Revizorski izvjestaj 2006 (pdf) - Montenegro berza

NOTES TO THE FINANCIAL STATEMENTS
December 31, 2006
CRNOGORSKA KOMERCIJALNA BANKA A.D., PODGORICA
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
3.5. Financial Assets (Continued)
(c) Investments available-for-sale
Available-for-sale investments are those intended to be held for an indefinite period of time,
which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or
equity prices.
(i) Initial recognition and subsequent measurement
Purchases and sales of financial assets, held to maturity and available-for-sale are recognized on
trade-date – the date on which the Bank commits to purchase or sell the asset. Loans are
recognized when cash is advanced to the borrowers. Financial assets are initially recognized at fair
value plus transaction costs for all financial assets not carried at fair value through profit or loss.
Available-for-sale financial assets are subsequently carried at fair value. Loans and receivables
and held-to-maturity investments are carried at amortized cost using the effective interest method.
Gains and losses arising from changes in the fair value of available-for-sale financial assets are
recognized directly in equity, until the financial asset is derecognized or impaired at which time
the cumulative gain or loss previously recognized in equity should be recognized in profit or loss.
However, interest calculated using the effective interest method is recognized in the income
statement. Dividends on available-for-sale equity instruments are recognized in the income
statement when the entity’s right to receive payment is established.
The fair value of quoted investments in active markets is based on current bid prices. If the market
for a financial asset is not active (and for unlisted securities), the Bank establishes fair value by
using valuation techniques. These include the use of recent arm’s length transactions, discounted
cash flow analysis and other valuation techniques commonly used by market participants.
(d) Impairment of financial assets
(i) Assets carried at amortized cost
The Bank assesses at each balance sheet date whether there is objective evidence that a financial
asset or group of financial assets is impaired. A financial asset or a group of financial assets is
impaired and impairment losses are incurred if, and 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
(a ‘loss event’) 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. Objective evidence that a
financial asset or group of assets is impaired includes observable data that comes to the attention
of the Bank about the following loss events:
1 significant financial difficulty of the issuer or obligor;
2. a breach of contract, such as a default or delinquency in interest or principal payments;
3. the Bank granting to the borrower, for economic or legal reasons relating to the borrower’s
financial difficulty, a concession that the lender would not otherwise consider;
4. it becoming probable that the borrower will enter bankruptcy or other financial reorganization;
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