Page 79 - Annual Report 2023

ANNUAL REPORT 2023 10
Notes to the Consolidated Financial Statements for the year ended 31 December 2023
(amounts in USD, unless otherwise stated)

reverse in the foreseeable future.
Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on
the laws that have been enacted or substantively enacted by the reporting date.
In determining the amount of current and deferred tax the Bank takes into account the impact of uncertain tax positions and whether
additional taxes and interest may be due. The Bank believes that its accruals for tax liabilities are adequate for all open tax years based
on its assessment of many factors, including interpretations of tax law and prior experience. This assessment relies on estimates and
assumptions and may involve a series of judgments about future events. New information may become available that causes the Bank
to change its judgment regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense in the
period that such a determination is made.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset
can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that
the related tax benefit will be realised. Additional income taxes that arise from the distribution of dividends by the Bank are recognised
at the same time as the liability to pay the related dividend is recognised.

Tax applications for foreign subsidiaries of the Bank:
Republic of Kosovo
The applicable corporate tax rate in Republic of Kosovo is 10%. Under Kosovo tax legislation system, tax losses can be carried forward
to be offset against future taxable income for up to seven years.

(g) Financial assets and liabilities
(i) Recognition
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial
instrument.

The Bank initially recognises loans, deposits, debt securities issued and subordinated liabilities on the date at which they are originated.
Regular way purchases and sales of financial assets are recognised on the trade date at which the Bank commits to purchase or sell
the asset, with the exception of spot foreign exchange transactions which are recognized on settlement date (see note 3(b) (iv)). All
other financial assets and liabilities are initially recognised on the trade date at which the Bank becomes a party to the contractual
provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition
or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are
added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction
costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised
immediately in profit or loss.

(ii) Derecognition
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial
asset and substantially all the risks and rewards are transferred.
A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.
The Bank derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the
financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Bank neither transfers nor
retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Bank recognises its
retained interest in the asset and an associated liability for amounts it may have to pay. If the Bank retains substantially all the risks
and rewards of ownership of a transferred financial asset, the Bank continues to recognise the financial asset and also recognises
a collateralised borrowing for the proceeds received. The Bank derecognises financial liabilities when, and only when, the Bank’s
obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognised