Annual Report 2010 03 August 2011 - Banka Qendrore e ...
Annual Report 2010 03 August 2011 - Banka Qendrore e ... Annual Report 2010 03 August 2011 - Banka Qendrore e ...
Central Bank of the Republic of Kosovo Notes to the financial Statement (in thousands of EUR, unless otherwise stated) 2. Basis of preparation (Continued) c) Functional and presentation currency These financial statements are presented in Euro (“EUR”), which is CBK’s functional currency. Except as indicated, financial information presented in Euro has been rounded to the nearest thousand. d) Use of estimates and judgments The preparation of the financial statements requires management to make judgments, estimates and assumptions that affect the application of policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in any future periods affected. In particular, information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements are described in note 5. The accounting policies set out below have been applied consistently to all the periods presented in these financial statements. 3. Significant accounting policies a) Foreign currency transactions Transactions in foreign currencies are translated to the functional currency at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between the amortised cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortised cost in foreign currency translated at the exchange rate at the end of the period. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognised in profit or loss. b) Interest Interest income and expense are recognised in profit or loss using the effective interest method. The effective interest rate is the rate that exactly discounts the estimated future cash payments and receipts through the expected life of the financial asset or liability (or where appropriate, a shorter period) to the carrying amount of the financial asset or liability. The effective interest rate is established on initial recognition of the financial asset and liability and is not revised subsequently. Page 6 of 37
Central Bank of the Republic of Kosovo Notes to the financial Statement (in thousands of EUR, unless otherwise stated) 3. Significant accounting policies (continued) b) Interest (continued) The calculation of the effective interest rate includes all fees and points paid or received transaction costs, and discounts or premiums that are an integral part of the effective interest rate. Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial asset or liability. Interest income and expense presented in the profit or loss includes interest on financial assets and liabilities at amortised cost on an effective interest rate basis. c) Fees and commission Fees and commission income and expenses that are integral to the effective interest rate on a financial asset or liability are included in the measurement of the effective interest rate. Other fees and commission income, including transaction fees for operating accounts, fund transfers and licensing fees are recognized as the related services are performed. Other fees and commission expenses relate mainly to transaction and service fees, which are expensed as the services are received. d) Employee benefits i. Defined contribution plans CBK makes compulsory social security contributions that provide pension benefits for employees upon retirement. These contributions are classified under defined contribution plans based on Kosovo legislation. CBK’s contributions are charged to profit or loss as incurred. CBK makes pension contributions as permitted by the Kosovo law, whereby the State provides pension benefits for employees upon retirement. CBK’s contributions to the pension plan are charged to profit or loss as incurred. e) Taxation and profit allocation CBK is exempt from income tax according to Law No. 03/L-209 issued on 22 July 2010. See note 4 (f) on how CBK allocates its profit. Page 7 of 37
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Central Bank of the Republic of Kosovo<br />
Notes to the financial Statement<br />
(in thousands of EUR, unless otherwise stated)<br />
3. Significant accounting policies (continued)<br />
b) Interest (continued)<br />
The calculation of the effective interest rate includes all fees and points paid or received<br />
transaction costs, and discounts or premiums that are an integral part of the effective interest rate.<br />
Transaction costs are incremental costs that are directly attributable to the acquisition, issue or<br />
disposal of a financial asset or liability.<br />
Interest income and expense presented in the profit or loss includes interest on financial assets and<br />
liabilities at amortised cost on an effective interest rate basis.<br />
c) Fees and commission<br />
Fees and commission income and expenses that are integral to the effective interest rate on a<br />
financial asset or liability are included in the measurement of the effective interest rate.<br />
Other fees and commission income, including transaction fees for operating accounts, fund<br />
transfers and licensing fees are recognized as the related services are performed.<br />
Other fees and commission expenses relate mainly to transaction and service fees, which are<br />
expensed as the services are received.<br />
d) Employee benefits<br />
i. Defined contribution plans<br />
CBK makes compulsory social security contributions that provide pension benefits for employees<br />
upon retirement. These contributions are classified under defined contribution plans based on<br />
Kosovo legislation. CBK’s contributions are charged to profit or loss as incurred.<br />
CBK makes pension contributions as permitted by the Kosovo law, whereby the State provides<br />
pension benefits for employees upon retirement. CBK’s contributions to the pension plan are charged<br />
to profit or loss as incurred.<br />
e) Taxation and profit allocation<br />
CBK is exempt from income tax according to Law No. <strong>03</strong>/L-209 issued on 22 July <strong>2010</strong>. See note<br />
4 (f) on how CBK allocates its profit.<br />
Page 7 of 37
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