Page 72 - Annual Report 2022

Banka Kombëtare Tregtare Annual Report 2022 10

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)
(f) Income tax expense (continued)

The Bank determines taxation at the end of the year in accordance with the Albanian tax legislation. In 2022, tax on profit is equal
to 15% of the taxable income. Taxable income is calculated by adjusting the statutory profit before taxes for certain income and
expenditure items as required under the Albanian law. The statutory profit is based on the financial records kept by the Bank
for regulatory purposes and may differ from the International Financial Reporting Standards reported financial result. However,
current income tax payable for the 2022 financial year is equal according to both standards.
Deferred tax is provided for temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences:
the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination
and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries to the extent
that they probably will not 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.