VKF_FRAE_2018_uyg11

VakıfBank Annual Report 2018 165 CONVENIENCE TRANSLATION OF PUBLICLY ANNOUNCED UNCONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH, SEE NOTE I. OF SECTION THREE TÜRKİYE VAKIFLAR BANKASI TÜRK ANONİM ORTAKLIĞI AND ITS FINANCIAL SUBSIDIARIES NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED DECEMBER 31, 2018 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.) Assessment whether contractual cash flows are solely payments of principal and interest: For the purposes of this assessment, “Principal” is defined as the fair value of the financial asset on initial recognition. “Interest” is defined as consideration for the time value of money, for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin. In assessing whether the contractual cash flows are solely payments of principal and interest, the Bank will consider the contractual terms of the instrument. This will include assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making the assessment, the Bank consider: - Contingent events that would change the amount and timing of cash flows; - Leverage features; - Prepayment and extension terms; - Terms that limit the Bank’s claim to cash flows from specified assets - e.g. non-recourse asset arrangements; and - Features that modify consideration for the time value of money - e.g. periodic reset of interest rates. The Bank fulfills the on-balance sheet classification and measurement criteria by applying the procedures described above for all financial assets. Upon initial recognition each financial asset will be classified as either fair value through profit or loss (“FVTPL”), amortized cost or fair value through other comprehensive income (“FVTOCI”). As the requirements under TFRS 9 are different than the assessments under the existing TAS 39 rules, the classification and measurement of financial liabilities remain largely unchanged under TAS 39. Explanations of the effect from Bank’s application of TFRS 9 can be found below: As of January 1, 2018, the Bank does not have any financial assets that exceed the contractual cash flows test, including interest payments on principal and principal balance. Reconciliation of statement of financial position balances in transition to TFRS 9 Financial Assets Before TFRS 9 Book Value December 31, 2017 Reclassifications Remeasurements TFRS 9 Book Value January 1, 2018 Fair value through P/L Balance before classification (trading financial assets) 263 - - - Classified to available for sales - 43,370 - - Book value after classification - - - 43,633 Fair value through other comprehensive income Book value before classification (available for sale) 13,549,714 - - - Financial assets at fair value through profit or loss - (43,370) - - Financial assets classified as measured at amortized cost - (7,454,527) - - Book value after classification - - - 6,051,817 Measured at amortized cost financial assets Balance before classification (held-to-maturity investments) 16,766,071 - - - Classified from available for sale financial assets - 7,454,527 202,045 - Book value after classification - - - 24,422,643