Financial Statements - United Bank Limited

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NOTES TO AND FORMING PART OF THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2012 1. STATUS AND NATURE OF BUSINESS United Bank Limited (the Bank) is a banking company incorporated in Pakistan and is engaged in commercial banking and related services. The Bank's registered office and principal office are situated at UBL Building, Jinnah Avenue, Blue Area, Islamabad and at State Life Building No. 1, I. I. Chundrigar Road, Karachi respectively. The Bank operates 1,278 (2011: 1,218) branches inside Pakistan including 19 (2011: 14) Islamic Banking branches and 1 (2011: 1) branch in Karachi Export Processing Zone. The Bank also operates 18 (2011: 17) branches outside Pakistan as at December 31, 2012. The Bank's Ordinary shares are listed on all three stock exchanges in Pakistan. Its Global Depository Receipts (GDRs) are on the list of the UK Listing Authority and the London Stock Exchange Professional Securities Market. These GDRs are also eligible for trading on the International Order Book System of the London Stock Exchange. Further, the GDRs constitute an offering in the United States only to qualified institutional buyers in reliance on Rule 144A under the US Securities Act of 1933 and an offering outside the United States in reliance on Regulation S. 2. BASIS OF PRESENTATION 2.1 2.2 In accordance with the directives of the Federal Government regarding the shifting of the banking system to Islamic modes, the State Bank of Pakistan (SBP) has issued various circulars from time to time. Permissible forms of traderelated modes of financing include purchase of goods by banks from their customers and immediate resale to them at appropriate mark-up in price on deferred payment basis. The purchases and sales arising under these arrangements are not reflected in these unconsolidated financial statements as such, but are restricted to the amount of facility actually utilized and the appropriate portion of mark-up thereon. The Islamic Banking branches of the Bank have complied with the requirements set out under the Islamic Financial Accounting Standards issued by the Institute of Chartered Accountants of Pakistan and notified under the provisions of the Companies Ordinance, 1984. The financial results of the Islamic Banking branches of the Bank have been included in these unconsolidated financial statements for reporting purposes, after eliminating material inter-branch transactions / balances. Key financial figures of the Islamic Banking branches are disclosed in note 45 to these unconsolidated financial statements. 3. STATEMENT OF COMPLIANCE 3.1 3.2 3.3 These unconsolidated financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan, the requirements of the Companies Ordinance, 1984, the Banking Companies Ordinance, 1962 and the directives issued by the Securities and Exchange Commission of Pakistan (SECP) and the SBP. Approved accounting standards comprise of International Financial Reporting Standards (IFRS) and interpretations issued by the International Accounting Standards Board and Islamic Financial Accounting Standards (IFAS) issued by the Institute of Chartered Accountants of Pakistan. Wherever the requirements of the Companies Ordinance, 1984, the Banking Companies Ordinance, 1962 or the directives issued by the SECP and the SBP differ with the requirements of IFRS or IFAS, the requirements of the Companies Ordinance, 1984, the Banking Companies Ordinance, 1962 or the said directives prevail. The SBP, vide BSD Circular letter No. 10, dated August 26, 2002 has deferred the applicability of International Accounting Standard 39, Financial Instruments: Recognition and Measurement and International Accounting Standard 40, Investment Property for banking companies till further instructions. Further, according to the notification of the SECP issued vide SRO 411(I)/2008 dated April 28, 2008, IFRS 7, Financial Instruments: Disclosures has not been made applicable for banks. Accordingly, the requirements of these standards have not been considered in the preparation of these unconsolidated financial statements. However, investments have been classified and valued in accordance with the requirements of various circulars issued by the SBP. These unconsolidated financial statements represent the separate financial statements of the Bank. The consolidated financial statements of the Bank and its subsidiary companies are presented separately. 3.4 Standards, interpretations and amendments to approved accounting standards that are not yet effective The following revised standards, amendments and interpretations with respect to the approved accounting standards as applicable in Pakistan would be effective from the dates mentioned below against the respective standard or interpretation: 1
NOTES TO AND FORMING PART OF THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2012 Standard or Interpretation IAS 1 - Presentation of Financial Statements - Presentation of Items of Other Comprehensive Income Effective date (annual periods beginning on or after) July 01, 2012 IAS 19 - Employee Benefits (Revised) January 01, 2013 IAS 32 - Offsetting Financial Assets and Financial Liabilities - (Amendment) January 01, 2014 The Bank expects that the adoption of the above revisions, amendments and interpretations of the standards will not affect the Bank's financial statements in the period of initial application other than the revision to IAS 19 ‘Employee Benefits’ as described below: The significant changes to IAS 19 are as follows: - - - For defined benefit plans, the option to defer recognition of actuarial gains and losses (i.e., the corridor approach) has been removed. As revised, actuarial gains and losses are recognized in other comprehensive income when they occur. Amounts recorded in the profit and loss account are limited to current and past service costs, gains or losses on settlements, and net interest income (expense). All other changes in the net defined benefit obligation are recognized directly in other comprehensive income with no subsequent recycling through the profit and loss account. The distinction between short-term and long-term employee benefits will be based on the expected timing of settlement rather than the employee’s entitlement to the benefits. The revised standard has new or revised disclosure requirements. The disclosures now include quantitative information regarding the sensitivity of the defined benefit obligation to a reasonably possible change in each significant actuarial assumption. The Bank is currently assessing the full impact of the above amendments to IAS 19 on its unconsolidated financial statements. It is expected that the adoption of the said amendments, which are effective only from January 1, 2013, will result in a change in the Bank's accounting policy related to recognition of actuarial gains and losses (note 5.10.3) and in the recognition of cumulative unrecognized actuarial gain amounting to Rs.1,500.005 million in other comprehensive income in the period of initial application. In addition to the above amendments, improvements to various accounting standards have also been issued by the IASB. Such improvements are generally effective for accounting periods beginning on or after January 01, 2013. The Bank expects that such improvements to the standards will not have any material impact on the Company's financial statements in the period of initial application. The following new standards have been issued by the IASB, but have not yet been notified by the SECP for application in Pakistan. Standard or Interpretation IFRS 9 – Financial Instruments: Classification and Measurement IASB Effective date (annual periods beginning on or after) January 01, 2015 IFRS 10 – Consolidated Financial Statements January 01, 2013 IFRS 11 – Joint Arrangements IFRS 12 – Disclosure of Interests in Other Entities IFRS 13 – Fair Value Measurement January 01, 2013 January 01, 2013 January 01, 2013 2
Page 1 and 2: United Bank Limited UNCONSOLIDATED
Page 3 and 4: U N I T E D B A N K L I M I T E D i
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NOTES TO AND FORMING PART OF THE UN
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Annexure 'A' as referred to in note
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Sr. No. 1 Commercial Reprsentation
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Sr. No. Annexure 'B' as referred to
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Disposals of operating fixed assets
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Disposals of operating fixed assets
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Financial Statements - United Bank Limited

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