Annual Report 2010 - ProCredit Bank

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Annual Report 2010
carrying amount that would have been determined, net of depreciation
or amortisation, if no impairment loss had been recognised.
m) Deposits and subordinated liabilities
Deposits and subordinated liabilities are the Bank’s sources of
debt funding. The Bank classifies capital instruments as financial
liabilities or equity instruments in accordance with the substance
of the contractual terms of the instrument.
Deposits and subordinated liabilities are initially measured at fair
value plus transaction costs, and subsequently measured at their
amortised cost using the effective interest method.
n) Provisions
A provision is recognised if, as a result of a past event, the Bank
has a present legal or constructive obligation that can be estimated
reliably, and it is probable that an outflow of economic benefits will
be required to settle the obligation. Provisions are determined by
discounting the expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money and,
where appropriate, the risks specific to the liability.
o) Financial guarantees
Financial guarantees are contracts that require the Bank to make
specified payments to reimburse the holder for a loss it incurs because
a specified debtor fails to make payment when due in accordance
with the terms of a debt instrument.
Financial guarantee liabilities are initially recognised at their fair
value, and the initial fair value is amortised over the life of the financial
guarantee. The guarantee liability is subsequently carried at the
higher of this amortised amount and the present value of any expected
payment (when a payment under the guarantee has become
probable). Financial guarantees are included within other liabilities.
The Bank has no financial guarantees as at 31 December 2010.
p) Employee benefits
iv. Short-term benefits
Short-term employee benefit obligations are measured on an
undiscounted basis and are expensed as the related service is
provided.
Short-term employee benefits include wages, salaries, bonuses
and social security contributions. Short-term employee benefits
are recognised as expense when services are rendered. A provision
is recognised for the amount expected to be paid under short-term
cash bonus or profit-sharing plans if the Bank has a present legal or
constructive obligation to pay this amount as a result of past service
provided by the employee and the obligation can be estimated
reliably.
v. Defined contribution plans
Obligations for contributions to defined contribution pension plans
are recognised as an expense in profit or loss when they are due.
The Bank, in the normal course of business makes payments to the
Romanian State funds on behalf of its Romanian employees for pension,
health care and unemployment benefit.
All employees of the Bank are members and are also legally obliged
to make defined contributions (included in the social security contributions)
to the Romanian State pension plan (a State defined
contribution plan). All relevant contributions to the Romanian State
pension plan are recognised as an expense in the income state-
ment as incurred. The Bank does not have any further obligations.
The Bank does not operate any independent pension scheme and,
consequently, has no obligation in respect of pensions.
vi. Defined benefit plans
The Bank does not operate any defined benefit plan, thus has no
obligation related to contributions to any such plan.
i. Other long-term employee benefits
The Bank’s net obligation in respect of long-term employee benefits
other than pension plans is the amount of future benefit that
employees have earned in return for their service in the current and
prior periods. The Bank has no contractual obligation to pay any
long-term benefit calculated taking into account the past service.
ii. Termination benefits
The Bank is not committed, without realistic possibility of withdrawal,
to any formal detailed plan to terminate employment before
the normal retirement date.
q) Standards and interpretations not yet adopted
A number of standards, amendments to standards and interpretations
are not yet effective for the year ended 31 December 2010,
and have not been applied in preparing these consolidated financial
statements. None of these will have an impact on the financial
statements of the Bank, with the exception of:
• IFRS 9, “Financial Instruments” (effective for annual periods
beginning on or after 1 January 2013, early adoption is permitted)
is not yet effective for the year ended 31 December
2010, and has not been applied in preparing these financial
statements. This Standard replaces the guidance in IAS 39,
Financial Instruments: Recognition and Measurement, about
classification and measurement of financial assets and liabilities,
and derecognition of financial assets and liabilities. The
Standard eliminates the existing IAS 39 categories of held to
maturity, available for sale and loans and receivable. Financial
assets will be classified into one of two categories on initial
recognition: financial assets measured at amortised cost; or
financial assets measured at fair value. A financial asset is
measured at amortised cost if the following two conditions are
met: the assets are held within a business model whose objective
is to hold assets in order to collect contractual cash flows;
and, its contractual terms give rise on specified dates to cash
flows that are solely payments of principal and interest on the
principal outstanding. Gains and losses on re-measurement of
financial assets measured at fair value are recognised in profit
or loss, except that for an investment in an equity instrument
which is not held for trading, IFRS 9 provides, on initial recognition,
an irrevocable election to present all fair value changes
from the investment in other comprehensive income (OCI). The
election is available on an individual share-by-share basis. No
amount recognised in OCI is ever reclassified to profit or loss at
a later date. It also includes those paragraphs of IAS 39 dealing
with how to measure fair value and accounting for derivatives
embedded in a contract that contains a host that is not a financial
asset, as well as the requirements of IFRIC 9, “Reassessment
of Embedded Derivatives”. It is expected that the new
Standard, when initially applied, will have a significant impact
on the financial statements, since it will be required to be retrospectively
applied. However, the Bank is not able to prepare
an analysis of the impact this will have on the financial statements
until the date of initial application. The Bank has not yet
decided on the date that it will initially apply the new Standard.
This standard has not been endorsed by the European Union.