PA - Banco Security

Vida Security maintains current derivative contracts that are accounted for according to Title 7° of Circular Letter No. 1512, were by
these are measured considering the acquisition and the new exchange rates current as of the closing date of the financial statements.
b) Bank Subsidiary
Financial derivative contracts including foreign currency and UF forwards, interest rate futures, currency swaps, interest rate and
currency options, and other financial derivatives are initially recognized in the statement of financial position at their cost (including
transaction costs) and subsequently valued at fair value. The fair value is obtained from market rates, discounted cash flow models
and option valuation models, as appropriate. Derivative contracts are reported as assets when their fair value is positive and as
liability when this is negative.
Certain derivatives embedded in other financial instruments are treated as separate derivatives when their risk and characteristics are
not clearly related to the host contract and such host contract is not recorded at fair value through profit or loss.
On the inception of derivatives contract, these should be designated by the Bank as trading derivatives as hedging instruments.
Any changes in the fair value of financial derivative contracts held for tranding are included in the Consolidated Statement of Income
under the category of “Trading derivatives” of the “Financial Income” item.
If the derivative is designated as a hedging instrument in a hedge relationship, this may be: (1) a fair value hedge of assets or liabilities
or firm commitments, or (2) a hedge of cash flows related to recognized assets or liabilities or forecasted transactions. A hedging
relationship qualifies for hedge accounting if, and only if, all of the following conditions are met: (a) at the inception of the hedge
there is a formal designation and documentation of the hedging relationship; (b) the hedge is expected to be highly effective; (c) the
effectiveness of the hedge can be reliably measured and; (d) the hedge is assessed on an ongoing basis and determined actually to
have been highly effective throughout the financial reporting periods for which the hedge was designated.
Certain derivative transactions that do not quality as hedges are treated and recorded as trading derivatives, even though they are
effective hedges for managing positions of risk.
When a derivative is designated as a hedging instrument to hedge the exposure to changes in the fair value of a recognized asset or
liability, such asset or liability is recorded at its fair value with respect to the specific risk hedged. Gains or losses from remeasuring
the hedging instrument at fair value are recognized in profit or loss.
If the item hedged in a fair value hedge is an effective commitment, the changes in the fair value of the commitment in regard to
the risk hedged are recorded as assets or liabilities with charges in profit or loss. Gains or losses on the hedged item attributable to
the hedged risk adjust the carrying amount of the hedged item and are recognized in profit or loss. When a new asset or liability is
acquired as a result of the commitment, the initial recognition of the acquired asset or liability is adjusted to incorporate the mark
to market adjustment of the firm commitment recorded in the statement of financial position.
When a derivative hedges the exposure to changes in cash flows of existing assets or liabilities, or expected transactions, the effective
portion of changes in the fair value in regard to the risk hedged is recorded in other comprehensive income within equity.
Any ineffective portion of the gain or loss on the hedging instrument is recognized in profit or loss. The amounts recorded directly in
shareholders’ equity are recorded in income in the same periods in which the assets or liabilities hedged affect income.
When the Group enters into a fair value interest rate hedge, and the hedged item is an amount of currency instead of separate assets
or liabilities, gains or loss from fair value measurements, both of the hedged item and the hedging derivative, are recognized in profit
or loss for the year. The measurement at fair value of the hedged portfolio is presented in the consolidated statement of financial