IAS 39; 2016

180 Pages·2017·2.35 MB·English

Illustrative
disclosures
for banks
IAS 39
31 December 2016 year ends
kpmg.com/ifrs
Contents
About this guide 2
Independent auditors’ report 6
Consolidated fnancial statements 12
Financial highlights 13
Consolidated statement of fnancial position 14
Consolidated statement of proft or loss and other
comprehensive income 16
Consolidated statement of changes in equity 18
Consolidated statement of cash fows 22
Notes to the consolidated fnancial statements 24
Appendices 171
I New standards or amendments for 2016 and
forthcoming requirements 171
II Presentation of comprehensive income –
Two-statement approach 173
Acknowledgements 175
Keeping in touch 176
Notes
Basis of preparation 24 Accounting policies 134
1. Reporting entity 24 42. Basis of measurement 134
2. Basis of accounting 24 43. Changes in accounting policies 135
3. Functional and presentation currency 24 44. Signifcant accounting policies 136
4. Use of judgements and estimates 24 45. Standards issued but not yet effective 159
Financial risk review and fair value 25
5. Financial risk review 25
6. Fair values of fnancial instruments 59
Performance for the year 70
7. Operating segments 70
8. Net interest income 74
9. Net fee and commission income 75
10. Net trading income 76
11. Net income from other fnancial instruments
at FVTPL 77
12. Other revenue 78
13. Personnel expenses 79
14. Other expenses 85
15. Earnings per share 86
Income taxes 87
16. Income taxes 87
17. Classifcation of fnancial assets and fnancial
liabilities 90
Asets 90
18. Cash and cash equivalents 94
19. Trading assets and liabilities 95
20. Derivatives held for risk management 99
21. Loans and advances to banks 101
22. Loans and advances to customers 102
23. Investment securities 104
24. Property and equipment 106
25. Intangible assets and goodwill 107
26. Other assets 109
Liabilities and equity 111
27. Deposits from banks 111
28. Deposits from customers 112
29. Debt securities issued 113
30. Subordinated liabilities 114
31. Provisions 115
32. Other liabilities 116
33. Capital and reserves 117
Group composition 118
34. Group subsidiaries 118
Other information 119
35. Involvement with unconsolidated structured
entities 19
36. Transfers of fnancial assets 120
37. Contingencies 124
38. Related parties 125
39. Operating leases 126
40. Subsequent events 127
41. Financial risk management 128
2 | Illustrative disclosures of r bansk under IA S 93
About this guide
hT is guide has been produced by the KPMG International tS andards Group p( art
o f KPMG IFRG Limited ) and the viesw epx ressed herein are those o f the KPMG
International tS andards Group.
It is intended to help preparers in the preparation and presentation o f n� ancial
statements in accordance iw th IFR S by illustrating one possible of rmat of r n� ancial
statements of r a c� titious banik ng group involved in a range o f general banik ng
activities ; the ban k is not a r� stt- ime adopter o f IFR.S For more inof rmation on
adopting IFR S of r the r� st time, see hC apter.6 � 1 in the 1t3 h edition 2011/6 7 o f
our publication Insights into IFRS.
Standards covered hT is guide ree� cts standards and interpretations that have been issued by the
IA BS as at 13 eD cember 201 6 that are reuq ired to be applied by an entity iw th an
annual period beginning on 1 aJ nuary 201 6 c‘( urrently eef f ctive reuq irements.)’
hT e early adoption o f standards that are eef f ctive of r annual periods beginning
after 1aJ � nuary 201 6 of‘( rthcoming reuq irements )’ has not been illustrated in
thisg� uide.
hT is guide is not intended to be seen as a complete and ehx austive summary
o f all disclosure reuq irements under IFR.S Instead, it of cuses on disclosure
reuq irements that are particularly relevant to bansk . For more eax mples o f
other disclosures see our Guide to annual fnancial statements – Illustrative
disclosures cO( tober 201.)6
Other guidance In addition, IFR S and its interpretation change over time. Accordingly, this guide
should not be used as a substitute of r reef rring to the standards and other
relevant interpretative guidance.
Preparers should also consider applicable legal and regulatory reuq irements.
hT is guide does not consider the reuq irements o f any particular uj risdiction.
In preparing this guide, ew had regard to the recommendations made by the
nE hanced iD sclosurea T s k Force FTD E ( ) in its report Enhancing the Risk Disclosures
of Banks, issued on 2 9 cO tober 2012, and its revision issued on 7 eD cember
201,5 Impact of Expected Credit Loss Approaches on Bank Risk Disclosures.
hT e reports’ purpose is to help bansk improve their communication iw th their
staek holders in the area o f ris k disclosures, iw th the ultimate aim o f improving
investor cond� ence. hT e scope o f the recommendations is iw der than the
n� ancial statements because they apply to all n� ancial reports, including
public disclosures reuq ired by regulators and other communications iw th
staek holders. In some cases, recommendations in the report may impact the
manner o f presentation o f inof rmation that is already reuq ired to be disclosed
under IFR.S In other cases, it recommends disclosure o f ne w inof rmation.
Many regulators continue to of cus on disclosures in n� ancial statements. For
eax mple, the uE ropean eS curities and Marek ts Authority MSE( A ) has published
its public statement on uE ropean common enof rcement priorities of r 201 6
and issues of r consideration in implementing IFR S 9 Financial Instruments and
IFR1�S 5 Revenue from Contracts with Customers.
In addition, in preparing this guide ew also had regard to the recommendations
made by the aB sel oC mmittee on aB nik ng uS pervision in its Guidance on credit
risk and accounting for expected credit losses issued in eD cember 201.5
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Appendices Notes Primary statements Auditors’ report INTRODUCTION
About this guide � | 3
hT is guide includes an updated illustrative auditors ’ report, as a result o f the
What’s new in 2016?
adoption o f the of lloiw ng revised and ne w International tS andards on Auditing
I( AS s,) hw ich are eef f ctive of r audits o f n� ancial statements of r periods ending
on or atf er 1 5 eD cember 201:6
– IAS 700 R( evised ) Forming an Opinion and Reporting on Financial Statements;
– IAS 701 Communicating Key Audit Matters in the Independent Auditor’s
Report ; and
– IAS 720 R( evised ) The Auditor’s Responsibilities Relating to Other Information.
hT e guide also provides epx anded prei- mplementation disclosures on the
impact o f the adoption o f IFR.9 �S
Appendi x I provides a comprehensive list o f ne w reuq irements, distinguishing
betew en those that are eef f ctive of r an annual reporting period beginning on
1aJ � nuary 201,6 and those iw th a later eef f ctive date. oN ne o f the ne w standards
or amendments to standards had an impact on this guide.
hT is guide is part o f our suite o f publications – Guides to fnancial statements –
Need for judgement
and specic� ally of cuses on compliance iw th IFR.S Although it is not ehx austive,
this guide illustrates the disclosures reuq ired by IFR S of r one hypothetical
banik ng group, largely iw thout regard to materiality.
hT e preparation and presentation o f n� ancial statements reuq ire the preparer to
eex rcise uj dgement, in terms o f the choice o f accounting policies, the ordering
o f notes to the n� ancial statements, ho w the disclosures should be tailored
to ree� ct the entitys’ specic� circumstances, and the relevance o f disclosures
considering the needs o f the users.
pS ecic� guidance on materiality and its application to the n� ancial statements is
Materiality
included in paragraphs 213–9 o f IA S 1 Presentation of Financial Statements.
Materiality is relevant to the presentation and disclosure o f the items in
the n� ancial statements. Preparers need to consider hw ether the n� ancial
statements include all o f the inof rmation that is relevant to understanding an
entitys’ n� ancial position on the reporting date and its n� ancial perof rmance
during the reporting period.
Preparers also need to taek care not to reduce the understandability o f an
entitys’ n� ancial statements by obscuring material inof rmation iw th immaterial
inof rmation or by aggregating material inof rmation that is dief f rent by nature or
uf nction. Individual disclosures that are not material to the n� ancial statements
do not have to be presented – even i f they are a minimum reuq irement o f a
standard. Preparers need to consider the appropriate level o f disclosure based
on materiality of r the reporting period.
Step-up in the Investors continue to as k of r a stepu- p in the uq ality o f business reporting,
so entities should be careuf l not to become buried in compliance to the
quality of fnancial
ecx lusion o f relevance. In preparing its n� ancial statements, an entity needs
statements to ek ep in mind its iw der responsibilities of r reporting this inof rmation in
the most meaninguf l aw y. For more inof rmation, see our Better business
reportingew � bsite.
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Appendices Notes Primary statements Auditors’ report INTRODUCTION
4 | Illustrative disclosures of r bansk under IA S 93
Reef rences are included in the letf h- and margin o f this publication. Generally,
References
the reef rences relate only to presentation and disclosure reuq irements.
IAS 1.82(a) Paragraph 28 a( ) o f IA S 1.
[IAS 39.46(a)] Paragraph a(64 ) o f IA S .93 hT e bracek t indicates that
the paragraph relates to recognition and measurement
reuq irements, as opposed to presentation and disclosure
reuq irements.
Insights 2.3.60.10 Paragraph 2..3 06 .10 o f the 1t3 h edition 2011/6 7 o f our
publication Insights into IFRS.
hT e of lloiw ng marik ngs in the letf h- and margins indicate the of lloiw ng.
In the contetx o f consolidated n� ancial statements, the disclosures in
respect o f operating segments ( oN te 7 ) and PE S s( tatement o f prot� or loss
and ICO , and oN te 1 )5 apply only i f thep� arent:
– has debt or euq ity instruments o( perating segments ) or ordinary shares/
potential ordinary shares PE( )S that are traded in a public marek t – i.e.
a domestic or of reign stoc k ecx hange or an overt- hec- ounter marek t,
including local and regional marek ts ; or
– l� es, or is in the process o f l� ing, its n� ancial statements iw th a securities
commission or other regulatory organisation of r the purpose o f issuing
any class o f instruments in a public marek t.
Maoj r changes related to reuq irements that are ne w in 201.6
Footnotes in italics refer to recommendations in the EDTF report, which are not
specifc requirements of IFRS.
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Appendices Notes Primary statements Auditors’ report INTRODUCTION
About this guide � | 5
hT e of lloiw ng abbreviations are used otf en in this guide.
Abbreviations
GC U aC shg- enerating unit
FTDE nE hanced iD sclosure aT s k Force
PE S aE rnings per share
FPTV L Fair value through prot� or loss
IABS International Accounting tS andards oB ard
IU IFR S Interpretations oC mmittee publication IFRIC Update
ICN oN nc- ontrolling interests
oN tes oN tes to the n� ancial statements
ICO tO her comprehensive income
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Appendices Notes Primary statements Auditors’ report INTRODUCTION
6 | Illustrative disclosures of r bansk under IA S 93
[Name of bank]
Independent auditors’ report
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Appendices Notes Primary statements AUDITORS’ REPORT Introduction
Independent auditors ’ report | 7
a
Independent auditors’ report
To the Shareholders of [Name of bank]
Opinion
eW have audited the consolidated n� ancial statements o f [ Name of bank ] and its subsidiaries t( he
Group,) hw ich comprise the consolidated statement o f n� ancial position as at 13 eD � cember 201,6
and the consolidated statements o f prot� or loss and other comprehensive income, changes in
euq ity and cash o� sw of r the year then ended, and notes to the consolidated n� ancial statements,
including signic� ant accounting policies and other epx lanatoryi� nof rmation.
In our opinion, the accompanying consolidated n� ancial statements present af irly, in all material
respects, the consolidated n� ancial position o f the Group as at 13 eD cember2� 01,6 and its
consolidated n� ancial perof rmance and its consolidated cash o� sw of r the year then ended in
accordance iw th International Financial Reporting tS andards I( FR.)S
Basis for Opinion
eW conducted our audit in accordance iw th International tS andards on Auditing I( AS s.) uO r
responsibilities under those standards are uf rther described in the A‘ uditors ’ Responsibilities of r the
Audit o f the oC nsolidated Financial tS atements ’ section o f our report. eW are independent o f the
Group in accordance iw th the ethical reuq irements that are relevant to our audit o f the consolidated
n� ancial statements in [ jurisdiction,] and ew have uf ll� led our ethical responsibilities in accordance
iw th these reuq irements. eW believe that the audit evidence ew have obtained is suc� f ient and
appropriate to provide a basis of r our opinion.
Key Audit Matters
Key audit matters are those matters that, in our proef ssional uj dgement, ew re o f most signic� ance
in our audit o f the consolidated n� ancial statements o f the current period. hT ese matters ew re
addressed in the contetx o f our audit o f the consolidated n� ancial statements as a hw ole, and in
of rming our opinion thereon, and ew do not provide a separate opinion on these matters.
Impairment of loans and advances to customers
eS e oN tes 22 and v()J(4 ii) to the consolidated n� ancial statements.
The key audit matter How the matter was addressed in our audit
Impairment o f loans and advances to customers uO r procedures in this area included :
is a ek y audit matter due to the signic� ance o f
– assessing the trends in the local credit
the balances, and compleix ty and subej ctivity
environment, considering their liek ly impact
over estimating timing and amount o f
on the Groups’ epx osures and using this
impairment. hT e ris k is that the amount o f
inof rmation to of cus our testing on the ek y
impairment may be misstated.
ris k areas;
hT e estimation o f the impairment loss alloaw nce
– assessing and testing the design and
on an individual basis reuq ires management to
operating eef f ctiveness o f the controls over
maek uj dgements to determine hw ether there
the Groups’ loan impairment process – of r
is obej ctive evidence o f impairment and to maek
eax mple :
assumptions about the n� ancial condition o f the
borroew rs and epx ected uf ture cash o� sw .
a. hT is eax mple report has been prepared based on the of lloiw ng International tS andards on Auditing I( AS s,) eef f ctive
of r audits o f n� ancial statements of r periods ending on or atf er 1 5 eD cember 201:6
– IAS 700 R( evised ) Forming an Opinion and Reporting on Financial Statements;
– IAS 701 Communicating Key Audit Matters in the Independent Auditor’s Report ; and
– IAS 720 R( evised ) The Auditor’s Responsibilities Relating to Other Information and Related Conforming Amendments.
hT e of rmat o f the eax mple report does not ree� ct the legal or regulatory reuq irements o f any particular uj risdiction.
© 2017 KPMG IFRG Limited, a UK company, limited by guarantee. All rights reserved.
Appendices Notes Primary statements AUDITORS’ REPORT Introduction
8 | Illustrative disclosures of r bansk under IA S 93
hT e collective impairment loss alloaw nce - controls over the model process, including
relates to retail loans and losses incurred but building, monitoring, periodic validation and
not yet identie� d I( RNB loss alloaw nce ) on approvals;
other loans. hT e audit matters include controls
- controls over the completeness and
over the models used, accuracy o f input and
accuracy o f data input into models;
appropriateness o f model overlays. hT e model
overlays are reuq ired to address certain nk onw - of r the principal underlying system
data and system issues and to ree� ct economic generating credit data, I T controls such as
conditions at the year end. access, data management, and change
management ;
- controls over the identic� ation o f hw ich
loans and advances ew re impaired. For
individually signic� ant loans this included
controls over credit grading and the
monitoring process ; and
- the management revie w process over the
calculations ;
– testing a sample o f model overlays, including
evaluating the rationale of r the aduj stments,
the source o f data used, ek y assumptions
and sensitivity o f the overlays to these
assumptions. oC mparing the assumptions
used to selected etx ernally available industry,
n� ancial and economic data;
– rep- erof rming certain credit procedures as
of llosw :
- of r individually signic� ant loans:
– perof rming a credit assessment o f a
sample o f loans in credit ris k grades 6 �
and 7 to determine hw ether their
grading aw s appropriate and assess
the reasonableness o f the amount
and timing o f estimated recoverable
cash o� sw , including realisable value
o f collateral and ho w of rbearance
aw s considered. hW ere available,
ew compared the assumptions and
estimates made by management to that
etx ernally available ; and
– perof rming a credit assessment o f
a sample o f loans graded 1 to 5 to
determine hw ether their grading aw s
appropriate ; and
- of r retail loans:
– testing the accuracy o f ek y inputs into
the models;
– of r a selection o f models, using our
credit modelling specialists to assess
the appropriateness o f the impairment
calculation methodology ; and
– rep- erof rming certain calculations ; and
- assessing hw ether disclosures in the
n� ancial statements appropriately ree� ct
the Groups’ epx osure to credit ris.k
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Appendices Notes Primary statements AUDITORS’ REPORT Introduction