Annual report 2008-OK-B-up.qxp - Canadia Bank Plc.

NOTES TO THE FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.2 New accounting standards and interpretations (continued)
CAS 21 (revised 2008) has no material effect on the Bank's policy. The functional currency of the Bank has
been re-evaluated based on the guidance of the revised standards. The Bank has the same functional
currency as its measurement currency.
(b)Standards and amendments effective in 2008 but not relevant
The following standards and amendments are mandatory for accounting periods beginning on or after 1
January 2008 but are not relevant to the Bank's operations:
CAS 2, Inventories
CAS 11, Construction contracts
CAS 27, Consolidated and separate financial statements
CAS 41, Agriculture
CFRS 4, Insurance
2.3 Foreign currency transactions
(i) Functional and presentation currency
Items included in the financial statements of the Bank are measured using the currency of the primary economic
environment in which the Bank operates ("the functional currency"). The financial statements are
presented in United States dollars ("US$"), which is the Bank's functional and presentation currency.
(ii) Transactions and balances
Transactions in currencies other than US$ are translated into US$ at the exchange rate prevailing at the
date of transaction. Foreign exchange gains and losses resulting from the settlement of such transactions
and from the translation at the year end exchange rate from monetary assets and liabilities denominated
in currencies other than US$ are recognised in the income statement.
2.4 Cash and cash equivalents
For the purpose of the cash flow statement, cash and cash equivalents comprise balances with less then
three months' maturity from the date of acquisition, including cash on hand, non-restricted balance with
the Central Bank, and balances with other banks.
2.5 Loans and advances to customers
All loans and advances to customers are stated in the balance sheet as the amount of principal, less any
amounts written off and the provision for loan losses. Short term loans are those with a repayment date
within one year of the date the loan was advanced. Long term loans are those with a final repayment date
of more than one year of the date the loan was advanced.
Loans are written off when there is no realistic prospect of recovery. Recoveries of loans and advances previously
written off or provided for decrease the amount of the provision for losses on loans and advances
in the income statement.
2.6 Provision for loan losses
The Bank follows the mandatory credit classification and provisioning as required by Prakas B7-02-145
dated 7 June 2002 issued by the Central Bank. The Prakas requires commercial banks to classify their loan
portfolio into four classes and the mandatory level of specific provisioning is provided, depending on the
classification concerned and regardless of the assets (except cash) pledged as collateral as follows:
Annual Report 2008 33