VKF_FRAE_2018_uyg11

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 FOR THE YEAR ENDED DECEMBER 31, 2018 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.) 362 Part III: Financial Highlights and Assessment of Risk Management 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 Parent 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 Parent 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 Group 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 Parent 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) 129,972 - - - Classified to marketable securities - 43,370 - - Book value after classification - - - 173,342 Fair value through other comprehensive income Book value before classification (available for sale) 14,570,384 - - - Financial assets at fair value through profit or loss - (43,370) - - Financial assets measured at amortized cost - (7,454,527) - - Book value after classification - - - 7,072,487 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