Page 71 - Annual Report 2022

9 Banka Kombëtare Tregtare Annual Report 2022

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)
(b) Foreign currency (continued)

(ii) Foreign operations
The assets and liabilities of foreign operations are translated into Lek at spot exchange rates at the reporting date. The income
and expenses of foreign operations are translated into Lek at spot exchange rates at the dates of the transactions. Foreign
currency differences on the translation of foreign operations are recognised directly in other comprehensive income. Such
differences have been recognised in the foreign currency translation reserve.
(iii) Translation of financial statements from functional currency to presentation currency
Translation of financial statements from functional currency to presentation currency is done as follows:

• assets and liabilities for reporting date (including comparatives) are translated at the closing rate at the date of that reporting
date, which is Bank of Albania’s rate at 1 USD = 107.05 Lek (2021: 106.54).
• income and expenses (including comparatives) are translated at exchange rates at the dates of the transactions.
• equity items other than the net profit for the period and share capital, are translated at exchange rates at the dates of the
transactions.
• share capital has been translated as described in paragraph 3.(b).(i) above; and
• all resulting exchange differences are recognised through other comprehensive income as a separate component of equity in
the “Translation reserve” account.
(iv) Spot foreign exchange transactions
The Bank during the normal course of business enters into spot foreign exchange transactions with settlement dates 1 or 2
days after the trade date. These transactions are recorded in the financial statements on the settlement date. Foreign currency
differences are recognised in profit or loss on the settlement date.
(c) Interest
Interest income and expense are recognised in the profit or loss using the effective interest method. The effective interest rate is
the rate that exactly discounts the estimated future cash payments and receipts through the expected life of the financial asset
or liability (or, where appropriate, a shorter period) to the carrying amount of the financial asset or liability. When calculating the
effective interest rate, the Bank estimates future cash flows considering all contractual terms of the financial instrument but not
future credit losses.

The calculation of the effective interest rate includes all fees paid or received that are an integral part of the effective interest rate.
Transaction costs include incremental costs that are directly attributable to the acquisition or issue of a financial asset or liability.
(d) Fees and commission
Fees and commission income and expenses that are integral to the effective interest rate on a financial asset or liability are
included in the measurement of the effective interest rate. Other fees and commission income are recognised as the related
services are performed. Other fees and commission expense relate mainly to transaction and service fees, which are expensed
as the services are received.
(e) Lease payments made
Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease
incentives received are recognised as an integral part of the total lease expense, over the term of the lease.
(f) Income tax expense
Income tax expense comprises current and deferred tax. Income tax expense is recognized in the profit or loss except to the
extent that it relates to items recognized directly in equity or in other comprehensive income. Current tax is the expected tax
payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any
adjustment to tax payable in respect of previous years.