KB prezent. angl - Komerční banka

(m) Sale and repurchase agreements
Securities sold under sale and repurchase agreements (“repos”) are recorded as assets in the balance sheet lines Securities held for
trading or Securities available for sale as appropriate and the counterparty liability is included in Amounts due to banks or Amounts
due to customers as appropriate. Securities purchased under agreements to purchase and resell (“reverse repos”) are recorded as
assets in the balance sheet line Due from banks or Loans and advances to customers as appropriate, with the corresponding
decrease in cash being included in Cash and current balances with banks. The difference between the sale and repurchase price is
treated as interest and accrued evenly to expenses/income over the life of the repo agreement using the effective interest rate.
In regard to the sale of a security acquired as collateral under a reverse repurchase transaction, the Group recognises in the balance
sheet an amount payable from a security which is remeasured to fair value.
(n) Derivative financial instruments and hedging
In the normal course of business, the Group enters into contracts for derivative financial instruments which represent a financial
instrument that requires a very low initial investment relative to the nominal value of the contract. The derivative financial instruments
used include interest rate and currency forwards, swaps, securities based derivatives, and options. These financial instruments are
used by the Group to hedge interest rate risk and currency exposures associated with its transactions in the financial markets.
The Group also acts as an intermediary provider of these instruments to certain clients.
Derivative financial instruments are initially recognised in the balance sheet at cost (including transaction costs) and subsequently are
remeasured at their fair value. Fair values are obtained from quoted market prices, discounted cash flow models and options pricing
models as appropriate. All derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative.
Certain derivatives are embedded in other financial instruments, such as the conversion option in a convertible bond, and are treated
as separate derivatives when their risks and characteristics are not closely related to those of the host contract and the host contract
is not carried at fair value with fair value changes reported in the profit and loss statement.
Changes in the fair value of derivatives held for trading are included in the profit and loss statement line Net profit/(loss) on financial
operations.
On the date a derivative contract is entered into, the Group designates certain derivatives as either (i) a hedge of the fair value of
a recognised asset or liability (fair value hedge) or (ii) a hedge of a future cashflow attributable to a recognised asset or liability,
a forecasted transaction or a firm commitment (cash flow hedge). Hedge accounting is used for derivatives designated in this way
provided certain criteria are met.
The Group’s criteria for a derivative instrument to be accounted for as a hedge include:
(a) The Group has developed a risk management strategy;
(b) At the inception of the hedge, the hedging relationship is formally documented, the documentation identifies the hedged item and
the hedging instrument, defines the risk that is being hedged and the approach to establishing whether the hedge is effective;
(c) The hedge is effective, that is, if, at inception and throughout the period, changes in the fair value or cash flows of the hedged
item are almost fully offset by changes in the fair value or cash flows of the hedging instrument and the results are within a range
of 80 percent to 125 percent.
Changes in the fair value of derivatives that are designated and qualify as fair value hedges and that prove to be highly effective in
relation to the hedged risk, are recorded in the profit and loss statement along with the corresponding change in fair value of the
hedged asset or liability that is attributable to the specific hedged risk. The ineffective element of the hedge is charged directly to the
profit and loss statement line Net profit/(loss) on financial operations.
If the hedge no longer meets the criteria for hedge accounting, an adjustment to the carrying value of a hedged interest-bearing
financial instrument is amortised to net profit and loss over the period to maturity.