KB prezent. angl - Komerční banka

The Bank has carried in its balance sheet a general provision, which was established prior to 1 January 2002, for losses arising from
on and off balance sheet loan exposures. Pursuant to applicable legislation (the amended Provisioning Act), the Bank will utilise or
release the general provision by 31 December 2005 at no less than 25 percent of its balance on an annual basis.
In addition, the Bank has established a restructuring provision. The Bank recognises a provision for restructuring costs when it has
formulated restructuring plan, and begins to implement the restructuring plan or announces its main features. Information on
restructuring costs identified by the Bank is set out in Note 8.
The Bank creates a reserve for the estimate of income taxes.
(i) Employment benefits
The Bank provides its employees with loyalty benefits, retirement benefits and disability benefits.
The employees are entitled to claim loyalty benefits in circumstances where they are employed with the Bank for a defined period of
time. The employees are entitled to receive retirement or disability benefits if they are employed by the Bank until their retirement
age or are entitled to receive a disability pension and were employed with the Bank for a minimum defined period.
Estimated benefit costs are recognised on an accruals basis through a provision over the employment term using an accounting
methodology that is similar to that used in respect of defined benefit pension plans. In determining the parameters of the model, the
Bank refers to the most recent employee data (the length of employment with the Bank, age, gender, average salary) and estimates
made on the basis of monitored historical data about the Bank’s employees (expected reduction of the current staffing levels) and
other estimates (the amount of bonuses, anticipated increase in salaries, estimated amount of social security and health insurance
contributions, estimated discount rate).
The Bank additionally makes contributions, on behalf of its employees, to retirement pension insurance and capital life insurance
schemes. The Bank recognises the costs of these contributions as incurred.
(j) Certificated debts
Certificated debts issued by the Bank are stated at amortised costs using the effective interest rate method. Interest expense arising
on the issue of certificated debts is included in the profit and loss statement line Interest expense and similar expense.
In the event of the repurchase of its own certificated debts the Bank derecognises these debts so as to reflect the economic
substance of the transaction as a repayment of the Bank’s commitment and decreases its liabilities in the balance sheet line Payables
from debt securities. The difference between the cost and accrued value of the issued certificate debts is included in Net profit or
loss on financial operations.
(k) Recognition of income and expense
Interest income and expense are recognised in the profit and loss statement for all interest bearing instruments on an accruals basis
using the effective interest rate. Interest income includes coupons earned on fixed income investments and trading securities and
accrued discount and premium on treasury bills and other discounted instruments. Interest on non-performing loans is recognised on
a case by case basis and the Bank records a specific provision for this balance. Penalty interest is accounted for and included in
interest income on a cash basis. Fees and commissions are recognised in the period to which they relate on an accruals basis.
(l) Taxation
Taxation is calculated in accordance with the provisions of the relevant legislation of the Czech Republic based on the profit or loss
recognised in the profit and loss statement prepared under Czech Accounting Standards.
Deferred income tax is provided, using the balance sheet liability method, for temporary differences arising between the tax bases of
assets and liabilities and their carrying values for financial reporting purposes. Deferred income tax is determined using tax rates
effective in the periods in which the temporary tax difference is expected to be realised. The principal temporary differences arise
from depreciation on property, plant and equipment, general and specific provisions for loans, and tax losses carried forward.
Deferred tax assets in respect of tax losses carried forward and other temporary differences are recognised to the extent that it is
probable that future taxable profit will be available against which the tax assets can be utilised.
The Bank additionally accounts for a deferred tax liability in respect of the changes of fair values of hedging financial derivatives which
is recognised in the balance sheet line Gains or losses from revaluation of hedging derivatives.