KB prezent. angl - Komerční banka

128 ➔129
Consolidated Financial Statements
under IFRS
Changes in the fair value of derivatives that are designated and qualify as cash flow hedges and that prove to be highly effective in
relation to hedged risk, are recognised in the hedging reserve in shareholders’ equity. Amounts deferred in equity are transferred to
the profit and loss statement and classified as revenue or expense in the periods during which the hedged assets and liabilities affect
the profit and loss statement. The ineffective element of the hedge is charged directly to the profit and loss line Net profit/(loss) on
financial operations.
Certain derivative transactions, while providing economic hedges under the Group’s risk management positions, do not qualify for
hedge accounting under the specific rules of IAS 39 and are therefore treated as derivatives held for trading with fair value gains and
losses reported in the profit and loss statement line Net profit/(loss) on financial operations.
The fair value of derivative instruments held for trading and hedging purposes are disclosed in Note 38.
(o) Regulatory requirements
The banks within the Group are subject to the regulatory requirements of the respective national central banks. These regulations
include limits and other restrictions pertaining to minimum capital adequacy requirements, classification of loans and off balance
sheet commitments and provisioning to cover credit risk associated with clients, liquidity, interest rate and foreign currency position.
Similarly, other Group companies are subject to regulatory requirements specifically in relation to insurance and collective investment
schemes.
(p) Technical reserves
The Group records technical insurance reserves pursuant to Insurance No. Act 363/1999 as follows:
Life insurance reserve
The life insurance reserve is created as a sum of reserves calculated under individual life insurance policies and represents balances
of the Group’s commitments calculated using the “Zillmer method”. This technical reserve takes into account the calculated costs
and the portfolio size. This reserve includes an element of unearned premiums, if any.
(q) Fiduciary activities
Assets arising thereon together with related undertakings to return such assets to customers are excluded from these financial
statements where the Group acts in a fiduciary capacity such as nominee, trustee or agent.
(r) Share capital and treasury stock
Where the Bank purchases its own share capital or obtains rights to purchase its share capital, the consideration paid including any
attributable transaction costs net of income taxes is shown as a deduction from total shareholders’ equity. Gains and losses on sales
of own shares are recorded in equity.
4. Source of profits and losses
All income included in operating income was substantially generated from the provision of financial services in the Czech Republic.
The Group considers that its products and services arise from one segment of business, that is, the provision of financial services.