Page 83 - Annual Report 2022

21 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)
(p) Investments in associates and joint ventures

Investments in associates and joint ventures are accounted for using the equity method. The carrying amount of the investment
in associates and joint ventures is increased or decreased to recognise the Group’s share of the profit or loss and other
comprehensive income of the associate and joint venture, adjusted where necessary to ensure consistency with the accounting
policies of the Group. Unrealised gains and losses on transactions between the Group and its associates and joint ventures are
eliminated to the extent of the Group’s interest in those entities. Where unrealised losses are eliminated, the underlying asset is
also tested for impairment.
(q) Deposits, borrowings and subordinated liabilities

Deposits, borrowings and subordinated liabilities are part of the Bank’s sources of debt funding.
When the Bank sells a financial asset and simultaneously enters into an agreement to repurchase the asset (or a similar asset) at
a fixed price on a future date (“repo” or “stock lending”), the arrangement is accounted for as a deposit, and the underlying asset
continues to be recognised in the Bank’s financial statements.
Deposits, borrowings and subordinated liabilities are initially measured at fair value plus directly attributable transaction costs,
and subsequently measured at their amortised cost using the effective interest method.

(r) Provisions
A provision is recognised if, as a result of a past event, the Bank has a present legal or constructive obligation that can be
estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.

Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments
of the time value of money and, where appropriate, the risks specific to the liability.

A provision for restructuring is recognised when the Bank has approved a detailed and formal restructuring plan, and the
restructuring either has commenced or has been announced publicly. Future operating costs are not provided for.

A provision for onerous contracts is recognised when the expected benefits to be derived by the Bank from a contract are
lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of
the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a
provision is established, the Bank recognises any impairment loss on the assets associated with that contract.

(s) Employee benefits

(i) Defined contribution plans
Obligations for contributions to defined contribution pension plans are recognised as an expense in profit or loss when they are
due. The Bank makes compulsory social security contributions that provide pension benefits for employees upon retirement.
The local authorities are responsible for providing the legally set minimum threshold for pensions in Albania under a defined
contribution pension plan.

(ii) Defined benefit plans
The Bank created a fully employer sponsored pension plan fund-Staff Support Program (See note 21), during 2002. The amount
charged to this fund (SSP) was decided as 5% of yearly budgeted personnel salary expenses.

The amount due to employees based on the above plan would be grossed up by the interest that will accrue from the date the
employees leave the Bank until their retirement. It would be paid to employees only when they reach the Albanian statutory
retirement age, in monthly instalments equal to a minimum of 75% of their state monthly pension until the accumulated fund for
the employee is consumed.