VKF_FRAE_2017

333 VakıfBank Annual Report 2017 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 EXPLANATIONS AND NOTES RELATED TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.) VIII. FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES Carrying Value Fair Value Current Period Prior Period Current Period Prior Period Financial Assets: Receivables from Interbank Money Markets 1,659,062 5,232 1,659,062 5,232 Banks 13,323,799 5,275,489 13,323,799 5,275,489 Available-for-Sale Financial Assets 14,570,384 18,619,080 14,570,384 18,619,080 Held-to-Maturity Investments 16,766,071 8,180,535 16,466,094 7,992,774 Loans 186,548,784 149,575,269 188,124,330 149,812,100 Financial Leasing Receivables 1,880,200 1,546,409 1,880,200 1,546,409 Factoring Receivables 2,192,302 1,390,714 2,192,302 1,390,714 Financial Liabilities: Bank Deposits 9,779,391 5,075,901 9,779,391 5,139,171 Other Deposits 148,208,475 121,183,408 148,014,699 121,240,772 Funds Borrowed 31,387,788 26,299,430 31,362,999 27,221,894 Securities Issued 19,870,759 14,682,824 19,672,545 14,898,154 Subordinated Loans 5,917,137 5,014,700 5,837,524 4,694,264 Miscellaneous Payables 7,333,030 5,543,555 7,333,030 5,543,555 Fair values of available-for-sale financial assets and held-to-maturity investments are derived from market prices or in case of absence of such prices they are derived from prices of other marketable securities, whose interest rate, maturity date and other conditions are similar to securities held. Fair value of loans are calculated by discounting future cash flows with the use of current market interest rates. Fair value of funds borrowed with fixed interest rate are calculated by discounting cash flows with current market interest rates. Fair value of funds borrowed with floating interest rate is calculated according to repricing period by discounting cash flows with current market rates. Fair value of other assets and liabilities is calculated by adding accumulated acquisition costs and the sum of the interest accrual. Classification of fair value measurement TFRS 7 - Financial Instruments requires the classification of fair value measurements into a fair value hierarchy by reference to the observability and significance of the inputs used in measuring fair value of financial instruments measured at fair value to be disclosed. This classification basically relies on whether the relevant inputs are observable or not. Observable inputs refer to the use of market data obtained from independent sources, whereas unobservable inputs refer to the use of predictions and assumptions about the market made by the Company. This distinction brings about a fair value measurement classification generally as follows: Level 1: Fair value measurements using quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2: Fair value measurements using inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices); Level 3: Fair value measurements using inputs for the assets or liability that are not based on observable market data (unobservable inputs). Classification requires using observable market data if possible.