May 2015, Turkiye Halk Bankasi AS became the majority owner of Čačanska banka. The change of ownership caused the change to the Bank’s name and headquarters. The new name of the Bank is Halkbank a.d., Beograd (hereinafter: the “Bank”). During 2018, Turkiye Halkbankasi AS became it sole (100%) owner after purchase of the remaining shares held by the minority (non-controlling) shareholders. The Bank was registered with the Serbian Business Registers Agency under number BD 54244 as of September 13, 2005. 1.2. Activities The Bank is registered in the Republic of Serbia for payment, credit and deposit activities in the country and abroad and it operates in accordance with the effective Law on Banks. The Bank’s head office is in Belgrade, at the address of no. 9e, Milutina Milankovica Street, as registered with the Business Registers Agency under number BD 82129/2016 on October 19, 2016. As of December 31, 2019, the Bank's network consisted of 25 branches (2018: 24 branches, as follows: Belgrade (8 branches), Čačak (2 branches), Jagodina, Gornji Milanovac, Kraljevo, Užice, Kragujevac, Kruševac, Aranđelovac, Valjevo, Šabac, Niš, Novi Sad, Pančevo, Novi Pazar, Subotica and Smederevo. The Bank also had 9 sub-branches (2018: 9 sub-branches) in Paraćin, Požega, Topola, Ivanjica, Vrnjačka Banja, Leskovac, Mladenovac, Čačak and Tutin and 4 counters. In 2019 the Bank opened a new branch in Smederevo. As of December 31, 2019, the Bank had 525 employees (December 31, 2018: 487 employees). The Bank’s tax identification number is 100895809. 7 HALKBANK A.D., BEOGRAD NOTES TO THE FINANCIAL STATEMENTS December 31, 2019 All amounts expressed in thousands of RSD, unless otherwise stated. 2. BASIS OF PREPARATION AND PRESENTATION OF THE FINANCIAL STATEMENTS AND ACCOUNTING CONVENTION 2.1. Basis of Preparation and Presentation of the Financial Statements Legal entities and entrepreneurs incorporated in Serbia are required to maintain their books of account, to recognize and value assets and liabilities, income and expenses, and to present, submit and disclose financial statements in conformity the Law on Accounting (hereinafter referred to as the “Law”, Official Gazette of the Republic of Serbia no. 62/2013 and 30/2018). As a large legal entity and in accordance with the Law on Accounting, the Bank is required to apply International Financial Reporting Standards (“IFRS”), which as per the aforementioned law comprise the following: the Framework for the Preparation and Presentation of Financial Statements (the “Framework”), International Accounting Standards (“IAS”), International Financial Reporting Standards (“IFRS”), as well as the related interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”) and additional amendments to the standards and related interpretations issued by the International Accounting Standards Board (“IASB”), the translations of which to the Serbian language were approved and published by the competent Ministry of Finance. In addition, in accordance with the Amendments and Supplements to the Law on Banks (Official Gazette of the Republic of Serbia no. 14/2015), upon preparation of the annual financial statements, banks in the Republic of Serbia are obligated to apply the International Financial Reporting Standards, subsequent revisions and amendments thereto and related interpretations as from their issue date by the competent authorities. The accompanying financial statements are presented in the format prescribed by the Decision on Forms and Content of Items in the Financial Statement Forms to Be Completed by Banks (Official Gazette of RS nos. 101/2017, 38/2018 and 103/2018). The accompanying financial statements are stand-alone financial statements of the Bank. The Bank is not a parent entity, i.e., it has no subsidiaries or associates so that it does not prepare consolidated financial statements. The Bank’s sole shareholder is Turkiye Halkbankasi AS. The accompanying financial statements pertain to the reporting period ended December 31, 2019. These financial statements were approved and adopted by the Bank’s Executive Board on February 27, 2020. These financial statements were prepared at historical cost principle, except for the measurement of the following significant balance sheet items: financial instruments measured at fair value through other comprehensive income (FVtOCI); and derivative financial instruments stated at fair value. Historical cost is generally based on the fair value of consideration paid in exchange for goods and services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between the market participants at the measurement date under current market conditions regardless of whether that price is directly observable or estimated using another valuation technique. Upon estimating the fair value of assets or liabilities, the Bank takes into account characteristics of assets or liabilities that other market participants would also consider upon determining the price of assets or liabilities at the measurement date. Fair value for measurement and/or disclosure purposes in the accompanying financial statements was determined in the aforesaid manner, except for leasing transactions, which are in the scope of IAS 17, and measurements that have some similarities to fair value but are not fair value, such as the net realizable value in IAS 2 or value in use in IAS 36. In addition, for financial reporting purposes, fair value measurements are categorized into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3 inputs are unobservable inputs for the asset or liability. In the preparation of the accompanying financial statements, the Bank adhered to the accounting policies described in Note 3. The Bank’s financial statements are stated in thousands of dinars unless it is otherwise stated. Dinar (RSD) is the official presentation currency in the Republic of Serbia. 8 HALKBANK A.D., BEOGRAD NOTES TO THE FINANCIAL STATEMENTS December 31, 2019 All amounts expressed in thousands of RSD, unless otherwise stated. 2. BASIS OF PREPARATION AND PRESENTATION OF THE FINANCIAL STATEMENTS AND ACCOUNTING CONVENTION (Continued) 2.2. Standards, Amendments to the Existing Standards and Interpretations Effective for the Current Reporting Period The following new amendments to the existing standards issued by the International Accounting Standards Board (IASB) have been effective over the current reporting period: IFRS 16 “Leases” (effective for annual periods beginning on or after 1 January 2019), Amendments to IFRS 9 “Financial Instruments”-Prepayment Features with Negative Compensation (effective for annual periods beginning on or after 1 January 2019),) Amendments to IAS 19 “Employee Benefits” -Plan Amendment, Curtailment or Settlement (effective for annual periods beginning on or after 1 January 2019); Amendments to IAS 28 “Investments in Associatesand Joint Ventures”-Long-term Interests in Associates and Joint Ventures (effective for annual periods beginning on or after 1 January 2019); Amendments to various standards due to “Improvements to IFRSs -Cycle 2015-2017 (IFRS 3 “Business Combinations”, IFRS 11 “Joint Arrangements”, IAS 12 “Income Taxes” and IAS 23 “Borrowing Costs” with the aim of eliminating inconsistencies and clarifying the text (effective for annual periods beginning on or after 1 January 2019),and IFRIC 23 “Uncertainty over Income Tax Treatments” Settlement (effective for annual periods beginning on or after 1 January 2019). Implementation of these amendments to the existing standards has not led to any material changes in the Bank’s financial statements other than the adoption of IFRS 16, which is explained in more detail further in these financial statements. Quantitative effects of IFRS 16 the Bank has identified and recorded at the beginning of 2019. First-time adoption of IFRS 16 “Leases” IFRS 16 sets out the main principles of recognition, presentation and the disclosure of lease contracts for the counterparties, i.e., the lessee and lessor. IFRS 16 is effective for accounting periods beginning on or after January 1, 2019 and supersedes the previous lease guidance including IAS 17 ‘Leases’ and related interpretations: IFRIC 4 ‘Determining Whether an Arrangement Contains a Lease’, SIC 15 ‘Operating Leases –Incentives’ and SIC 27 ‘Evaluating the Substance of Transactions in the Legal Form of a Lease’. IFRS 16 provides a new definition of a lease. The essential element differentiating the definition of a lease under IAS 17 and under IFRS 16 is the concept of control. Under IFRS 16, an agreement is a lease or contains a lease if it conveys the right to control the use of an identified asset for a given period in exchange for compensation. Control is considered to exist, or to have been conveyed, if the lessee has the right to obtain substantially all of the economic benefits from the use of an identified asset, and the right to direct the use of that asset.