7.1 Financial instruments – initial recognition, classification and subsequent measurement
7.1.1 Date of recognition
The Group initially recognises loans and advances, deposits and subordinated liabilities, etc., on the date on which they are originated. All other financial instruments (including regular-way purchases and sales of financial assets) are recognised on the trade date, which is the date on which the Group becomes a party to the contractual provisions of the instrument.
7.1.2 Initial measurement of
The classification of financial instruments at initial recognition depends on their cash flow characteristics and the business model for managing the instruments. Refer Notes 7.1.3 and 7.1.4 for further details on classification of financial instruments.
A financial asset or financial liability is measured initially at fair value plus or minus transaction costs that are directly attributable to its acquisition or issue, except in the case of financial assets and financial liabilities at fair value through profit or loss as per SLFRS 9 and trade receivables that do not have a significant financing component as defined by SLFRS 15.
Transaction cost in relation to financial assets and financial liabilities at fair value through profit or loss are dealt with through the Income Statement.
Trade receivables that do not have significant financing component are measured at their transaction price at initial recognition as defined in SLFRS 15.
When the fair value of financial instruments (except trade receivables that do not have significant financing component) at initial recognition differs from the transaction price, the Group accounts for the Day 1 profit or loss, as described below.
188.8.131.52 “Day 1” profit or loss
When the transaction price of the instrument differs from the fair value at origination and fair value is based on a valuation technique using only inputs observable in market transactions, the Group recognises the difference between the transaction price and fair value in net gains/(losses) from trading. In those cases, where the fair value is based on models for which some inputs are not observable, the difference between the transaction price and the fair value is deferred and is only recognised in profit or loss when the inputs become observable, or when the instrument is derecognised. The “Day 1 loss” arising in the case of loans granted to employees at concessionary rates under uniformly applicable schemes is deferred and amortised using Effective Interest Rates (EIR) in “Interest income” and “Personnel Expenses” over the remaining service period of the employees or tenure of the loan whichever is shorter.
Refer Notes 14 and 20
7.1.3 Classification and subsequent measurement of financial assets
From January 1, 2018 as per SLFRS 9, the Group classifies all of its financial assets based on the business model for managing the assets and the assets’ contractual terms measured at either;
- Amortised cost
- Fair value through other comprehensive income (FVOCI)
- Fair value through profit or loss (FVTPL)
The subsequent measurement of financial assets depends on their classification.
Up to December 31, 2017 as per LKAS 39, the Group classified its financial assets into one of the following categories:
- Financial assets at fair value through profit or loss (FVTPL), and within this category
- Held for trading
- Designated at fair value through profit or loss
- Loans and receivables
- Held to maturity
- Available for sale
Details of the impact on reclassification and measurement from LKAS 39 to SLFRS 9 are disclosed in transition disclosures given in Note 12.
184.108.40.206 Business model assessment
With effect from January 1, 2018, the Group makes an assessment of the objective of a business model in which an asset is held at a portfolio level and not assessed on instrument-by- instrument basis because this best reflects the way the business is managed and information is provided to management. The information considered includes:
- the stated policies and objectives for the portfolio and the operation of those policies in practice. In particular, whether management’s strategy focuses on earning contractual interest revenue, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of the liabilities that are funding those assets or realising cash flows through the sale of the assets;
- how the performance of the portfolio is evaluated and reported to the Bank’s management;
- the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed;
- how managers of the business are compensated – e.g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected; and
- the frequency, volume and timing of sales in prior periods, the reasons for such sales and its expectations about future sales activity. However, information about sales activity is not considered in isolation, but as part of an overall assessment of how the Bank’s stated objective for managing the financial assets is achieved and how cash flows are realised.
The business model assessment is based on reasonably expected scenarios without taking ‘worst case’ or ‘stress case’ scenarios into account. If cash flows after initial recognition are realised in a way that is different from the Bank’s original expectations, the Bank does not change the classification of the remaining financial assets held in that business model, but incorporates such information when assessing newly originated or newly purchased financial assets going forward.
220.127.116.11 Assessment of whether contractual cash flows are solely payments of principal and interest (SPPI test)
As a second step of its classification process the Group assesses the contractual terms of financial assets to identify whether they meet the SPPI test.
For the purposes of this assessment, “principal” is defined as the fair value of the financial asset on initial recognition and may change over the life of the financial asset (for example, if there are repayments of principal or amortisation of the premium/discount).
“Interest” is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs, as well as profit margin.
In contrast, contractual terms that introduce a more than de minimise exposure to risks or volatility in the contractual cash flows that are unrelated to a basic lending arrangement do not give rise to contractual cash flows that are solely payments of principal and interest on the principal amount outstanding. In such cases, the financial asset is required to be measured at FVTPL.
In assessing whether the contractual cash flows are solely payments of principal and interest on principal amount outstanding, the Group considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making the assessment, the Group considers:
- contingent events that would change the amount and timing of cash flows;
- leverage features;
- prepayment and extension terms;
- terms that limit the Group’s claim to cash flows from specified assets; and
- features that modify consideration of the time value of money.
The Group holds a portfolio of long-term fixed rate loans for which the Group has the option to propose to revise the interest rate at periodic reset dates. These reset rights are limited to the market rate at the time of revision. The borrowers have an option to either accept the revised rate or redeem the loan at par without penalty. The Group has determined that the contractual cash flows of these loans are solely payments of principal and interest because the option varies the interest rate in a way that is consideration for the time value of money, credit risk, other basic lending risks and costs associated with the principal amount outstanding.
Refer Notes 18.104.22.168 to 22.214.171.124 below for details on different types of financial assets recognised on the SOFP.
126.96.36.199 Financial assets measured at
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:
- The asset is held within a business model whose objective is to hold assets to collect contractual cash flows; and
- The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Financial assets measured at amortised cost are given in Notes 188.8.131.52.1 to 184.108.40.206.6 below.
220.127.116.11.1 Loans and advances to banks and
Loans and advances to banks and other customers include amounts due from banks, loans and advances and lease receivables of the Group.
Details of “Loans and advances to banks and other customers” are given in Notes 34 and Note 35.
18.104.22.168.2 Securities purchased under resale agreements (reverse repos)
When the Group purchases a financial asset and simultaneously enters into an agreement to resale the asset (or a similar asset) at a fixed price on a future date (reverse repo), the arrangement is accounted for as a financial asset in the SOFP reflecting the transaction’s economic substance as a loan granted by the Group. Subsequent to initial recognition, these securities issued are measured at amortised cost using the EIR with the corresponding interest income/ receivable being recognised as interest income in profit or loss.
Details of “Securities purchased under resale agreements” are given in the SOFP.
22.214.171.124.3 Debt and other financial instruments measured at amortised cost
Details of “Debt and other financial instruments measured at amortised cost” are given in Note 36.
126.96.36.199.4 Cash and cash equivalents
Details of “Cash and cash equivalents” are given in Note 29.
188.8.131.52.5 Balances with central banks
Details of “Balances with central banks” are given in Note 30.
184.108.40.206.6 Placement with banks
Details of “Placement with banks” are given in Note 31.
220.127.116.11 Financial assets measured at FVOCI
Financial assets at FVOCI include debt and equity instruments measured at fair value through other comprehensive income.
Financial assets measured at FVOCI are given in Notes 18.104.22.168.1 and 22.214.171.124.2.
126.96.36.199.1 Debt instruments measured at FVOCI
Debt instruments are measured at FVOCI if they are held within a business model whose objective is to hold for collection of contractual cash flows and for selling financial assets, where the asset’s cash flows represent payments that are solely payments of principal and interest on principal outstanding.
Details of “Debt instruments at FVOCI” are given in Note 37.
188.8.131.52.2 Equity instruments designated at FVOCI
Upon initial recognition, the Group elects to classify irrevocably some of its equity investments held for strategic and statutory purposes as equity instruments at FVOCI. Details of “Equity instruments at FVOCI” are given in Note 37.
184.108.40.206 Financial assets measured at FVTPL
As per SLFRS 9, all financial assets other than those classified at amortised cost or FVOCI are classified as measured at FVTPL. Financial assets at fair value through profit or loss include financial assets that are held for trading or managed and whose performance is evaluated on a fair value basis as they are neither held to collect contractual cash
flows nor held both to collect contractual cash flows and to sell financial assets and financial assets designated upon initial recognition at fair value through profit or loss which are discussed in Notes 220.127.116.11.1 and 18.104.22.168.2 below.
As per LKAS 39, financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss.
22.214.171.124.1 Financial assets Held for trading
Details of “Financial Assets Held for trading” are given in Note 33.
126.96.36.199.1.1 Derivatives recorded at
fair value through profit or loss
Details of “Derivative financial assets” recorded at fair value through profit or loss are given in Note 32.
188.8.131.52.2 Financial assets designated at
fair value through profit or loss
As per SLFRS 9, on initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL when such designation eliminates or significantly reduces an accounting mismatch that would otherwise arise from measuring the assets or liabilities or recognising gains or losses on them on a different basis.
As per LKAS 39, the Group designated financial assets at fair value through profit or loss in the following circumstances:
- the assets are managed, evaluated and reported internally on a fair value basis; or
- the designation eliminates or significantly reduces an accounting mismatch, which would otherwise have arisen; or
- the asset contains an embedded derivative that significantly modifies the cash flows which would otherwise have been required under the contract.
Financial assets designated at fair value through profit or loss are recorded in the SOFP at fair value. Changes in fair value are recorded in “Net gain or loss on financial assets and liabilities designated at fair value through profit or loss”. Interest earned is accrued in “Interest Income”, using the EIR, while dividend income is recorded in “Other operating income” when the right to receive the payment has been established.
The Group has not designated any financial assets upon initial recognition as at fair value through profit or loss as at the end of the reporting period.
184.108.40.206 Financial investments –
Held-to-maturity (Up to December 31, 2017)
Details of “Financial investments – Held to maturity” are given in Note 36.
220.127.116.11 Financial investments –
Loans and receivables (Up to December 31, 2017)
Details of “Financial investments – Loans
and receivables” are given in Note 36.
18.104.22.168 Financial investments –
Available for sale (Up to December 31, 2017)
Details of “Financial investments – Available for sale” are given in Note 37.
7.1.4 Classification and subsequent measurement of financial liabilities
As per SLFRS 9, the Group classifies financial liabilities, other than financial guarantees and loan commitments into one of the following categories:
- Financial liabilities at fair value through profit or loss, and within this category as–
- Held-for-trading; or
- Designated at fair value through profit or loss;
- Financial liabilities measured at
The subsequent measurement of financial liabilities depends on their classification.
SLFRS 9 largely retains the existing requirements in LKAS 39 for the classification of financial liabilities.
Refer Notes 22.214.171.124 and 126.96.36.199 as detailed below:
188.8.131.52 Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Refer Notes 184.108.40.206.1 and 220.127.116.11.2 below.
18.104.22.168.1 Financial liabilities held for trading
Details of “Derivative financial liabilities” classified under Financial Liabilities Held for Trading are given in Note 46.1.
22.214.171.124.2 Financial liabilities designated at fair value through profit or loss
Financial liabilities designated at fair value through profit or loss are recorded in the SOFP at fair value when
- The designation eliminates, or significantly reduces, the inconsistent treatment that would otherwise arise from measuring the assets or liabilities or recognising gains or losses on them on a different basis, or
- A group of financial liabilities or financial assets and financial liabilities is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided on that basis to entity’s key management personnel, or
- The liabilities containing one or more embedded derivatives, unless they do not significantly modify the cash flows that would otherwise be required by the contract, or it is clear with little or no analysis when a similar instrument is first considered that separation of the embedded derivative(s) is prohibited.
Changes in fair value are recorded in “Net fair value gains/ (losses) from financial instruments at fair value through profit or loss” with the exception of movements in fair value of liabilities designated at FVTPL due to changes in the Bank’s own credit risk. Such changes in fair value are recorded in the own credit reserve through OCI and do not get recycled to profit or loss. Interest paid/payable is accrued in “Interest expense”, using the EIR.
The Group has not designated any financial liabilities as at fair value through profit or loss as at the end of the reporting period.
126.96.36.199 Financial liabilities at amortised cost
Financial liabilities issued by the Group that are not designated at FVTPL are classified as financial liabilities at amortised cost under “Due to banks”, “Due to depositors”, “Securities sold under repurchase agreements”, “Other borrowings” or “Subordinated liabilities” as appropriate, where the substance of the contractual arrangement results in the Group having an obligation either to deliver cash or another financial asset to the holder, or to satisfy the obligation other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of own equity shares. The Group classifies capital instruments as financial liabilities or equity instruments in accordance with the substance of the contractual terms of the instrument.
After initial recognition, such financial liabilities are subsequently measured at amortised cost using the EIR method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR.
The EIR amortisation is included in “Interest expense” in the Income Statement. Gains and losses too are recognised in the Income Statement when the liabilities are derecognised as well as through the EIR amortisation process.
188.8.131.52.1 Due to banks
Details of “Due to banks” are given in Note 45.
184.108.40.206.2 Due to depositors
Details of “Due to depositors” are given in Note 47.
220.127.116.11.3 Securities sold under repurchase agreements (repos)
When the Group sells a financial asset and simultaneously enters into an agreement to repurchase the asset (or a similar asset) at a fixed price on a future date (repos), the arrangement is accounted for as a financial liability in the SOFP reflecting the transaction’s economic substance as a deposit. Subsequent to initial recognition, these securities are measured at amortised cost using the EIR with the corresponding interest payable being recognised as interest expense in profit or loss.
Details of “Securities sold under repurchase agreements (repos)” are given in the SOFP in the section on Statement of Financial Position in the chapter on Financial Reports.
18.104.22.168.4 Other Borrowings
Details of “Other Borrowings” are given in Note 48.
22.214.171.124.5 Subordinated liabilities
Details of “Subordinated liabilities” are given in Note 52.
7.1.5 Derivatives held for risk management purposes and hedge accounting
Derivatives held for risk management purposes include all derivative assets and liabilities that are not classified as trading assets and liabilities. Derivatives held for risk management purposes are measured at fair value in the SOFP.
The Group designates certain derivatives held for risk management as well as certain non-derivative financial instruments as hedging instruments in qualifying hedging relationships. On initial designation of the hedge, the Group formally documents the relationship between the hedging instrument and hedged item, including risk management objective and strategy in undertaking the hedge, together with the method that will be used to assess the effectiveness of the hedging relationship. The Group makes an assessment, both at inception of the hedge relationship and on an ongoing basis, of whether the hedging instrument is expected to be highly effective in offsetting the changes in fair value or cash flow of the respective hedged item during the period for which the hedge is designated, and whether the actual results of each hedge are within a range of 80% to 125%. The Group makes an assessment for a cash flow hedge of a forecast transaction, of whether the forecast transaction is highly probable to occur and presents an exposure to variations in cash flows that could ultimately affect profit or loss.
The Group currently uses cash flow hedging relationships for risk management
purposes as discussed in the Notes 126.96.36.199 to 188.8.131.52 below:
184.108.40.206 Fair value hedges
When a derivative is designated as the hedging instrument in a hedge of the change in fair value of a recognised asset or liability or a firm commitment that could affect the profit or loss, changes in the fair value of the derivative are recognised immediately in profit or loss in the same line item as the hedged item that is attributable to the hedged risk.
If the hedging derivative expires or is sold, terminated or exercised, or the hedge no longer meets the criteria for fair value hedge accounting, or the hedge designation is revoked, then hedge accounting is discontinued prospectively. However, if the derivative is novated to a central counterparty by both parties as a consequence of laws or regulations without changes in its terms except for those are necessary for the novation, then the derivative is not considered as expired or terminated.
Any adjustment up to the point of discontinuation to a hedged item for which the effective interest method is used is amortised to profit or loss as part of the recalculated EIR of the item over its remaining life.
220.127.116.11 Cash flow hedges
When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a particular risk associated with a recognised asset or liability that could affect the profit or loss, the effective portion of changes in the fair value of the derivative are recognised in OCI and presented in the hedging reserve within equity. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit or loss.
The amount recognised in OCI is reclassified to profit or loss as a reclassification adjustment in the same period as the hedged cash flows affect profit or loss, and in the same line item in the Statement of Profit or Loss and OCI.
If the hedging derivative expires or is sold, terminated or exercised, or the hedge no longer meets the criteria for cash flow hedge accounting, or the hedge designation is revoked, then hedge accounting is discontinued prospectively. However, if the derivative is novated to a central counterparty by both parties as a consequence of laws or regulations without changes in its terms except for those are necessary for the novation, then the derivative is not considered as expired
Details of “Cash flow hedges” are given in Notes 32.2 and 46.2.
18.104.22.168 Net investment hedges
When a derivative instrument or a non-derivative financial liability is designated as the hedging instrument in a hedge of a net investment in a foreign operation, the effective portion of changes in the fair value of the hedging instrument is recognised in OCI and presented in the translation reserve within equity. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit or loss. The amount recognised in OCI is reclassified to profit or loss as a reclassification adjustment on disposal of the foreign operation.
22.214.171.124 Other non-trading derivatives
If the derivative is not held for trading, and is not designated in a qualifying hedging relationship, then all changes in its fair value are recognised immediately in profit or loss as a component of net income from other financial instruments at fair value through profit or loss.
126.96.36.199 Embedded derivatives
An embedded derivative is a component of a hybrid instrument that also includes a non-derivative host contract with the effect that some of the cash flows of the combined instrument vary in a way similar to a stand-alone derivative. An embedded derivative causes some or all of the cash flows that otherwise would be required by the contract to be modified according to a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index, or other variable, provided that, in the case of a non-financial variable, it is not specific to a party to the contract. A derivative that is attached to a financial instrument, but is contractually transferable independently of that instrument, or has a different counterparty from that instrument, is not an embedded derivative, but a separate financial instrument.
As per SLFRS 9, Derivatives may be embedded in another contractual arrangement (a host contract). The Group treats derivatives embedded in financial liabilities and non-financial host contracts as separate derivatives if:
- The host contract is not itself carried at FVTPL;
- The terms of the embedded derivative would meet the definition of a derivative if they were contained in a separate contract; and
- The economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics and risks of the host contract.
Separated embedded derivatives are measured at fair value, with all changes in fair value recognised in profit or loss unless they form part of a qualifying cash flow or net investment hedging relationship. Separated embedded derivatives are presented in the SOFP together with the host contract. Derivatives embedded in financial assets are classified based on the business model and their contractual terms are not separated as explained in Note 188.8.131.52 and 184.108.40.206.
As per LKAS 39, the Group treated derivatives embedded in financial assets in addition to derivatives embedded in financial liabilities and non-financial host contracts as separate derivatives if they fulfilled the same criteria mentioned above.
Separated embedded derivatives are measured at fair value, with all changes in fair value recognised in profit or loss unless they formed part of a qualifying cash flow or net investment hedging relationship. Separated embedded derivatives are presented in the SOFP together with the
7.1.6 Reclassification of financial assets and liabilities
As per SLFRS 9, Financial assets are not reclassified subsequent to their initial recognition, except and only in those rare circumstances when the Group changes its objective of the business model for managing such financial assets which may include the acquisition, disposal or termination of a business line.
Financial Liabilities are not reclassified as such reclassifications are not permitted by SLFRS 9.
220.127.116.11 Timing of reclassification of
Consequent to the change in the business model, the Bank reclassifies all affected assets prospectively from the first day of the first reporting period following the change in the business model (the reclassification date). Accordingly, prior periods are not restated.
18.104.22.168 Measurement of reclassification of
22.214.171.124.1 Reclassification of Financial Instruments at ‘Fair value through profit or loss’
- To Fair value through other comprehensive income
The fair value on reclassification date becomes the new gross carrying amount. The EIR is calculated based on the new gross carrying amount. Subsequent changes in the fair value is recognised
- To Amortised Cost
The fair value on reclassification date becomes the new carrying amount. The EIR is calculated based on the new gross carrying amount.
126.96.36.199.2 Reclassification of Financial Instruments at ‘Fair value through other comprehensive income’
- To Fair value through profit or lossThe accumulated balance in OCI is reclassified to profit and loss on the reclassification date.
- To Amortised Cost
The financial asset is reclassified at fair value. The cumulative balance in OCI is removed and is used to adjust fair value on the reclassification date. The adjusted amount becomes the amortised cost.
EIR determined at initial recognition and gross carrying amount are not adjusted as a result of reclassification.
188.8.131.52.3 Reclassification of Financial Instruments at “Amortised Cost”
- To Fair value through other comprehensive income
The asset is remeasured to fair value, with any difference recognised in OCI. EIR determined at initial recognition is not adjusted as a result of reclassification.
- To Fair value through profit or loss
The fair value on the reclassification date becomes the new carrying amount. The difference between amortised cost and fair value is recognised in profit and loss.
7.1.7 Derecognition of financial assets and financial liabilities
184.108.40.206 Financial assets
The Group derecognises a financial asset (or where applicable a part thereof) when the contractual rights to the cash flows from the financial asset expire or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all risks and rewards of ownership and it does not retain control of the financial asset.
On derecognition of a financial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset derecognised) and the sum of the consideration received (including any new asset obtained less any new liability assumed) and any cumulative gain or loss that had been recognised in OCI is recognised in profit or loss.
However, cumulative gain/loss recognised in OCI in respect of equity investment securities designated as at FVOCI is not recognised in profit or loss on derecognition of such securities as per SLFRS 9.
Any interest in transferred financial assets that qualify for derecognition that is created or retained by the Group is recognised as a separate asset or liability.
The Group enters into transactions whereby it transfers assets recognised on its SOFP, but retains either all or substantially all risks and rewards of the transferred assets or a portion of them. In such cases, the transferred assets are not derecognised.
When assets are sold to a third party with a concurrent total rate of return swap on the transferred assets, the transaction is accounted for as a secured financing transaction similar to sale and repurchase transactions because the Group retains all or substantially all risks and rewards of ownership of such assets.
When the Group has transferred its right to receive cash flows from an asset or has entered into a pass-through arrangement and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on the basis that reflected the rights and obligations that the Group has retained.
220.127.116.11 Financial liabilities
The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expired.
7.1.8 Modification of financial assets and financial liabilities
18.104.22.168 Financial assets
If the terms of a financial asset are modified, the Group evaluates whether the cash flows of the modified asset are substantially different. If the cash flows are substantially different, then the contractual rights to cash flows from the original financial asset are deemed to have expired. In this case, the original financial asset is derecognised and a new financial asset is recognised at fair value.
As per SLFRS 9, if the cash flows of the modified asset carried at amortised cost are not substantially different, then the modification does not result in derecognition of the financial asset. In this case, the Group recalculates the gross carrying amount of the financial asset and recognises the amount arising from adjusting the gross carrying amount as a modification gain or loss in profit or loss. If such a modification is carried out because of financial difficulties of the borrower, then the gain or loss is presented together with impairment losses. In other cases, it is presented as interest income.
As per LKAS 39, if the terms of a financial asset were modified because of financial difficulties of the borrower and the asset was not derecognised, then impairment of the asset was measured using pre-modification interest rate.
22.214.171.124 Financial liabilities
Where an existing financial liability is replaced by another from the same lender on substantially different terms or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability. In this case, a new financial liability based on the modified terms is recognised at fair value. The difference between the carrying amount of the financial liability extinguished and the new financial liability with modified terms is recognised in profit or loss.
7.1.9 Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount reported in the SOFP if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.
Income and expenses are presented on a net basis only when permitted under SLFRSs, or for gains and losses arising from a group of similar transactions such as in the Group’s trading activity.
7.1.10 Amortised cost and gross carrying amount
The “amortised cost” of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured on initial recognition minus the principal repayments, plus or minus the cumulative amortisation using the EIR method of any difference between that initial amount and the maturity amount and, for financial assets, adjusted for any ECL allowance.
The “gross carrying amount of a financial asset’ is the amortised cost of a financial asset before adjusting for any ECL allowance.
7.1.11 Fair value of financial instruments
Fair value measurement of financial instruments including the fair value hierarchy is explained in Notes 4 and 28.
7.1.12 Identification and measurement of impairment of financial assets
126.96.36.199 Overview of the ECL principles
As per SLFRS 9, the Group records an allowance for expected credit losses for loans and advances to banks and other customers, debt and other financial instruments measured at amortised cost, debt instruments measured at fair value through other comprehensive income, loan commitments and financial guarantee contracts.
SLFRS 9 outlines a “three-stage” model for impairment based on changes in credit quality since initial recognition.
- Stage 1: A financial asset that is not originally credit-impaired on initial recognition is classified in Stage 1. Financial instruments in Stage 1 have their ECL measured at an amount equal to the proportion of lifetime expected credit losses (LTECL) that result from default events possible within next 12 months (12M ECL).
- Stage 2: If a significant increase in credit risk (SICR) since origination is identified, it is moved to Stage 2 and the Group records an allowance for LTECL. Refer Note 188.8.131.52 for a description on how the Group determines when a significant increase in credit risk has occurred.
- Stage 3: If a financial asset is credit-impaired, it is moved to Stage 3 and the Group recognises an allowance for LTECL, with probability of default at 100%. Refer Note 184.108.40.206 for a description on how the Group defines credit impaired and default.
- Purchased or originated credit impaired (POCI) financial assets: Financial assets which are credit impaired on initial recognition are categorised within Stage 3 with a carrying value already reflecting the lifetime expected credit losses. The Group does not have POCI loans as at the reporting date.
The key judgements and assumptions adopted by the Group in addressing the requirements of SLFRS 9 are discussed below:
220.127.116.11 Significant increase in credit risk
When determining whether the risk of default on a financial instrument has increased significantly since initial recognition, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information analysis, based on the Group’s historical experience and expert credit assessment and including forward looking information.
The Group considers an exposure to have significantly increased credit risk when contractual payments of a customer are more than 30 days past due in accordance with the rebuttable presumption in SLFRS 9.
The Group individually reviews at each reporting date, loans and advances above a predefined threshold to identify whether the credit risk has increased significantly since origination, before an exposure is in default. Such indicators include, inter alia:
- When reasonable and supportable forecasts of future economic conditions directly affect the performance of a customer/group of customers, portfolios or instruments.
- When there is a significant change in the geographical locations or natural catastrophes that directly impact the performance of a customer/group of customers or an instruments.
- When the value of collateral is significantly reduced and/or realisibility of collateral is doubtful.
- When a customer is subject to litigation, that significantly affects the performance of the credit facility.
- Frequent changes in the senior management of an institutional customer.
- Delay in the commencement of business operations/projects by more than two years from the originally agreed date.
- Modification of terms resulting in concessions, including extensions, deferment of payments, waiver of covenants
- When the customer is deceased/insolvent.
- When the Bank is unable to contact or find the customer
- A fall of 50% or more in the turnover and/or profit before tax of the customer when compared to the previous year
- Erosion in net-worth by more than 25% when compared to the previous year.
Credit facilities/exposures which have one or more of the above indicators are treated as facilities with significant increase in credit risk and assessed accordingly in ECL computations. The Group regularly monitors the effectiveness of the criteria used to identify significant increase in credit risk to confirm that the criteria is capable of identifying significant increase in credit risk before an exposure is in default.
For debt instruments having an external credit rating, which are measured at amortised cost or at FVOCI, the Group determines significant increase in credit risk based on the generally accepted investment/non-investment grade definitions published by international rating agencies. Debt instruments are moved to stage 2 if their credit risk increases to the extent that they are no longer considered investment grade.
18.104.22.168 Definition of default and
credit impaired assets
The Group considers loans and advances to other customers be defaulted when:
- The borrower is unlikely to pay its obligations to the Group in full, without recourse by the Group to actions such as realising security (if any is held); or
- The borrower becomes 90 days past due on its contractual payments.
In addition, the Group classifies the financial investments under Stage 3 when the external credit rating assigned to the particular investment is “default”.
In assessing whether a borrower is in default, Group reviews its individually significant loans and advances above a predefined threshold at each reporting date. The Group considers non performing credit facilities/customers with one or more of indicators set out in Note 22.214.171.124 above as credit impaired. Further, as per “CBSL Guidelines to Licensed Banks on the Adoption of Sri Lanka Accounting Standard – SLFRS 9: Financial Instruments”, all the credit facilities/ customers classified as non-performing as per CBSL Directions are assessed as Stage 3 exposure.
126.96.36.199 Movement between the stages
Financial assets can be transferred between the different categories (other than POCI) depending on their relative change in credit risk since initial recognition. Financial instruments are transferred out of stage 2 if their credit risk is no longer considered to be significantly increased since initial recognition based on the assessments described in Note 188.8.131.52. Financial instruments are transferred out of stage 3 when they no longer exhibit any evidence of credit impairment as described above.
184.108.40.206 Grouping financial assets measured on collective basis
The Group calculates ECLs either on a collective or an individual basis. Asset classes where the Group calculates ECL on individual basis include;
- Credit impaired facilities of individually significant customers
- The treasury, trading and interbank relationships (such as due from Banks, money at call and short notice, placements with Banks, government securities, investments in debentures etc.)
Those financial assets for which, the Group determines that no provision is required under individual impairment are then collectively assessed for ECL. For the purpose of ECL calculation on collective basis, financial assets are grouped on the basis of similar risk characteristics. Loans and advances to other customers are grouped into homogeneous portfolios, based on a combination of product and customer characteristics.
220.127.116.11 Identification and measurement of impairment of financial assets under LKAS 39
The Group assessed whether there is objective evidence that financial assets not carried at fair value through profit or loss are impaired as at the reporting date. A financial asset or a group of financial assets is “impaired” when objective evidence demonstrates that a loss event has occurred after the initial recognition of the asset(s) and that the loss event has an impact on the future cash flows of the asset(s) that can be estimated reliably.
Objective evidence that financial assets (including equity securities) were similar to the qualitative criteria given in Section 18.104.22.168 for identification of credit-impaired assets.
In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost was considered as an objective evidence of impairment.
22.214.171.124.1 Impairment of financial assets measured at amortised cost
Details of the individual and collective assessment of impairments are given in Note 19.
126.96.36.199.2 Impairment of financial investments – Available for sale
For available-for-sale financial investments, the Group assessed at each reporting date whether there was objective evidence that an investment was impaired.
In the case of debt instruments classified as AFS, the Group assessed individually whether there is objective evidence of impairment based on the same criteria as financial assets carried at amortised cost. However, the amount recorded for impairment was the cumulative loss measured as the difference between the amortised cost and the current fair value, less any impairment loss on that investment previously recognised in profit or loss. Future interest income based on the reduced carrying amount/impaired balance was accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income on such assets was recorded within “Interest income”.
In the case investments classified as AFS, objective evidence also included a “significant” or “prolonged” decline in the fair value of the investment below its cost. In general, the Group considered a decline of 20% to be “significant” and a period of nine months to be “prolonged”. However, in specific circumstances a smaller decline or a shorter period was considered appropriate. Where there was evidence of impairment, the cumulative impairment loss on that investment previously recognised in Equity through the OCI was removed from Equity and charged to profit or loss.
If, in a subsequent period, the fair value of an impaired available-for-sale debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognised, then such impairment loss was reversed through profit or loss; otherwise, any increase in fair value was recognised through OCI. Any subsequent recovery in the fair value of an available-for-sale equity instrument was recognised in OCI.
The Group wrote off certain financial investments – available for sale, either partially or in full and any related provision for impairment losses, when the Group determines that there was no realistic prospect of recovery.
7.2 Non-current assets held for sale and disposal groups
The Group intends to recover the value of non-current assets and disposal groups classified as held for sale as at the reporting date principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset or disposal group is available for sale in its present condition, Management has committed to the sale and the sale is expected to have been completed within one year from the date of classification.
As per the Sri Lanka Accounting Standard – SLFRS 5 on “Non-current Assets Held for Sale and Discontinued Operations”, these assets are measured at the lower of the carrying amount and fair value, less costs to sell. Thereafter, the Group assesses at each reporting date or more frequently if events or changes in circumstances indicate that the investment or a group of investment is impaired. The Group recognises an impairment loss for any initial or subsequent write down of the assets to fair value less costs to sell and also recognises a gain for any subsequent increase in fair value less costs to sell of an asset, only to the extent of the cumulative impairment losses that have been recognised previously. Impairment loss is first allocated to good will, and then to the remaining assets and liabilities on a pro rata basis, except that no loss is allocated to financial assets, deferred tax assets or employee benefit assets which continue to be measured in accordance with the Group’s other accounting policies. As a result, once classified, the Group neither amortises nor depreciates the assets classified as held for sale.
In the Income Statement of the reporting period and of the comparable period of the previous year, income and expenses from discontinued operations are reported separately from income and expenses from continuing operations, down to the level of profit after taxes, even when the Group retains a NCI in a subsidiary after the sale. The resulting profit or loss (after taxes) is reported separately in the Income Statement.
7.3 Property, plant and equipment
Details of “Property, plant and equipment” are given in Note 40.
Details of “Depreciation” are given in Note 21.
7.3.2 Borrowing costs
As per the Sri Lanka Accounting Standard – LKAS 23 on “Borrowing Costs”, the Group capitalises borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of the asset. A qualifying asset is an asset which takes a substantial period of time to get ready for its intended use or sale. Other borrowing costs are recognised in the profit or loss in the period in which they occur.
7.4 Intangible assets
Details of “Intangible assets” are given in Note 41.
Amortisation recognised during the year in respect of intangible assets is included under the item of “Amortisation of intangible assets” under “Depreciation and amortisation” in profit or loss.
Refer Note 21
7.5 Impairment of non-financial assets
At each reporting date, the Group reviews the carrying amounts of its non-financial assets (other than investment properties and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Good will is tested annually for impairment.
For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that is largely independent of the cash inflows of other assets or CGUs. Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination.
The “recoverable amount” of an asset or CGU is the greater of its value in use and its fair value less costs to sell. “Value in use” is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.
An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount.
The Group’s corporate assets do not generate separate cash inflows and are used by more than one CGU. Corporate assets are allocated to CGUs on a reasonable and consistent basis and tested for impairment as part of the testing of the CGUs to which the corporate assets are allocated.
Impairment losses are recognised in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had
7.6 Dividends payable
Dividends on ordinary shares are recognised as a liability and deducted from equity when they are recommended and declared by the Board of Directors and approved by the shareholders. Interim dividends are deducted from Equity when they are declared and no longer at the discretion of the Bank.
Dividends for the year, that are approved after the reporting date and not provided for, are disclosed as an event after the reporting period in accordance with the Sri Lanka Accounting Standard – LKAS 10 on “Events after the Reporting Period” in Note 70.
7.7 Employee benefits
7.7.1 Defined Benefit Plans (DBPs)
A defined benefit plan is a post-
employment benefit plan other than a Defined contribution plan as defined in the Sri Lanka Accounting Standard – LKAS 19 on “Employee Benefits”.
188.8.131.52 Defined benefit pension plans
184.108.40.206.1 Description of the plans and employee
The Bank operates three types of Defined Benefit Pension Plans for its employees as described below:
- The Bank has an approved Pension Fund, which was established in 1992. As per the Deed of Trust, only those employees who were less than 45 years of age as at January 1, 1992 were covered by the Pension Fund in order to leave a minimum contribution for a period of 10 years before they are eligible to draw pension from the Pension Fund. Further, only the employees who joined the Bank on or before December 31, 2001, were in pensionable service of the Bank:
During 2006, the Bank offered a restructured pension scheme to convert the DBP to a Defined Contribution Plan (DCP) for the pensionable employees of the Bank and over 99% of them accepted it. As a result, the above Pension Fund now covers only those employees who did not opt for the restructured pension scheme and those employees who were covered by the Pension Fund previously but retired before the restructured pension scheme came into effect:
- Provision for pensions has been made for those employees who retired on or before December 31, 2001, and on whose behalf the Bank could not make contributions to the Retirement Pension Fund for more than 10 years. This liability although not funded has been provided for in full in the Financial Statements:
- Provision has been made in the Financial Statements for Retirement Gratuity from the first year of service for all employees who joined the Bank on or after January 1, 2002, as they are not in pensionable service of the Bank under either the DBP or DCP. However, if any of these employees resign before retirement, the Bank is liable to pay gratuity to such employees. This liability although not funded has been provided for in full in the Financial Statements.
The subsidiaries of the Bank do not operate Pension Funds.
The Bank’s net obligation in respect of Defined Benefit Pension Plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets, as per the Sri Lanka Accounting Standard – LKAS 19 on “Employee Benefits” as detailed in Note 50.
The past service cost is recognised as an expense on a straight-line basis over the period until the benefits become vested.
If the benefits are already vested following the introduction of, or changes to, a pension plan, past service cost is recognised immediately.
220.127.116.11.2 Recognition of actuarial gains or losses
Actuarial gains or losses are recognised in the OCI in the period in which they arise.
18.104.22.168.3 Recognition of retirement
The defined benefit asset or liability comprises the present value of the defined benefit obligation, less past service cost not yet recognised and less the fair value of plan assets out of which the obligations are to be settled directly. The value of any asset is restricted to the sum of any past service cost not yet recognised and the present value of any economic benefits available in the form of refunds from the plan or reductions in the future contributions to the plan.
The calculation of defined benefit obligations is performed annually by a qualified actuary using the Projected Unit Credit Method. When the calculation results in a potential asset for the Group, the recognised asset is limited to the present value of economic benefits available in
the form of any future refunds from the
plan or reductions in future contributions
to the plan. To calculate the present
value of economic benefits, consideration
is given to any applicable minimum
Remeasurement of the net defined benefit liability, which comprises actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in OCI. The Group determines the net interest expense/(income) on the net defined benefit liability/(asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then net-defined benefit liability/(asset), taking into account any changes in the net-defined benefit liability/(asset) during the period as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognised in profit or loss.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognised immediately in profit or loss. The Group recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs.
Amounts recognised in profit or loss as expenses on DBPs and provisions made on DBPs together with the details of valuation methods are given in Notes 20 and 50.
7.7.2 Defined Contribution Plans (DCPs)
A defined contribution plan is a post-employment plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligations to pay a further amount. Obligations to DCPs are recognised in the profit or loss as the related service is provided. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available. The Group has three such plans as explained in Notes 22.214.171.124, 126.96.36.199 and 188.8.131.52 below.
Amounts recognised in profit or loss as expenses on DCPs are given in Note 20.
184.108.40.206 Defined contribution pension plan
As explained in Note 220.127.116.11.1 (a), during 2006, the Bank restructured its pension scheme which was a DBP to a DCP. This restructured plan was offered on a voluntary basis to the eligible employees of the Bank. The scheme provides for lump sum payments instead of commuted/monthly pensions to the eligible employees at the point of their separation, in return for surrendering their pension rights. The lump sum offered consisted of a past service package and a future service package. The shortfall on account of the past service package in excess of the funds available in the Pension Fund was borne by the Bank in 2006.
The future service package includes monthly contributions to be made by the Bank for the employees who accepted the offer, to be made during their remaining period of service, at predetermined contribution rates to be applied on their salaries, which are estimated to increase for this purpose at 10% p.a. based on the salary levels that prevailed as at the date of implementation of this scheme. In addition, interest to be earned on the assets of the DCP is also allocated to the employees who opted for the restructured scheme.
The assets of this Fund are held separately from those of the Bank and are independently administered by the Trustees as per the provisions of the Trust Deed.
18.104.22.168 Employees’ Provident Fund
The Bank and employees contribute to an approved Private Provident Fund at 12% and 8% respectively, on the salaries of each employee. Other local entities of the Group and their employees contribute at the same percentages as above to the Employees’ Provident Fund managed by the CBSL.
22.214.171.124 Employees’ Trust Fund
The Bank and other local entities of the Group contribute at the rate of 3% of the salaries of each employee to the Employees’ Trust Fund managed by the CBSL.
7.7.3 Other long-term employee benefits
The Group’s net obligation in respect of long-term employee benefits other than pension plans is the amount of future benefits that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value and the fair value of any related assets is deducted. The discount rate used as the yield as at the reporting date is the current market rate that has been extrapolated to reflect long-term rate of discount based on market rates of interest on short-term Corporate/Government Bonds and anticipated long-term rate of inflation. The calculation is performed using the Projected Unit Credit Method. Remeasurements are recognised in profit or loss in the period in which they arise.
The Group does not have any other long-term employee benefit plans.
7.7.4 Terminal benefits
Termination benefits are expensed at the earlier of when the Group can no longer withdraw the offer of those benefits and when the Group recognises costs for a restructuring. If benefits are not expected to be wholly settled within 12 months of the reporting date, then they are discounted.
7.7.5 Short-term employee benefits
Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
7.7.6 Share-based payment arrangements
Share-based payment arrangements in which the Group receives services as consideration for its own equity instruments are accounted for as equity-settled share-based payment transactions, regardless of how the equity instruments are obtained by the Group. Senior Executive Employees of the Group receive remuneration in the form of share-based payment transactions, where by employees render services as consideration for equity instruments (equity-settled transactions). The Group does not operate any cash-settled share-based payment transactions.
The Group applies the requirements of the Sri Lanka Accounting Standard – SLFRS 2 on “Share-based Payment” (SLFRS 2) in accounting for equity-settled share-based payment transactions, if any, that were granted after January 1, 2012 and had not vested at the same date. As per SLFRS 2, on the grant date fair value of equity-settled share-based payment awards (i.e., share options) granted to employees is recognised as personnel expense, with a corresponding increase in equity, over the period in which the employees unconditionally become entitled to the awards. The amount recognised as an expense is adjusted to reflect the number of share awards for which the related service and non-market performance vesting conditions are expected to be met, so that the amount ultimately recognised as an expense is based on the number of share awards that do meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.
The Employee Share Option Plan – 2015, which was granted is subjected to the above accounting treatment.
However, the Employee Share Option Plan – 2008 which was granted prior to January 1, 2012, the effective date of the SLFRS 2 was not subjected to the above accounting treatment and the proceeds received during the year by the Group in consideration for shares issued were accounted for as Stated Capital within Equity.
The details of Employee Share Option Plans are given in Notes 53.2 and 54.
The dilutive effect of outstanding options
is reflected as additional share dilution in
the computation of diluted Earnings per Share as disclosed in Notes 25.2 and 25.3.
7.8 Other liabilities
Details of “Other liabilities” are given in Note 50.
Provision for restructuring is recognised when the Group has approved a detailed and formal restructuring plan, and the restructuring either has commenced or has been announced publicly. Future operating losses arising on such restructuring are not provided for.
The Group does not have any provision for restructuring as at the reporting date.
7.10 Onerous contracts
A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Group recognises any impairment loss on the assets associated with that contract.
The Group does not have any onerous contracts as at the reporting date.
7.11 Bank levies
A provision for Bank levies is recognised when the condition that triggers the payment of the levy is met. If a levy obligation is subject to a minimum activity threshold so that the obligating event is reaching a minimum activity, then a provision is recognised when that minimum activity threshold is reached.
7.12 Financial guarantees, letters of
credit and undrawn loan commitments
“Financial guarantees” are contracts that require the Group to make specified payments to reimburse the holder for a loss that it incurs because a specified debtor fails to make payment when it is due in accordance with the terms of a debt instrument. Undrawn loan commitments and Letters of Credits are commitments under which, over the duration of the commitment, the Bank is required to provide a loan with pre-specified terms to the customer.
Financial guarantees are initially recognised in the financial statements (within other liabilities) at fair value, being the premium received. Subsequent to initial recognition, the Bank’s liability under each guarantee is measured at the higher of the amount initially recognised less cumulative amortisation recognised in the Income Statement, and – under LKAS 39 – the best estimate of expenditure required to settle any financial obligation arising as a result of the guarantee, or – under SLFRS 9 – an ECL provision if appropriate.
The premium received is recognised in profit or loss in “Net fees and commission income” on a straight-line basis over the life of the guarantee.
Similar to financial guarantee contracts for letters of credit and undrawn loan commitments, a provision was made if they were an onerous contract under LKAS 39, but from January 1, 2018, these contracts are in the scope of the ECL requirements. The nominal contractual value of financial guarantees, letters of credit and undrawn loan commitments, where the loan agreed to be provided is on market terms, are not recorded on in the SOFP. The nominal values of these instruments together with the corresponding ECLs are disclosed in Note 59.
Loan commitments at below market interest rates drawdown are initially measured at fair value and subsequently measured at the higher of the amount of the ECL allowance and the amount initially recognised less, when appropriate, the cumulative amount of income recognised.
All discernible risks are accounted for in determining the amount of known liabilities as explained in Note 7.8 above.
Details of the Commitments are given in Notes 59.2 and 59.3.
7.14 Contingent liabilities and
A detailed list of “Contingent liabilities and commitments” and “Litigation against the Bank and the Group” are given in Notes 59 and 61.
7.15 Stated capital and reserves
Details of the “Stated capital and reserves” are given in Notes 53, 55, 56 and 57 to the Financial Statements.
7.16 Earnings per share (EPS)
Details of “Basic and Diluted EPS” are given in Note 25.
7.17 Operating segments
Details of “Operating segments” are given in Note 63.
7.18 Fiduciary assets
The Bank provides trust and other fiduciary services that result in the holding or investing of assets on behalf of its clients. Assets held in a fiduciary capacity are not reported in these Financial Statements as they do not belong to the Bank.