Basic HTML Version
Türkiye Vakıflar Bankası Türk Anonim Ortaklığı
Unconsolidated Financial Report as at and
For the Year Ended 31 December 2013
(Currency: Thousands of TurkIsh Lıra (“TL”))
(Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Section 3 Note I)
SECTION THREE
Accounting Policies
I. Basis of presentation
As per the Article 37 of “Accounting and Recording Rules” of the Turkish Banking Law no. 5411 published on the Official Gazette no. 25983 dated 1
November 2005 and became effective, the Bank keeps its accounting records and prepares its unconsolidated financial statements and the related
footnotes in accordance with accounting and valuation standards described in “Regulation on Accounting Applications for Banks and Safeguarding of
Documents” published by the Banking Regulation and Supervision Agency (“BRSA”) and effective since 1 November 2006, Turkish Accounting Standards
(“TAS”), Turkish Financial Reporting Standards (“TFRS”) and the related statements and guidance. (collectively “Reporting Standards”)
The accompanying consolidated financial statements are prepared in accordance with the historical cost basis except for the financial assets at fair
value through profit or loss, derivative financial assets and liabilities held for trading purpose, available-for-sale financial assets and unconsolidated
investments in associates and subsidiaries whose fair value can be reliably measured and assets available for sale, which are presented on a fair value
basis.
Additional paragraph for convenience translation to English
The differences between accounting principles, as described in the preceding paragraphs, and the accounting principles generally accepted in countries,
in which the accompanying unconsolidated financial statements are to be distributed, and International Financial Reporting Standards (“IFRS”), may have
significant influence on the accompanying unconsolidated financial statements. Accordingly, the accompanying unconsolidated financial statements are
not intended to present the financial position and results of operations in accordance with the accounting principles generally accepted in such countries
and IFRS.
II. Strategy for the use of financial instruments and foreign currency transactions
Strategy for the use of financial instruments
The Bank’s core operations are based on retail banking, corporate banking, private banking, foreign exchange operations, money market operations,
investment security transactions, and international banking. As a result of the nature of its operations, the Bank intensively utilizes financial instruments.
The Bank funds itself through deposits with different maturities as the main funding resources that are invested in assets earning higher returns.
The most important fund sources of the Bank other than the deposits are its equity and medium and long-term borrowings obtained from foreign
financial institutions. The Bank pursues an effective asset-liability management strategy by securing balance between funding resources and
investments so as to reduce risks and increase returns. Accordingly, the Bank attaches great significance to long-term placements bearing higher
interest rates.
It is essential to consider the maturity structure of assets and liabilities in liquidity management. The essence of asset liability management is the
keep the liquidity risk, interest rate risk, exchange rate risk, and credit risk within reasonable limits; while enhancing profitability and strengthening the
shareholders’ equity.
Investments in marketable securities and lending loans generate higher return than the average rate of return of the Bank’s operating activities on
the basis of maturity structures and market conditions. When bank placements are considered, they have short term maturity in terms of liquidity
management but earn lower return. The Bank takes position against short-term foreign exchange risk, interest rate risk and market risk in money and
capital markets, by considering market conditions, within specified limits set by regulations. The Bank hedges itself and controls its position against the
foreign exchange risk being exposed due to foreign currency available-for-sale investments, investments in other portfolios and other foreign currency
transactions by various derivative transactions and setting the equilibrium between foreign currency denominated assets and liabilities.
Within the legal limitations and the regulations of the bank’s internal control, the foreign currency position is being followed, the foreign currency
position is established according to the basket equilibrium that is determined by taking into account current market conditions.
In order to avoid interest rate risk, assets and liabilities having fixed and floating interest rates are kept in balance, taking the maturity structure into
consideration.
Information on foreign currency transactions
Transactions are recorded in TL, the functional currency of the Bank. Foreign currency transactions are recorded using the foreign exchange rates
effective at the transaction date. Non-monetary foreign currency items which are recorded at fair value are valued at historical foreign exchange rates.
Foreign exchange gain/loss amounts due to conversion of monetary items or collection or payments foreign currency denominated transactions are
recognized in income statement.
Foreign exchange differences resulting from amortized costs of foreign currency denominated available-for-sale financial assets are recognized in
the statement of income whilst foreign exchange differences resulting from unrealized gains and losses are presented in “valuation differences of
marketable securities” under equity.
118