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Convenience Translation of Publicly Announced Unconsolidated Financial
Statements Originally Issued in Turkish, See Note I of Section Three
Arap Türk Bankası A.Ş.
Notes to Unconsolidated Financial
Statements at 31 December 2014
( Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated. )
General Information
Corporate Management
Financial Information
II. INFORMATION ON STRATEGY FOR THE USE OF FINANCIAL INSTRUMENTS AND FOREIGN CURRENCY
TRANSACTIONS
The Bank’s core business operation is banking activities including corporate banking, commercial banking, retail banking and security
transactions (treasury transactions) together with international banking services. The Bank uses financial instruments intensively
because of the nature of the Bank. The main funding resources are deposits, borrowing and equity and these resources are invested
in qualified financial assets. The Bank follows the utilization of resources and the risk and return for the investments in various financial
assets through an effective asset and liability management strategy.
The transactions in foreign currency are recorded in accordance with TAS 21-Effects of Exchange Rate Changes. Related gain and loss
occurred due to the changes in exchange rates resulted by the foreign currency transactions are translated into TL over the effective
exchange rate prevailing at the date of the transaction and is recorded accordingly. At the end of the related periods, foreign currency
assets and liability balances outstanding are translated into Turkish Lira over the Bank’s exchange rates prevailing at the balance sheet
date and the resulting exchange rate differences are accounted as foreign exchange gains and losses.
III. EXPLANATIONS ON INVESTMENTS IN SUBSDIARIES
Subsidiaries are the entities that the Bank has the power to govern the financial and operating policies of those so as to obtain benefits
from its activities. Subsidiaries are accounted in accordance with “TAS 27-Individual Financial Statements” in the unconsolidated
financial statements. Subsidiaries are recorded at fair value. Subsidiaries which are not traded in an active market and whose fair value
cannot be reliably set are reflected in financial statements with their costs after deducting impairment losses, if any.
IV. INFORMATION ON FORWARD TRANSACTIONS, OPTIONS AND DERIVATIVE INSTRUMENTS
The Bank’s financial derivatives are classified as “Held for Trading” in accordance with “TAS-39 Financial Instruments: Recognition and
Measurement”.
Derivatives are initially recorded at their purchase costs including the transaction costs. The notional amounts of derivative transactions
are recorded in off-balance sheet accounts based on their contractual amounts.
The derivative transactions are measured at fair value subsequent to initial recognition and if the fair value of a derivative financial
instrument is positive, it is disclosed under the main account fair values of financial assets through profit or loss” in trading derivative
financial instruments and if the fair value difference is negative, it is disclosed under trading derivative financial liabilities.
Gains and losses arising from a change in fair value of trading derivatives after the re measurement are accounted in the income
statement. The fair value of the derivative financial instruments is calculated using quoted market prices by using discounted cash
flows model.
V. INFORMATION ON INTEREST INCOME AND EXPENSE
Interest income and expense are recognized according to the effective interest method based on accrual basis. Effective interest rate
is the rate that discounts the expected cash flows of financial assets or liabilities during their lifetimes to their carrying values. Effective
interest rate is calculated when a financial asset or a liability is initially recorded and is not modified thereafter.
The computation of effective interest rate comprises discounts and premiums, fees and commissions paid or received and transaction
costs. Transaction costs are additional costs that are directly related to the acquisition, issuance or disposal of financial assets or
liabilities.
In accordance with the related regulation, the accrued interest income on non-performing loans are reversed and subsequently
recognized as interest income only when collected.