Page 73 - Annual Report 2022

11 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)
(g) Financial assets and liabilities (continued)

(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 and the consideration paid and payable is recognised in profit or loss.
The Bank enters into transactions whereby it transfers assets recognised on its statement of financial position, but retains either
all or substantially all of the risks and rewards of the transferred assets or a portion of them. If all or substantially all risks and
rewards are retained, then the transferred assets are not derecognised from the statement of financial position. Transfers of assets
with retention of all or substantially all risks and rewards include, for example, securities lending and repurchase transactions.

When assets are sold to a third party with a concurrent total rate of return swap on the transferred assets, the transaction is
accounted for as a secured financing transaction similar to repurchase transactions.
In transactions in which the Bank neither retains nor transfers substantially all the risks and rewards of ownership of a financial
asset, it derecognises the asset if it does not retain control over the asset. The rights and obligations retained in the transfer are
recognised separately as assets and liabilities as appropriate. In transfers in which control over the asset is retained, the Bank
continues to recognise the asset to the extent of its continuing involvement, determined by the extent to which it is exposed to
changes in the value of the transferred asset.
In certain transactions the Bank retains the obligation to service the transferred financial asset for a fee. The transferred asset
is derecognised in its entirety if it meets the derecognition criteria. An asset or liability is recognised for the servicing contract,
depending on whether the servicing fee is more than adequate (asset) or is less than adequate (liability) for performing the
servicing.
The Bank writes off certain loans and investment securities when they are determined to be uncollectible.
(iii) Classification and initial measurement of financial assets
All financial assets are initially measured at fair value adjusted for transaction costs (where applicable).
Financial assets, other than those designated and effective as hedging instruments, are classified into the following categories:

• amortised cost
• fair value through profit or loss (FVTPL)
• fair value through other comprehensive income (FVOCI).
The classification is determined by both:
• the entity’s business model for managing the financial asset
• the contractual cash flow characteristics of the financial asset.

All income and expenses relating to financial assets are recognised in profit or loss.