KB prezent. angl - Komerční banka

State guarantee covering losses on the Bank’s risk assets
On 29 December 2000, pursuant to the Public Support Act No. 59/2000 Coll., the Bank entered into an agreement with Konsolidační
banka Praha, s. p. ú. under which Konsolidační banka guaranteed a defined portfolio of classified on and off balance sheet exposures.
The guarantee has applied to the net book values as of 31 December 2000. The period for determining the level of the pay-out under
the guarantee matured as of 31 December 2003 and payments of realised losses will be settled through mid-2004.
Under the agreement, the Bank provided regular quarterly reports to Česká konsolidační agentura (formerly Konsolidační banka) on
the administration of the assets and the expected losses on the guaranteed pool of exposures.
The aggregate declared losses incurred on the guaranteed portfolio amounted to CZK 5,370 million at the end of 2003, of which five
percent represents the Bank’s participation and is provisioned, and Česká konsolidační agentura is to be required to pay CZK 5,102 million.
In accordance with the agreement, Česká konsolidační agentura provided the Bank with an up-front payment of CZK 5,862 million at
the end of 2003 to be used to settle the amount arising from the state guarantee in 2004.
The European Commission has assessed the state guarantee pursuant to EU rules on state aid. The European Commission has
issued a decision that the state guarantee provided to the Bank was compliant with EU rules on state aid. This decision is effective
even if the settlement of the state guarantee is made subsequent to the date of EU accession.
Changes in the Bank’s Financial Group
In June 2003, the Bank sold its 100 percent equity interest in Reflexim, a. s. In the same month, the Bank also disposed of its
50 percent shareholding in CAC Leasing, a. s. and 10 percent shareholding in CAC Leasing Slovakia. The Bank made aggregate
pre-tax gains of CZK 783 million on the sale of these shareholdings.
In September 2003, the Bank entered into an agreement to increase the share capital of Franfinance Consumer Credit, s. r. o. from
CZK 120 million to CZK 245 million and became the majority shareholder of the entity owning 51 percent of its issued share capital. Given
that the share capital increase was not registered in the Register of Companies as of 31 December 2003, the Bank does not report the
equity investment in Franfinance Consumer Credit, s. r. o. in its financial statements for the year ended 31 December 2003. The share
capital increase was registered and the result of the transaction was recognised in the Bank’s books in February 2004. Franfinance
Consumer Credit, s. r. o. acquired 100 percent of the issued share capital of Essox, a. s. in December 2003. This transaction was settled in 2003.
3. Principal accounting policies
The principal accounting policies adopted in the preparation of these financial statements are set out below:
(a) Basis of accounting
The financial statements for the year ended 31 December 2003 are based on the Bank’s accounting records which are maintained in
accordance with the Accounting Act No. 563/1991 Coll. and relevant regulations, guidance and notices, specifically the Notice of the
Czech Finance Ministry No. 501/2002 Coll., which provides implementation guidance on certain provisions of the Accounting Act
563/1991 Coll., as amended. The Notice sets out the classification and identification of the components of financial statements and
consolidated financial statements and defines the economic substance of financial statement components, guiding chart of accounts,
accounting policies and their adoption, methods of consolidating financial statements and policies to be followed in including entities
in consolidated accounts.
The financial statements are prepared on the accruals basis of accounting whereby the effects of transactions and other events are
recognised when they occur and are reported in the financial statements of the periods to which they relate. The financial statements are
prepared under the historical cost convention, as modified by the remeasurement of financial instruments held for trading and available for
sale to fair value. Assets that are not remeasured to fair value and suffered an impairment are stated at net recoverable amount.
The financial statements are prepared in accordance with the Notice of the Czech Finance Ministry No. 501/2002 dated 6 November 2002,
under which comparative figures for the previous two financial reporting periods are reported reflecting the conditions that exist in
the period for which the financial statements are prepared. As such, the Bank has restated the amounts reported for the previous
two periods and the presented figures are not necessarily consistent with the balances and amounts presented in the financial
statements for the prior periods.