ANNUAL

ENKA İNŞAAT VE SANAYİ A.Ş. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
(Amounts are expressed as thousands of U.S. Dollars (“USD”) unless otherwise stated. Currencies other than USD are expressed
in thousands unless otherwise indicated.)
2. BASIS OF PRESENTATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (cont’d)
2.5 Summary of significant accounting policies (cont’d)
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are
assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost
of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing
costs are recognized in the consolidated statement of profit or loss in the period in which they are incurred.
Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity
instrument of another entity.
According to IFRS 9 as from 1 January 2010, the group classifies its financial assets in the following categories: those
to be measured subsequently at fair value, and those to be measured at amortised cost. This classification depends on
whether the financial asset is a debt or equity investment.
(a) Financial assets at amortised cost
A debt investment is classified as ‘amortised cost’ only if both of the following criteria are met: the objective of the
group’s business model is to hold the asset to collect the contractual cash flows; and the contractual terms give rise
on specified dates to cash flows that are solely payments of principal and interest on the principal outstanding. The
nature of any derivatives embedded in the debt investment are considered in determining whether the cash flows of
the investment are solely payment of principal and interest on the principal outstanding and are not accounted for
separately.
A gain or loss on a debt investment that is subsequently measured at amortised cost and is not part of a hedging
relationship is recognised in profit or loss when the financial asset is derecognised or impaired and through the
amortisation process using the effective interest rate method.
(b) Financial assets at fair value
If either of the two criteria above are not met, the debt instrument is classified as ‘fair value through profit or loss.
The Group has classified their financial assets as financial assets to be measured at fair value.
Regular purchases and sales of financial assets are recognised on the trade-date — the date on which the Group
commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from
the investments have expired or have been transferred and the group has transferred substantially all risks and rewards
of ownership.
At initial recognition, the group measures a financial asset at its fair value. A gain or loss on a debt investment that is
subsequently measured at fair value and is not part of a hedging relationship is recognised in profit or loss and
presented in the consolidated statement of profit or loss within income / (expenses) from investing activities in the
period in which they arise. The Group is required to reclassify all affected debt investments when and only when its
business model for managing those assets changes.
Impairment of financial assets
Financial assets at amortised cost
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or
group of financial assets measured at amortised cost is impaired. A financial asset or a group of financial assets is
impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or
more events that occurred after the initial recognition of the asset and that loss event has an impact on the estimated
future cash flows of the financial asset or group of financial assets that can be reliably estimated.
ENKA İNŞAAT VE SANAYİ A.Ş. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
(Amounts are expressed as thousands of U.S. Dollars (“USD”) unless otherwise stated. Currencies other than USD are expressed
in thousands unless otherwise indicated.)
2. BASIS OF PRESENTATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (cont’d)
2.5 Summary of significant accounting policies (cont’d)
Financial instruments (cont’d)
Impairment of financial assets (cont’d)
Financial assets at amortised cost (cont’d)
The criteria that the group uses to determine that there is objective evidence of an impairment loss include:
Significant financial difficulty of the issuer or obligor;
A breach of contract, such as a default or delinquency in interest or principal payments;
The group, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower
a concession that the lender would not otherwise consider;
It becomes probable that the borrower will enter bankruptcy or other financial reorganisation;
The disappearance of an active market for that financial asset because of financial difficulties; or
Observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio
of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with
the individual financial assets in the portfolio, including:
i. adverse changes in the payment status of borrowers in the portfolio; and
ii. national or local economic conditions that correlate with defaults on the assets in the portfolio.
The Group first assesses whether objective evidence of impairment exists.
For loans and receivables category, the amount of the loss is measured as the difference between the asset’s carrying
amount and the present value of estimated future cash flows (excluding future credit losses that have not been
incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced
and the amount of the loss is recognised in the consolidated statement of profit or loss. If a loan or held-to-maturity
investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective
interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis
of an instrument’s fair value using an observable market price.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to
an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the
reversal of the previously recognised impairment loss is recognised in the consolidated statement of profit or loss.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments
which their maturities are three months or less from date of acquisition and that are readily convertible to a known
amount of cash and are subject to an insignificant risk of changes in value. The Group’s cash and cash equivalents
are classified under the category of ‘Loans and Receivables’.
Financial liabilities
Financial liabilities and equity instruments issued by the Group are classified according to the substance of the
contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity
instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its
liabilities. The accounting policies adopted for specific financial liabilities and equity instruments are set out below.
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