Page 74 - Annual Report 2022

Banka Kombëtare Tregtare Annual Report 2022 12

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)

(iii) Classification and initial measurement of financial assets (continued)
- Assessment of whether contractual cash flows are solely payments of principal and interest (SPPI)
As per the new standard, one of the conditions for financial assets to be classified either under ‘amortised cost’ or ‘Fair Value
Through Profit or Loss (“FVTPL”) category is that the contractual terms of the financial asset should give rise on specified dates
to cash flows that are solely payments of principal and interest on the principal amount outstanding. The Bank has performed
the SPPI test and has determined the business models for its financial assets.
- Business model assessment

There are three business models under IFRS 9 – ‘Held to Collect (“HTC”)’, ‘Held to Collect and Sell (“HTCS”)’ and ‘Other (“Other
BM”)’.
1. Under the HTC model, cash flows result from collecting contractual payments. If an SPPI product is HTC, it is measured at
amortised cost.
2. Under HTCS, cash flows result from contractual payments, as well as from selling the financial assets. If an SPPI product is
HTCS, it is measured at fair value though other comprehensive income (“FVOCI”).
3. Other BM are those that are neither HTC, nor HTCS. One example could be a model under which trading is the primary
purpose with contractual payment collection not constituting an integral part of the model. If a product (SPPI or not) is held
under Other BM, it is measured at fair value though profit or loss (“FVTPL”).
The Bank has assessed the business model for its financial assets as follows;
Treasury
Treasury assets consist of cash or equivalents, Government Bonds, Investment securities such as Eurobonds, Bonds and
Certificates.
The Bank also considers Loans to banks such as Syndicated Loans, Bilateral Loans and Murabaha as treasury products.
Investment securities are accounted for depending on their classification as either Held-to-Maturity (“HTM”), or Available-for-
Sale (“AFS”) and in some cases as Held-for-Trading (“TRD”).
The business model of the Bank under IFRS 9 is:
- “HTC” for HTM products. Such products shall be measured at amortised cost;
- “HTCS” for AFS products. Such products shall be measured at FVOCI; and
- “Other BM” for TRD products and shall be measured at FVTPL.
Retail
The Retail assets consist of various financing facilities to individuals (e.g. Mortgage loans, Consumer loans, Home improvement
loans, Car loans, Credit cards). These products are non-derivative financial assets with fixed or determinable payments that are
not quoted in an active market and which are held for collection of contractual cash flows of principal and interest.
The fair value of the Retail assets is not a critical aspect in the Bank’s management of the portfolio.
The business model of the Banks under IFRS 9 is “HTC” and the Retail loans shall be measured at amortised cost.
Corporate
The Corporate assets consist of various financing facilities to corporates (e.g. Cash loans, Non-cash loans, Agro loans, Project
& structured finance, Business credit cards). These products are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market and which are held for collection of contractual cash flows of principal and
interest.
The fair value of the Corporate assets is not a critical aspect in the Bank’s management of the portfolio.
The business model of the Banks under IFRS 9 is “HTC” and the corporate loans shall be measured at amortised cost.