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