Annual Report - VÚB banka

2. Summary of significant accounting policies (continued)
2.21 Legal reserve fund
In accordance with the law and statutes of the Bank,
the Bank is obliged to contribute at least 10% of
its annual net profi t to the ‘Legal reserve fund’ until
it reaches 20% of the share capital. Usage of the
‘Legal reserve fund’ is restricted by the law and the
fund can be used for coverage of the losses of the
Bank.
2.22 Interest income
Interest income and expense is recognized in the
income statement on an accrual basis by using of
effective interest rate method. Interest income and
expense includes the amortization of any discount
or premium on fi nancial instruments. Interest income
also includes up-front and commitment fees,
which are subject to the effective interest rate calculation
and are amortized over the life of the loan.
2.23 Fee and commission income
Fee and commission income arises on fi nancial
services provided by the Bank including account
maintenance, cash management services, brokerage
services, investment advice and fi nancial planning,
investment banking services, project fi nance
transactions and asset management services. Fee
and commission income is recognized when the
corresponding service is provided.
80
2.24 Net trading income
Net trading income includes gains and losses arising
from purchases, disposals and changes in the
fair value of fi nancial assets and liabilities including
2.25 Dividend income
Dividend income is recognized in the income statement
on the date that the dividend is declared.
securities and derivative instruments. It also includes
the result of all foreign currency transactions.
2.26 Income tax
Income tax is calculated in accordance with the regulations
of the Slovak Republic and other jurisdictions,
in which the Bank operates.
Deferred tax assets and liabilities are provided,
using the balance sheet method, for all temporary
differences arising between tax bases of assets
or liabilities and their carrying values for fi nancial
reporting purposes. Expected tax rates, applicable
for the periods when assets and liabilities are realized,
are used to determine deferred tax.
The Bank is also subject to various indirect operating
taxes, which are included in ‘Other operating
expenses’.
2.27 Fiduciary assets
Assets held in a fi duciary capacity are not reported
in the fi nancial statements, as they are not the assets
of the Bank.
Annual Report 2007