Annual Report: - Gorenjska banka

The calculation of present value of the estimated future cash flows of collateralised financial assets
reflects the cash flows that may result from foreclosure less costs for obtaining and selling the
collateral, whether or not foreclosure is probable.
For the purpose of collective evaluation of impairment, financial assets are grouped in groups from
A to E on the basis of similar credit risk characteristics that include financial condition of the client,
its ability to generate adequate cash flow to repay the loan, received collateral and past experience
with the client.
Future cash flows in a group of financial assets that are collectively evaluated for impairment are
estimated on the basis of the contractual cash flows and historical loss experience for assets with
credit risk characteristics similar to those in the group. The methodology and assumptions used for
estimating future cash flows are reviewed regularly.
Methodology is based on the migration matrices (among groups A to E) for the years 1998 to 2011.
Migration of a client to group E is considered a loss event for the Bank. The amount of impairment
needed is calculated from the probability that a client will migrate from groups A, B, C and D into
group E in the period of five years. To calculate expected loss the probability of migration to group E
is multiplied by the average loss that the bank had with exposures classified in the group E in the past.
If the amount of the impairment subsequently decreases due to an event occurring after the write
down, the reversal of loss is credited as a reduction of an allowance for loan impairment.
When a loan is uncollectable, it is written off against the related provision for loan impairment. Such
loans are written of after all the necessary procedures have been completed and the amount of the
loss has been determined. Subsequent recoveries of amounts previously written off decrease the
amount of the provision for loan impairment in the income statement.
2.11.2. Assets classified as available for sale, measured at fair value
The Bank assesses at each reporting date whether there is objective evidence that a financial
asset or group of financial assets should be impaired. In the case of equity investments classified
as available for sale, a significant or prolonged decline in the fair value of the security below its cost
is considered in determining whether the assets need to be impaired. If any such evidence exists
for available for sale financial assets, the cumulative loss - measured as the difference between the
acquisition cost and current fair value, less any impairment loss on that financial asset previously
recognised in profit or loss - is removed from other comprehensive income and recognised in the
income statement. Impairment losses recognised in the income statement on equity instruments
are not reversed through the income statement. If, in a subsequent period, the fair value of a debt
instrument classified as available for sale increases and the increase can be objectively related to
an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is
reversed through the income statement.
2.12. Intangible assets
Intangible assets, which relate solely to software licences and the licences for their use, are stated at cost,
less accumulated amortisation and impairment losses. Amortisation is provided on a straight-line basis
at rates designed to write off the cost of software over its estimated useful life, not exceeding a period of
ten years. Assets in the course of transfer, construction or implementation are not amortised until they
are brought into use. The term and method of depreciation for intangible assets with a determinable
useful life are reviewed at the end of each financial year.
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Gorenjska banka, d. d., Kranj
Annual Report 2011
Financial Report