119 / 324
119
VAKIFBANK
2014 ANNUAL REPORT
CONVENIENCE TRANSLATION OF PUBLICLY ANNOUNCED UNCONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH, SEE NOTE I. OF SECTION THREE
TÜRKİYE VAKIFLAR BANKASI TÜRK ANONİM ORTAKLIĞI
UNCONSOLIDATED FINANCIAL REPORT FOR THE
YEAR ENDED AT 31 DECEMBER 2014
(Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)
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
Foreign currency 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.
If the net investments in associates and subsidiaries operating in foreign countries are measured at cost, they are reported as translated into TL by using
the foreign exchange rate at the date of transaction. If related associates and subsidiaries are measured at fair value, net foreign operations are reported as
translated into TL by the rates prevailing at the date of the determination of the fair value.
III. INFORMATION ON FORWARDS, OPTIONS AND OTHER DERIVATIVE TRANSACTIONS
The derivative transactions mainly consist of currency and interest rate swaps, precious metals swaps, foreign currency forward contracts and currency options.
The Bank has classified its derivative transactions, mentioned above, as “trading purpose” 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 are recognized in the statement of income.
IV. INFORMATION ON INTEREST INCOME AND EXPENSES
Interest income and expense are recognized according to the effective interest method based on accrual basis. 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 and is not modified thereafter.
The computation of effective interest rate comprises discounts and premiums, fees and commissions paid or received and transaction costs. Transaction costs
are additional costs that are directly related to the acquisition, issuance or disposal of financial assets or liabilities.
In accordance with the related regulation, the accrued interest income on non-performing loans are reversed and subsequently recognized as interest income
only when collected.