Page 70 - Annual Report 2022

Banka Kombëtare Tregtare Annual Report 2022 8

Banka Kombëtare Tregtare Sh.a.
Notes to the Consolidated Financial Statements for the year ended
31 December 2022 (Amounts in USD, unless otherwise stated)

3. Significant accounting policies (continued)
(a) Basis of consolidation (continued)

(i) Subsidiaries (continued)
Consolidation of a subsidiary begins when the Bank obtains control over the subsidiary and ceases when the Bank loses control
of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the
consolidated statement of profit or loss and other comprehensive income from the date the Bank gains control until the date
when the Bank ceases to control the subsidiary.
The consolidated financial statements have been prepared using uniform accounting policies for like transactions and other
events in similar circumstances.
On 3 September 2007 BKT opened its first branch outside of the territory of the Republic of Albania. The Administrative Office of
this branch was opened in Prishtina, Kosovo. Pursuant to the request of “Banka Kombetare Tregtare” Kosovo dated 14.02.2018,
in reference to the change of the transformation from a branch to a subsidiary, the Central Bank of Kosovo has approved on 30
April 2018 the transformation into subsidiary of Banka Kombetare Tregtare – Kosovo Branch. Under this decision, all the rights
and obligations deriving from BKT – Kosovo Branch shall remain rights and obligations of BKT Kosovo Sh.A as a subsidiary. The
Spin Off date of BKT Kosovo is effective as at 1 January 2019. The functional currency is the EURO. The effect of translating
foreign operations into the Bank’s functional currency is explained in note 3.(b).(ii) below.
BKT has established in 2022 the electronic money company “BKT Pay” investing EUR 1,000,000 into its share capital at a
participation rate of 100%. BKT Pay was legally registered on September 26, 2022. BKT Pay has applied to obtain the license
from Bank of Albania and is expected to start the activity within 2023.
(ii) Transactions eliminated on consolidation
All intragroup assets and liabilities, equity, income, expenses and cash flows (except for foreign currency transaction gains or
losses) relating to transactions between members of the Group are eliminated in full on consolidation. Unrealised losses are
eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
(iii) Business combinations
The Group applies the acquisition method in accounting for business combinations. The consideration transferred by the Group
to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair values of assets transferred, liabilities
incurred and the equity interests issued by the Group, which includes the fair value of any asset or liability arising from a
contingent consideration arrangement. Acquisition costs are expensed as incurred. Assets acquired and liabilities assumed are
generally measured at their acquisition-date fair values.
(b) Foreign currency
(i) Foreign currency transactions
Transactions in foreign currencies are translated into the respective functional currency of the operation at the spot exchange
rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are
retranslated into the functional currency at the spot exchange rate at that date. The foreign currency gain or loss on monetary
items is the difference between amortised cost in the functional currency at the beginning of the period, adjusted for effective
interest and payments during the period, and the amortised cost in foreign currency translated at the exchange rate at the end of
the period. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated
into the functional currency at the spot exchange rate at the date that the fair value was determined. Foreign currency differences
arising on retranslation are recognised in profit or loss.
Non-monetary assets and liabilities denominated in foreign currencies, which are stated at historic cost, are translated at the
foreign exchange rate ruling at the date of the transaction, with the exception of the share capital, which is issued and maintained
in USD as per the legislation in Albania as well as per Special Law No. 8634, dated 6 July 2000, between the Bank’s shareholders
and the Republic of Albania on the Bank’s privatisation. Furthermore, the Operating Policy Guidelines of the Bank require that
the share capital be hedged by USD assets, and it is therefore treated as a monetary item, with the revaluation difference being
taken to profit or loss together with the revaluation difference of the corresponding USD asset, which offset each other in a
natural hedge.