Tomato Specialized Bank

TOMATO SPECIALIZED BANK (formerly known as Best Specialized bank)NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20102. Summary of significant accounting policies (continued)2.2 New accounting standards and interpretations (continued)Interest income and interest expenseThe Bank currently recognises interest income and expense on an accrual basis atcontractual rates, except where serious doubt exists as to the collectibility, interest issuspended until it is realized on a cash basis. CIAS 39 requires interest income andexpense for all interest-bearing financial instruments to be recognised using theeffective interest method. In respect of a financial asset or a group of similar financialassets which are impaired, interest income is to be recognised at interest rate used indiscounting future cash flows for purpose of measuring the impairment loss.• CIFRS 7 (Amendment), ‘Financial instruments - Disclosures’The revised standard requires enhanced disclosures in respect of fair value measurementand liquidity risk. In particular, the amendment requires disclosure of fair values by fairvalue measurement hierarchy as follows:o Level 1 - Quoted prices (unadjusted) in active markets for identical assets orliabilities;o Level 2 - Inputs, other than quoted prices included within Level 1, that areobservable for an asset or liability, either directly or indirectly; ando Level 3 - Inputs for an asset or liability that are not based on observable market data.• CIFRS 9, ‘Financial instruments’The standard establishes principles for financial reporting of financial assets that willpresent relevant and useful information to users of financial statements for theirassessment of the amounts, timing and uncertainty of the entity's future cash flows.CIFRS 9 specify the bases for classification and measurement of financial assets,including some hybrid contracts. They require all financial assets to be: (a) classified onthe basis of an entity's business model for managing the financial assets and thecontractual cash flow characteristics of a financial asset; (b) initially measured at fairvalue, plus transaction costs in the case of a financial asset not at fair value throughprofit or loss; and (c) subsequently measured at amortised cost or fair value based onasset classification.Other than the standards and amendments to existing standards as set out above, the otherpublished standards, amendments and interpretations to existing standards, which areapplicable for accounting periods beginning on or after 1 January 2010, are not relevant to theBank’s operations.2.3 Foreign currencies translation(a)Functional and presentation currencyItems included in the financial statements of the Bank are measured using the currency of theprimary economic environment in which the Bank operates (‘the functional currency’).14