Letno poročilo 2007 - UniCredit Banka Slovenija dd

Accounting ReportSummary of Accounting PoliciesTransactions and balances: Foreign currency transactions aretranslated into the functional currency using the European CentralBank exchange rates at the dates of the transactions. The Bank haschanged its policy in 2007. Up to 12 December 2007, the EuropeanCentral Bank exchange rate was used for foreign currency translationof balances next day after being published. From 12 December2007 on, European Central Bank exchange rate is used already on itspublishing date. Foreign exchange gains and losses resulting fromthe settlement of such transactions and from the translation at yearendexchange rates of monetary assets and liabilities denominatedin foreign currencies are recognized in the income statementexcept when deferred in equity as qualifying cash flow hedges andavailable-for-sale investments.Forward transactions denominated in a foreign currency aretranslated into euro using the forward rate.The spot rates of exchange used in preparation of the Bank’s balancesheet as of the reporting date were as follows:Currency 31. 12. 2007 31. 12. 2006EUR 1.0000 1.0000USD 1.4721 1.3172CHF 1.6547 1.6080Financial assetsThe Bank classifies its financial assets in the following categories:financial assets at fair value through profit or loss, loans andreceivables, held-to-maturity investments and available-for-salefinancial assets. The Bank determines the classification of itsinvestments at initial recognition.The Bank has changed in 2007 its policy on recognition andderecognition of financial assets. All financial assets held by theBank are recognized and derecognized using trade date accountingexcept loans and receivables, which are recognized when cash isadvanced to the borrowers. When a financial asset is recognisedinitially, the Bank measures it at its fair value plus, in the case ofa financial asset not at fair value through profit or loss, transactioncosts that are directly attributable to the acquisition of the financialasset.The Bank derecognises a financial asset when the contractualrights to the cash flows from the asset expire, or it transfers therights to receive the contractual cash flows on the financial assetin a transaction in which substantially all the risks and rewardsof ownership of the financial asset are transferred. Any interest intransferred financial assets that is created or retained by the Bank isrecognised as a separate asset or liability.The Bank derecognises a financial liability when its contractualobligations are discharged or cancelled or expire.(a) Financial assets at fair value through profit or lossThis category contains financial assets held for trading and thosewhich are upon initial recognition designated by the Bank as at fairvalue through profit or loss.• A financial asset is classified as held for trading if it is acquiredor incurred principally for the purpose of selling or repurchasingin the near term or if it is part of a portfolio of identified financialinstruments that are managed together and for which there isevidence of a recent actual pattern of short-term profit-taking.Derivatives are also categorized as held for trading unless they aredesignated as hedging instruments.Subsequent to the initial recognition these financial assets areaccounted for and stated at their fair value, which approximatesthe price quoted on recognised stock exchanges or calculated byacceptable valuation models. The Bank includes unrealised gainsand losses in ‘Gains and losses on financial assets and liabilitiesheld for trading’. Interest earned on trading securities is accruedon a daily basis and reported in ‘Interest income’ in the incomestatement. Their amount is presented in Note 18.• The Bank’s financial assets are designated at fair value throughprofit and loss when doing so significantly reduces measurementinconsistencies that would arise if the related derivativeswere treated as held for trading and the underlying financialinstruments were measured at effective interest method.Loans measured at fair value through profit and loss are fixed-rateloans which are hedged at the loans’ reference rate with interestrate swaps. Loans are designated at their fair value through profitand loss in order to avoid a mismatch in the presentation of theeconomic content of a transaction. The change in fair value ofloans is based on a marked to model methodology on a monthlybasis.156 2007 Annual Report · UniCredit Bank