Contents - Equity Bank Group

Notes to the Financial StatementsFor the year ended 31st December 2007(b) Foreign currency transactionsTransactions in foreign currencies are translated to the functional currency of the Bank at exchange rates ruling on the transaction dates.Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at themean exchange rate as at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in thefunctional currency at the beginning of the year, adjusted for effective interest and payments during the year, and the amortised costin foreign currency translated at the exchange rate at the end of the year. Non-monetary assets and liabilities denominated in foreigncurrencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair valuewas determined.(c) Interest income and interest expenseInterest income and expense are recognised in the income statement on accrual basis.Interest income and expense presented in the income statement include:• Interest on financial assets and liabilities on accrual basis taking into account the effective interest rate basis• Interest on available-for-sale investment securities on an effective interest basisInterest income and expense on all trading assets and liabilities are considered to be incidental to the Bank’s trading operations and arepresented together with all other changes in the fair value of trading assets and liabilities in net trading income.(d) Fees and commissionFees and commission income and expenses, other fees and commission income, including account servicing fees, investment managementfees, placement fees and syndication fees, are recognised as the related services are performed.Other fees and commission expense relates mainly to transaction and service fees, which are expensed as the services are received.(e) Net trading incomeNet trading income comprises gains less losses related to trading assets and liabilities, and includes all realised and unrealised fair valuechanges, interest, and foreign exchange differences.(f) Lease paymentsPayments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentivesreceived are recognised as an integral part of the total lease expense, over the term of the lease.(g) Income tax expenseIncome tax expense comprises current and deferred tax. Income tax expense is recognised in the income statement except to the extentthat it relates to items recognised directly in equity, in which case it is recognised in equity.Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balancesheet date, and any adjustment to tax payable in respect of previous years.Deferred tax is provided using the balance sheet method, providing for temporary differences between the carrying amounts of assetsand liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is measured at the tax rates that2007 Annual Report and Financial Statements 37