Page 67 - BKT Annual Report 2024 EN

Notes to the Consolidated Financial Statements for the year ended 31 December 2024 Notes to the Consolidated Financial Statements for the year ended 31 December 2024
(amounts in USD, unless otherwise stated) (amounts in USD, unless otherwise stated)

obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognised Treasury
and the consideration paid and payable is recognised in profit or loss. Treasury assets consist of cash or equivalents, Government Bonds, Investment securities such as Eurobonds, Bonds and Certificates.
The Bank also considers Loans to banks such as Syndicated Loans, Bilateral Loans and Murabaha as treasury products.
The Bank enters into transactions whereby it transfers assets recognised on its statement of financial position, but retains either all or Investment securities are accounted for depending on their classification as either Held-to-Maturity (“HTM”), or Available-for-Sale (“AFS”)
substantially all of the risks and rewards of the transferred assets or a portion of them. If all or substantially all risks and rewards are and in some cases as Held-for-Trading (“TRD”).
retained, then the transferred assets are not derecognised from the statement of financial position. Transfers of assets with retention The business model of the Bank under IFRS 9 is:
of all or substantially all risks and rewards include, for example, securities lending and repurchase transactions. - “HTC” for HTM products. Such products shall be measured at amortised cost;
When assets are sold to a third party with a concurrent total rate of return swap on the transferred assets, the transaction is accounted - “HTCS” for AFS products. Such products shall be measured at FVOCI; and
for as a secured financing transaction similar to repurchase transactions. - “Other BM” for TRD products and shall be measured at FVTPL.
In transactions in which the Bank neither retains nor transfers substantially all the risks and rewards of ownership of a financial asset,
Retail
it derecognises the asset if it does not retain control over the asset. The rights and obligations retained in the transfer are recognised
The Retail assets consist of various financing facilities to individuals (e.g. Mortgage loans, Consumer loans, Home improvement loans,
separately as assets and liabilities as appropriate. In transfers in which control over the asset is retained, the Bank continues to recognise
Car loans, Credit cards). These products are non-derivative financial assets with fixed or determinable payments that are not quoted
the asset to the extent of its continuing involvement, determined by the extent to which it is exposed to changes in the value of the
in an active market and which are held for collection of contractual cash flows of principal and interest.
transferred asset.
The fair value of the Retail assets is not a critical aspect in the Bank’s management of the portfolio.
The business model of the Banks under IFRS 9 is “HTC” and the Retail loans shall be measured at amortised cost.
In certain transactions the Bank retains the obligation to service the transferred financial asset for a fee. The transferred asset is
derecognised in its entirety if it meets the derecognition criteria. An asset or liability is recognised for the servicing contract, depending Corporate
on whether the servicing fee is more than adequate (asset) or is less than adequate (liability) for performing the servicing. The Corporate assets consist of various financing facilities to corporates (e.g. Cash loans, Non-cash loans, Agro loans, Project &
The Bank writes off certain loans and investment securities when they are determined to be uncollectible. structured finance, Business credit cards). These products are non-derivative financial assets with fixed or determinable payments that
are not quoted in an active market and which are held for collection of contractual cash flows of principal and interest.
(iii) Classification and initial measurement of financial assets The fair value of the Corporate assets is not a critical aspect in the Bank’s management of the portfolio.
All financial assets are initially measured at fair value adjusted for transaction costs (where applicable). The business model of the Banks under IFRS 9 is “HTC” and the corporate loans shall be measured at amortised cost.
Financial assets, other than those designated and effective as hedging instruments, are classified into the following categories:
(iv) Subsequent measurement of financial assets
• amortised cost
• fair value through profit or loss (FVTPL) Financial assets at amortised cost
• fair value through other comprehensive income (FVOCI). Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as FVTPL):
• they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows
The classification is determined by both: • the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal
• the entity’s business model for managing the financial asset amount outstanding
• the contractual cash flow characteristics of the financial asset. After initial recognition, these are measured at amortised cost using the effective interest method.
Discounting is omitted where the effect of discounting is immaterial. The Group’s cash and cash equivalents, loans and most of other
All income and expenses relating to financial assets are recognised in profit or loss. receivables fall into this category of financial instruments as well as government bonds and forfeiting instruments that were previously
classified as held-to-maturity under IAS 39.
– Assessment of whether contractual cash flows are solely payments of principal and interest (SPPI)
As per the new standard, one of the conditions for financial assets to be classified either under ‘amortised cost’ or ‘Fair Value Through
Financial assets at fair value through profit or loss (FVTPL)
Profit or Loss (“FVTPL”) category is that the contractual terms of the financial asset should give rise on specified dates to cash flows
Financial assets that are held within a different business model other than ‘hold to collect’ or ‘hold to collect and sell’ are categorised
that are solely payments of principal and interest on the principal amount outstanding. The Bank has performed the SPPI test and has
at fair value through profit and loss. Further, irrespective of business model financial assets whose contractual cash flows are not solely
determined the business models for its financial assets.
payments of principal and interest are accounted for at FVTPL. All derivative financial instruments fall into this category, except for
those designated and effective as hedging instruments, for which the hedge accounting requirements apply (see below). The category
– Business model assessment
There are three business models under IFRS 9 – ‘Held to Collect (“HTC”)’, ‘Held to Collect and Sell (“HTCS”)’ and ‘Other (“Other BM”)’. also contains an equity investment. The Group accounts for the investment at FVTPL and did not make the irrevocable election to
1. Under the HTC model, cash flows result from collecting contractual payments. If an SPPI product is HTC, it is measured at amortised account for the investment in Albania Leasing Sh.a and equity securities at fair value through other comprehensive income (FVOCI).
cost. The equity investment in Albania Leasing Sh.a. and certain equity securities were measured at cost less any impairment charges in
2. Under HTCS, cash flows result from contractual payments, as well as from selling the financial assets. If an SPPI product is HTCS, the comparative period under IAS 39, as it was determined that their fair value could not be estimated reliably. In the current financial
it is measured at fair value through other comprehensive income (“FVOCI”). year, the fair value was determined in line with the requirements of IFRS 9, which does not allow for measurement at cost. Assets
3. Other BM are those that are neither HTC, nor HTCS. One example could be a model under which trading is the primary purpose in this category are measured at fair value with gains or losses recognised in profit or loss. The fair values of financial assets in this
with contractual payment collection not constituting an integral part of the model. If a product (SPPI or not) is held under Other BM, category are determined by reference to active market transactions or using a valuation technique where no active market exists. The
it is measured at fair value though profit or loss (“FVTPL”). Bank determined that in the current period the Fair Value of these investments approximates to their carrying amount. The Group’s
government bonds that were previously classified as held-for-trading under IAS 39 fall into this category.
The Bank has assessed the business model for its financial assets as follows;

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