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PART III: FINANCIAL HIGHLIGHTS AND RISK MANAGEMENT
CONVENIENCE TRANSLATION OF PUBLICLY ANNOUNCED CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH, SEE IN NOTE I. OF SECTION THREE
TÜRKİYE VAKIFLAR BANKASI TÜRK ANONİM ORTAKLIĞI AND
ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND
FOR THE YEAR ENDED 31 DECEMBER 2015
(Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)
Pursuant to the 4 March 2010 dated and 764 numbered decision of Board of Directors of Central Bank of Turkish Republic of Northern Cyprus, the
official authorisation of World Vakıf UBB Ltd., a subsidiary which was subject to consolidation in previous periods, is abrogated due to incompliance with
the 7th and 9th articles of 41/2008 numbered Law of International Banking Units. World Vakıf UBB Ltd. will be liquidated according to 24 May 2010
dated decision of the Nicosia Local Court. Therefore, the financial statements of the company have not been consolidated as at 31 December 2015 and
31 December 2014 but until the liquidation decision date its accumulated previous years’ loss has been included in the accompanying consolidated
financial statements.
The liquidation process of World Vakıf Off UBB Ltd., an associate of the Parent Bank, has been carried out by NCTR Collecting and Liquidation Office. The
application of the company for cancellation of the liquidation has been rejected and the decision of liquidation has been agreed. Thus, the company’s
name has been changed as “World Vakıf UBB Ltd. in Liquidation”.
As per the resolution of the Board of Directors of the Parent Bank held on 8 September 2011, it has been decided to merge Vakıf Sistem Pazarlama
Yazılım Servis Güvenlik Temizlik Ticaret ve Sanayi A.Ş. with Vakıf Pazarlama Ticaret A.Ş. with dissolution of Vakıf Sistem Pazarlama Yazılım Servis
Güvenlik Temizlik Ticaret ve Sanayi A.Ş. without liquidation, in accordance with Mülga Law No: 6762, article 451 of Turkish Commercial Code. Since Vakıf
Pazarlama ve Ticaret A.Ş. is not a financial subsidiary anymore, its financial statements have not been consolidated as at 31 December 2015 and 31
December 2014, but its equity until the merger date has been included in the accompanying consolidated financial statements.
Investments in associates consolidated per equity method
As at and for the year ended 31 December 2015, the financial statements of Kıbrıs Vakıflar Bankası Ltd and Türkiye Sınai Kalkınma Bankası A.Ş. have
been consolidated per equity method in the consolidated financial statements of the Group.
Kıbrıs Vakıflar Bankası Ltd.
was established in 1982 in Turkish Republic of Northern Cyprus, mainly to encourage the credit cards issued by the Bank, and
increase foreign exchange inflow, and carry on retail and commercial banking operations. Its head office is in Lefkosa.
Türkiye Sınai Kalkınma Bankası A.Ş.
was established in 1950 to support investments in all economic sectors. Its head office is in Istanbul.
In cases where the accounting policies for the preparation of the financial statements of Financial Subsidiaries are different than those of the Parent
Bank, the differences have been adjusted to the accounting policies of the Parent Bank, taking the materiality principle into account. The financial
statements of local Financial Subsidiaries, and foreign Financial Subsidiaries preparing their financial statements according to the principles of the
countries which they are located in, have been adjusted in accordance with Reporting Standards as at the related reporting dates. Inter-company
balances and transactions, and any unrealized gains and losses arising from inter-company transactions, are eliminated in preparing these consolidated
financial statements.
IV. INFORMATION ON FORWARDS, OPTIONS AND OTHER DERIVATIVE TRANSACTIONS
The derivative transactions of the Group mainly consist of currency and interest rate swaps, precious metal swaps, foreign currency forward contracts
and currency options. The Group has classified its derivative transactions as “trading purpose derivatives” in accordance with the TAS 39 – Financial
Instruments: Recognition and Measurement.
Derivatives are initially recorded at their purchase costs. The notional amounts of derivative transactions are recorded in off-balance sheet accounts
based on their contractual amounts.
Subsequently, the derivative transactions are measured at their fair values and the changes in fair values are recorded in the balance sheet under
“Derivative financial assets held for trading purpose” or “Derivative financial liabilities held for trading purpose”. The subsequent fair value changes of
derivative transactions is recorded in the consolidated statement of income.
V. INFORMATION ON INTEREST INCOME AND EXPENSES
Banking activities
Interest income and expense are recognized according to the effective interest method based on accrual basis. According to the TAS 39 - Financial
Instruments: Recognition and Measurement, 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 with
transactions costs and is not modified thereafter.
In accordance with Regulation on Identification of and Provision against Non-Performing Loans and Other Receivables, the accrued interest income on
non-performing loans are reversed and subsequently recognized as interest income only when collected.
