Page 82 - Annual Report 2022

Banka Kombëtare Tregtare Annual Report 2022 20

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)
(l) Intangible assets

Intangible assets comprise software acquired by the Bank. Software acquired by the Bank is stated at cost less accumulated
amortisation and accumulated impairment losses.
Expenditure on internally developed software is recognised as an asset when the Bank is able to demonstrate its intention and
ability to complete the development and use the software in a manner that will generate future economic benefits, and can
reliably measure the costs to complete the development. The capitalised costs of internally developed software include all costs
directly attributable to developing the software, and are amortised over its useful life. Internally developed software is stated at
capitalised cost less accumulated amortisation and impairment.
Subsequent expenditure on software assets is capitalised only when it increases the future economic benefits embodied in the
specific asset to which it relates. All other expenditure is expensed as incurred.
Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful life of the software, from the date
that it is available for use. The estimated useful life of software is four years.
(m) Assets acquired through legal process (repossessed collateral)

Repossessed collateral represents financial and non-financial assets acquired by the Group in settlement of overdue loans.
The assets are initially recognised at fair value when acquired and included in premises and equipment, other financial assets,
investment properties or inventories within other assets depending on their nature and the Group’s intention in respect of
recovery of these assets, and are subsequently remeasured and accounted for in accordance with the accounting policies for
these categories of assets. The Group applies its accounting policy for non-current assets held for sale or disposal groups to
repossessed collateral where the relevant conditions for such classification are met at the end of the reporting period.
Where repossessed collateral results in acquiring control over a business, the business combination is accounted for using the
purchase method of accounting with fair value of the settled loan representing the cost of acquisition (refer to the accounting
policy for consolidation). Accounting policy for associates is applied to repossessed shares where the Group obtains significant
influence, but not control. The cost of the associate is the fair value of the loan settled by repossessing the pledged shares.
(n) Impairment of non-financial assets
The carrying amounts of the Bank’s non-financial assets, other than deferred tax assets, are reviewed at each reporting date
to determine whether there is any indication of impairment. If any such indication exists then the asset’s recoverable amount is
estimated.
An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount.
A cash-generating unit is the smallest identifiable asset group that generates cash flows that largely are independent from
other assets and groups. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash-
generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the
carrying amount of the other assets in the unit (group of units) on a pro rata basis.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses recognised
in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists.
An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An
impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would
have been determined, net of depreciation or amortization, if no impairment loss had been recognized.