Annual Report 2012 - Raiffeisen Bank Kosovo JSC

characteristics (i.e., on the basis of the Bank’s grading process that considers asset type, industry, geographical location,
collateral type, past-due status and other relevant factors). Those characteristics are relevant to the estimation of future
cash flows for groups of such assets by being indicative of the debtors’ ability to pay all amounts due according to the
contractual terms of the assets being evaluated.
Future cash flows in a group of financial assets that are collectively evaluated for impairment are estimated on the
basis of the contractual cash flows of the assets in the Bank and historical loss experience for assets with credit risk
characteristics similar to those in the Bank. Historical loss experience is adjusted on the basis of current observable data
to reflect the effects of current conditions that did not affect the period on which the historical loss experience is based
and to remove the effects of conditions in the historical period that do not currently exist.
Estimates of changes in future cash flows for groups of assets reflect and directionally consistent with changes in related
observable data from period to period (for example, changes in unemployment rates, property prices, payment status,
or other factors indicative of changes in the probability of losses in the Bank and their magnitude). The methodology and
assumptions used for estimating future cash flows are reviewed regularly by the Bank to reduce any differences between
loss estimates and actual loss experience.
When a loan is uncollectible, it is written off against the related provision for loan impairment. Such loans are written off
after all the necessary procedures have been completed and the amount of the loss has been determined.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively
to an event occurring after the impairment was recognized (such as an improvement in the debtor’s credit rating), the
previously recognized impairment loss is reversed by adjusting the allowance account. The amount of the reversal is
recognized in the profit and loss in impairment charge for credit losses.
(b) Impairment of available-for-sale financial assets
The Bank assesses at each reporting date whether there is objective evidence that a financial asset or a group of
financial assets is impaired. In the case of debt investments classified as available for sale, a significant or prolonged
decline in the fair value of the security below its cost is considered in determining whether the assets are impaired. If any
such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the
acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit
or loss – is removed from other comprehensive income and recognised in the profit or loss. If, in a subsequent period,
the fair value of a debt instrument classified as available for sale increases and the increase can be objectively related
to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed through
the profit and loss.
3.8. Cash and cash equivalents
Cash and cash equivalents are items which can be converted into cash at short notice (less than three months maturity)
and which are subject to an insignificant risk of changes in value. Amounts which relate to funds that are of a restricted
nature are excluded from cash and cash equivalents.
3.9. Mandatory liquidity reserves
In accordance with the CBK rules, the Bank should meet the minimum average liquidity requirement. The liquidity
requirement is calculated on a weekly basis as 10 per cent of the deposit base, defined as the average total deposit
liabilities to the non-banking public in euro and other currencies, over the business days of the maintenance period. The
assets with which the Bank may satisfy its liquidity requirement are the euro deposits with the CBK and 50 per cent of the
euro equivalent of cash denominated in readily convertible currencies. Deposits with the CBK must not be less than 5 per
cent of the applicable deposit base. As the respective liquid assets are not available to finance the Bank’s day to day
operations, they have been excluded from cash and cash equivalents for the purposes of the cash flow statement.
3.10. Derivatives held for risk management purposes
Derivatives held for risk management purposes include all derivative assets and liabilities that are not classified as
trading assets or liabilities. Derivatives held for risk management purposes are measured at fair value in the reporting
date.
3.11. Leasehold improvements and equipment
Leasehold improvements and equipment are stated at historical cost less accumulated depreciation and accumulated
impairment, if any. Historical cost includes expenditure that is directly attributable to the acquisition of the items of
leasehold improvements and equipment.
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Addresses Glossary Financial Statements Segment Reports Overview Macroeconomic Environment RBI Vision and Mission Management Board Introduction