Page 75 - Annual Report 2022

13 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)

(iv) Subsequent measurement of financial assets
Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as FVTPL):
• they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows
• the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the
principal amount outstanding
After initial recognition, these are measured at amortised cost using the effective interest method.
Discounting is omitted where the effect of discounting is immaterial. The Group’s cash and cash equivalents, loans and most of
other receivables fall into this category of financial instruments as well as government bonds and forfeiting instruments that were
previously classified as held-to-maturity under IAS 39.
Financial assets at fair value through profit or loss (FVTPL)
Financial assets that are held within a different business model other than ‘hold to collect’ or ‘hold to collect and sell’ are
categorised at fair value through profit and loss. Further, irrespective of business model financial assets whose contractual cash
flows are not solely payments of principal and interest are accounted for at FVTPL. All derivative financial instruments fall into this
category, except for those designated and effective as hedging instruments, for which the hedge accounting requirements apply
(see below). The category also contains an equity investment. The Group accounts for the investment at FVTPL and did not make
the irrevocable election to account for the investment in Albania Leasing Sh.a and equity securities at fair value through other
comprehensive income (FVOCI). The equity investment in Albania Leasing Sh.a. and certain equity securities were measured at
cost less any impairment charges in the comparative period under IAS 39, as it was determined that their fair value could not
be estimated reliably. In the current financial year, the fair value was determined in line with the requirements of IFRS 9, which
does not allow for measurement at cost. Assets in this category are measured at fair value with gains or losses recognised in
profit or loss. The fair values of financial assets in this category are determined by reference to active market transactions or
using a valuation technique where no active market exists. The Bank determined that in the current period the Fair Value of these
investments approximates to their carrying amount. The Group’s government bonds that were previously classified as held-for-
trading under IAS 39 fall into this category.
Financial assets at fair value through other comprehensive income (T)
The Group accounts for financial assets at FVOCI if the assets meet the following conditions:
• they are held under a business model whose objective it is “hold to collect” the associated cash flows and sell and
• the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the
principal amount outstanding.
Any gains or losses recognised in other comprehensive income (OCI) will be recycled upon derecognition of the asset. The
Group’s government bonds and treasury bills, corporate bonds, promissory notes, assets backed securities and equity portfolio
that were previously classified as available for sale under IAS 39 fall into this category.
(v) Reclassifications of financial assets
The Bank has made a reclassification of AFS (FVOCI) securities to HTM (Amortized Cost) securities between 24 February
th
– 3 March 2022. The Board of Directors and Senior Management have decided to change the business model of treasury
rd
investments recognized and measured under IFRS9. The change of business model is very rare for the Bank. Based on the new
business model, the entity objective is to keep the majority of its treasury investments at Amortized Cost by holding to collect
their contractual cash flows. The Management intention is solely to benefit from the spread between the yield of financial assets
and cost of liabilities. As such, the new business model is not for an individual asset but for a higher level of aggregation which
makes a significant part of Bank’s financial assets.