Annual Report: - Gorenjska banka

2.22. Borrowings and other financial liabilities measured at amortized cost
Borrowings are recognised initially at fair value, being their issue proceeds (fair value of consideration
received) net of transaction cost incurred. Borrowings are subsequently stated at amortised cost
and any difference between net proceeds and the redemption value is recognised in the income
statement over the period of the borrowings using the effective interest method.
Other financial liabilities of the bank, measured at amortized cost, are deposits of banks and
customers and debt securities issued.
2.23. Fiduciary activities
The Bank also offers its clients securities intermediation services. A fee is charged for this service.
The clients’ assets are not included in the statement of financial position and do not represent a risk
for the Bank. Details on fiduciary activities are given in note 7.
2.24. Comparatives
Where necessary, comparative figures have been adjusted to conform to changes in presentation
in the current year.
3. Critical accounting estimates and judgments
a) Impairment losses on loans and advances
The Bank reviews its loan portfolio to assess impairment on a monthly basis. In determining whether
an impairment loss should be recorded in the income statement, the Bank makes judgments as to
whether there is any observable data indicating that there is a measurable decrease in the estimated
future cash flows from a portfolio of loans before the decrease can be identified with an individual loan
in that portfolio. This evidence may include observable data indicating that there has been an adverse
change in the payment status of borrowers in a group, or national or local economic conditions that
correlate with defaults on assets in the group. Management uses estimates based on historical loss
experience for assets with credit risk characteristics and objective evidence of impairment similar
to those in the portfolio when scheduling its future cash flows. Individual estimates are based on
future cash flows assessed by accounting officers using all relevant information on counterparty and
its ability to meet specific obligations. Scheduled cash flows are reviewed by independent experts.
Low value exposures are reviewed on the pool basis. The methodology and assumptions used for
estimating both the amount and timing of future cash flows are reviewed regularly to reduce any
differences between loss estimates and actual loss experience.
b) Fair value of financial instruments
The fair values of financial instruments that are not quoted in active markets are determined by
using valuation techniques. Where valuation techniques are used to determine fair values, they are
validated and periodically reviewed by qualified personnel independent of the area that created
them. All models are calibrated to ensure that outputs reflect actual data and cooperative market
prices. To the extent practical, models use only observable data, however areas such as credit risk,
volatilities and correlations require management to make estimates. Changes in assumptions about
these factors could affect reported fair value of financial instruments.
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Gorenjska banka, d. d., Kranj
Annual Report 2011
Financial Report