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International Financial Reporting Standards Illustrative Bank Financial Statements 2002

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PricewaterhouseCoopers (www.pwcglobal.com), is the world’s largest professional services organisation. Drawing on the knowledge and skills of 125,000 people in 142 countries, we help our clients solve complex business problems and measurably enhance their ability to build value, manage risk and improve performance. PricewaterhouseCoopers refers to the member firms of the worldwide PricewaterhouseCoopers organisation. Other publications on IFRS The following publications on International Financial Reporting Standards and corporate practices have been published by PricewaterhouseCoopers and are available from your nearest PricewaterhouseCoopers office. International Accounting Standards – A Pocket Guide International Financial Reporting Standards – Disclosure Checklist International Financial Reporting Standards – Illustrative Corporate Financial Statements International Accounting Standards – Understanding IAS 29 International Accounting Standards – Understanding IAS 39 International Accounting Similarities and Differences – IAS, USGAAP and UKGAAP Audit Committees – Good Practices for Meeting Market Expectations Reporting Progress – Good Practices for Meeting Market Expectations The latest news, discussions and IFRS publications issued by PricewaterhouseCoopers can be found at www.pwcglobal.com/ifrs

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International Financial Reporting Standards Illustrative Bank Financial Statements Year ended 31 December 2002 In May 2002 the International Accounting Standards Board (IASB) published a revised Preface to International Financial Reporting Standards which defines International Financial Reporting Standards (IFRS) to include standards and interpretations approved by the IASB as well as International Accounting Standards (IAS) and SIC Interpretations issued by the previous International Accounting Standards Committee. This publication provides an illustrative set of consolidated financial statements, prepared in accordance with International Financial Reporting Standards, for a fictitious multinational banking group. These financial statements include the disclosures required by International Financial Reporting Standards published up to and including June 2002. The example disclosures in these illustrative financial statements should not be considered to be the only acceptable form of presentation. The form and content of a bank’s financial statements are the responsibility of the bank’s management, and other forms of presentation which are equally acceptable may be preferred and adopted, provided they include the specific disclosures and formats where prescribed in International Financial Reporting Standards. These illustrative financial statements are not a substitute for reading the Standards and Interpretations themselves or for professional judgment as to fairness of presentation. They do not cover all possible disclosures required by International Financial Reporting Standards nor do they take account of any specific legal framework. Depending on the circumstances, further specific information may be required in order to ensure fair presentation under International Financial Reporting Standards and we recommend that reference is made to our separate publication ‘International Financial Reporting Standards – Disclosure Checklist 2002’. Additional accounting policies and disclosures may be required in order to comply with local laws, national financial reporting standards and stock exchange regulations.

Structure of publication

Page 2–3 4 5 6 7 8–18 19–31 32–64 65 66–68

General information and operating and financial review Consolidated income statement Consolidated balance sheet Consolidated statement of changes in shareholders’ equity Consolidated cash flow statement Accounting policies Financial risk management Notes to the consolidated financial statements Report of the auditors Index of International Financial Reporting Standards disclosure requirements

Format of IFRS Illustrative Bank Financial Statements The references in the left margin of the financial statements represent the paragraph of the Standards in which the disclosure requirements appear – for example, ‘8p40’ indicates IAS 8 paragraph 40. The designation ‘DV’ (‘Disclosure voluntary’) indicates that the relevant IFRS encourages, but does not require, the disclosure. These financial statements also include additional disclosures which may represent best practice. Additional notes and explanations are shown in italics.

PricewaterhouseCoopers

1

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

General information 1p102(b)

ABC Banking Group (the Group) provides retail, corporate banking and investment banking services in various parts of the world. The Group has operations in over 20 countries and employs over 22,000 people.

1p102(a)

The parent company of the Group is ABC Bank Holdings (the Bank) which is a limited liability company and is incorporated and domiciled in [name of country]. The address of its registered office is as follows: [address of registered office]. The Bank has a primary listing on the [name of city] stock exchange, with further listings in [name].

Operating and financial review DV,1p8 DV,1p9

International Financial Reporting Standards do not address the requirements for information to be included in a directors’ report or financial commentary. Generally such requirements are determined by local laws and regulations. IAS 1 encourages, but does not require, companies to present, outside the financial statements, a financial review by management which describes and explains the main features of the enterprise’s financial performance and financial position and the principal uncertainties it faces. In 1998 the International Organisation of Securities Commissions issued “International Disclosure Standards for Cross-Border Offerings and Initial Listings for Foreign Issuers”, comprising recommended disclosure standards including an operating and financial review and discussion of future prospects. IOSCO standards for prospectuses are not mandatory – but they will increasingly be incorporated in national stock exchange requirements both for prospectuses and annual reports. The text of IOSCO’s Standard on Operating and Financial Reviews and Prospects is reproduced below. However, the standard was not designed with the specific features of banks in mind and is likely to need significant modification for financial services entities. Discuss the company’s financial condition, changes in financial condition and results of operations for each year and interim period for which financial statements are required, including the causes of material changes from year to year in financial statement line items, to the extent necessary for an understanding of the company’s business as a whole. Information provided also shall relate to all separate segments of the company. Provide the information specified below as well as such other information that is necessary for an investor’s understanding of the company’s financial condition, changes in financial condition and results of operation. A. Operating Results Provide information regarding significant factors, including unusual or infrequent events or new developments, materially affecting the company’s income from operations, indicating the extent to which income was so affected. Describe any other significant component of revenue or expenses necessary to understand the company’s results of operations. 1. To the extent that the financial statements disclose material changes in net sales or revenues, provide a narrative discussion of the extent to which such changes are attributable to changes in prices or to changes in the volume or amount of products or services being sold or to the introduction of new products or services. Management should provide commentary about average interest rates, average interest earning assets and average interest bearing liabilities for the period 2. Describe the impact of inflation, if material. If the currency in which financial statements are presented is of a country that has experienced hyperinflation, the existence of such inflation, a five year history of the annual rate of inflation and a discussion of the impact of hyperinflation on the company’s business shall be disclosed.

2

PricewaterhouseCoopers

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

Operating and financial review (continued) 3. Provide information regarding the impact of foreign currency fluctuations on the company, if material, and the extent to which foreign currency net investments are hedged by currency borrowings and other hedging instruments. 4. Provide information regarding any governmental economic, fiscal, monetary or political policies or factors that have materially affected, or could materially affect, directly or indirectly, the company’s operations or investments by host country shareholders. B. Liquidity and Capital Resources. The following information shall be provided: 1. Information regarding the company’s liquidity (both short and long term), including: (a) a description of the internal and external sources of liquidity and a brief discussion of any material unused sources of liquidity. Include a statement by the company that, in its opinion, the working capital is sufficient for the company’s present requirements, or, if not, how it proposes to provide the additional working capital needed. (b) an evaluation of the sources and amounts of the company’s cash flows, including the nature and extent of any legal or economic restrictions on the ability of subsidiaries to transfer funds to the company in the form of cash dividends, loans or advances and the impact such restrictions have had or are expected to have on the ability of the company to meet its cash obligations. (c) information on the level of borrowings at the end of the period under review, the seasonality of borrowing requirements and the maturity profile of borrowings and committed borrowing facilities, with a description of any restrictions on their use. 2. Information regarding the type of financial instruments used, the maturity profile of debt, currency and interest rate structure. The discussion also should include funding and treasury policies and objectives in terms of the manner in which treasury activities are controlled, the currencies in which cash and cash equivalents are held, the extent to which borrowings are at fixed rates, and the use of financial instruments for hedging purposes. 3. Information regarding the company’s material commitments for capital expenditures as of the end of the latest financial year and any subsequent interim period and an indication of the general purpose of such commitments and the anticipated sources of funds needed to fulfil such commitments. C. Research and Development, Patents and Licenses, etc. Provide a description of the company’s research and development policies for the last three years, where it is significant, including the amount spent during each of the last three financial years on company-sponsored research and development activities. D. Trend Information. The company should identify the most significant recent trends in production, sales and inventory, the state of the order book and costs and selling prices since the latest financial year. The company also should discuss, for at least the current financial year, any known trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on the company’s net sales or revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition.

PricewaterhouseCoopers

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International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

Consolidated income statement 30p9

(all amounts expressed in millions of [local currency])

Notes

1p75,77

Year ended 31 December 2002

2001

30p10

Interest income

2

7,243

6,483

30p10

Interest expense

2

(4,656)

(4,079)

2,587

2,404

Net interest income 30p10

Fee and commission income

3

1,095

1,044

30p10

Fee and commission expense

3

(48)

(52)

1,047

992

Net fee and commission income 30p10

Dividend income

4

87

33

30p10

Net trading income

5

268

251

39p170(c)

Gains less losses from investment securities

17

112

156

30p10

Other operating income Operating income

64

54

4,165

3,890

30p10

Impairment losses on loans and advances

8

(120)

(136)

30p10

Other operating expenses

6

(2,797)

(2,558)

1,248

1,196

12

11

1,260

1,207

(382)

(379)

878

828

(7)

(8)

871

820

Profit from operations 28p28

Share of results of associates before tax

18

Profit before tax 12p77

Income tax expense

8p10

Profit from ordinary activities after tax

27p26

Minority interest

1p75(i)

Net profit

33p47

4

9

34

Earnings per share (expressed in LC per share) – basic

10

0.76

0.74

– diluted

10

0.73

0.71

PricewaterhouseCoopers

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

Consolidated balance sheet 30p18,19

(all amounts expressed in millions of [local currency])

Notes

1p66,67

As at 31 December 2002

2001

1p53 ASSETS 30p19

Cash and balances with central banks

11

6,080

4,315

30p19

Treasury bills and other eligible bills

12

1,485

771

30p19

Due from other banks

13

8,576

6,604

30p19

Trading securities

14

8,721

9,376

30p19

Derivative financial instruments

15

5,325

5,442

30p19

Loans and advances to customers

16

59,203

53,208

30p19

Investment securities – available-for-sale

17

4,006

1,201

30p19

– held-to-maturity

17

3,999

1,009

28p28

Investments in associated undertakings

18

112

108

1p66(b)

Goodwill and other intangible assets

19

122

204

1p66(a)

Property, plant and equipment

20

1,519

1,555

12p69

Deferred tax assets

31

273

255

1p66(i)

Other assets

21

2,110

2,111

101,531

86,159

Total assets LIABILITIES 30p19

Due to other banks

22

15,039

13,633

30p19

Other deposits

23

16,249

12,031

30p19

Derivative financial instruments and other trading liabilities

15

4,039

6,277

30p19

Due to customers

24

51,775

42,698

30p19

Debt securities in issue

25

1,766

1,232

30p19

Other borrowed funds

26

2,808

2,512

1p66(i)

Other liabilities

29

2,871

2,224

12p69

Current taxes

101

173

12p69

Deferred tax liabilities

31

1,109

693

1p66(j)

Retirement benefit obligations

32

237

221

95,994

81,694

34

36

37

35

1,200

1,150 818

Total liabilities 27p26

Minority interest

1p66(m)

SHAREHOLDERS’ EQUITY

1p73(e)

Ordinary shares

1p73(e)

Share premium

35

857

1p73(e)

Less: treasury shares

35

(47)

(52)

1p73(e)

Retained earnings

36

2,359

1,920

1p73(e)

Other reserves

36

1,132

592

Total shareholders’ equity

5,501

4,428

Total equity and liabilities

101,531

86,159

10p16

These financial statements have been approved for issue by the Board of Directors on [date] 2003.

PricewaterhouseCoopers

5

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

Consolidated statement of changes in shareholders’ equity 1p86(f) 1p86(e)

(all amounts expressed in millions of [local currency])

1p86(c)

Balance at 1 January 2001 Arising in the period: Available-for-sale investments 36 – net fair value losses, net of tax Cash flow hedges 36 – net fair value gains, net of tax Currency translation differences Transfers: Available-for-sale investments – transfer to net profit, net of tax Cash flow hedges 36 – transfer to net profit, net of tax Net gains not recognised in the income statement Net profit Dividend for 2000 Transfer to general banking reserves Transfer to statutory reserve Convertible bond – equity component Purchases/sales of treasury shares Issue of share capital – share options

39p170(a) 39p169(c) 1p86(b) 39p170(a)

39p169(c) 1p86(b) 1p86(a) 1p86(d)

1p86(d)

Notes

Balance at 31 December 2001 /1 January 2002

39p170(a) 39p169(c) 1p86(b) 39p170(a)

39p169(c) 39p169(c) 1p86(b) 1p86(a) 1p86(d)

1p86(d)

Arising in the period: Available-for-sale investments – net fair value gains, net of tax Cash flow hedges – net fair value gains, net of tax Currency translation differences Transfers: Available-for-sale investments – transfer to net profit, net of tax Cash flow hedges – transfer to net profit, net of tax – transfer to assets, net of tax Net gains not recognised in the income statement Net profit Dividend for 2001 Transfer to general banking reserves Transfer to statutory reserve Purchases/sales of treasury shares Issue of share capital – share options Balance at 31 December 2002

6

PricewaterhouseCoopers

Share Share capital premium

Treasury Retained shares Reserves earnings

Total

1,120

788

(46)

150

1,512

3,524

–

–

–

(63)

–

(63)

– –

– –

– –

343 (94)

– –

343 (94)

–

–

–

67

–

67

–

–

–

75

–

75

– – – – – – – 30

– – – – – – 15 15

– – – – – – (6) –

328 – – 49 41 24 – –

– 820 (322) (49) (41) – – –

328 820 (322) – – 24 9 45

1,150

818

(52)

592

1,920

4,428

–

–

–

100

–

100

– –

– –

– –

213 (20)

– –

213 (20)

–

–

–

28

–

28

– –

– –

– –

140 7

– –

140 7

– – – – – – 50

– – – – – 9 30

– – – – – 5 –

468 – – 58 14 – –

– 871 (360) (58) (14) – –

468 871 (360) – – 14 80

1,200

857

(47)

1,132

2,359

5,501

36

36

36

37 36 36 35 35

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

Consolidated cash flow statement 7p10 7p18(b) 7p31 7p31 7p31

7p35

(all amounts expressed in millions of [local currency])

Notes

Cash flows from operating activities Interest and commission receipts Interest payments Dividend receipts Fee and commission receipts Net trading and other income Recoveries on loans previously written off Cash payments to employees and suppliers Income taxes paid Cash flows from operating profits before changes in operating assets and liabilities

7,003 (4,889) 89 1,008 305 29 (2,506) (390)

6,497 (4,156) 37 1,099 331 37 (2,264) (307)

649

1,274

(160) (181) 81 (5,765) (341) 1,339 4,235 258 9,019 268

(552) (101) (119) (4,527) 127 1,273 1,819 – 1,175 133

9,402

502

(293) 46 (431) 67 (5,852) 469

– – (382) 79 (249) 498

(5,994)

(54)

1,425 (577) 80 (96) 110 (360)

1,254 (518) 45 (112) 121 (322)

582

468

Effect of exchange rate changes on cash and cash equivalents

(180)

(74)

Net increase in cash and cash equivalents

3,810

842

Changes in operating assets and liabilities: Net increase in trading securities Net increase in bought and sold options Net decrease/(increase) in loans and advances to banks Net increase in loans and advances to customers Net (increase)/decrease in other assets Net increase in deposits from other banks Net increase in other deposits Net increase in trading liabilities Net increase in amounts due to customers Net increase in other liabilities Net cash from operating activities 7p21 7p39 7p39 7p16(a) 7p16(b) 7p16(c) 7p16(d)

Cash flows from investing activities Acquisition of subsidiaries, net of cash acquired Disposal of subsidiaries, net of cash disposed Purchase of property and equipment Proceeds from sale of property and equipment Purchase of securities Proceeds from sale and redemption of securities

40 40 20 17

Net cash used in investing activities 7p21 7p17(c) 7p17(d) 7p17(a) 7p17(b) 7p17(a) 7p31

Year ended 31 December 2002 2001

Cash flows from financing activities Proceeds from borrowed funds and debt securities Repayments of borrowed funds and debt securities Issue of ordinary shares Purchase of treasury shares Sale of treasury shares Dividends paid

35 35 35 37

Net cash from financing activities

Cash and cash equivalents at beginning of year

38

10,840

9,998

Cash and cash equivalents at end of year

38

14,650

10,840

PricewaterhouseCoopers

7

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

Accounting policies In presenting the accounting policies on pages 9 to18, it is recognised that certain items may not necessarily apply to a particular reporting entity. For example, if the reporting entity does not have investment property, it is not necessary to include disclosure of the accounting policy for investment property. The reporting entity should describe each specific accounting policy that is necessary for a proper understanding of the financial statements.

Index to accounting policies Page A

Basis of preparation

9

B

Group accounts (including subsidiaries, associates etc.)

9

C

Derivative financial instruments and hedging

Page K

Goodwill

14

L

Computer software development costs

14

M Property, plant and equipment

15

10

N Leases

15

D Offsetting financial instruments

11

O Cash and cash equivalents

15

E

Interest income and expense

11

P

F

Fee and commission income

12

Q Employee benefits

16

12

R

Deferred income taxes

16

H Sale and repurchase agreements and lending of securities 12

S

Borrowings, including preference shares

17

T

Share capital and treasury stock

17

G Trading securities

I

Investment securities and purchased loans and receivables 12

J

Originated loans and provisions for loan impairment

8

PricewaterhouseCoopers

13

Provisions

15

U Acceptances

18

V

18

Fiduciary activities

W Segmental reporting

18

X

18

Comparatives

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

Accounting policies (continued) 1p91(a)/ 1p97(b) 30p8

The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below:

A Basis of presentation 1p11 1p97(a)

These consolidated financial statements are prepared in accordance with International Financial Reporting Standards. The consolidated financial statements are prepared under the historical cost convention as modified by the revaluation of available-for-sale investment securities, financial assets and financial liabilities held for trading and all derivative contracts

21p43

[If the presentation currency is not the currency of the country in which the company is domiciled, disclose the reason for choosing the presentation currency.] The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge of current events and actions, actual results ultimately may differ from those estimates. The Group adopted IAS 39 Financial Instruments: Recognition and Measurement in 2001. The financial effects of adopting IAS 39 were reported in the previous year’s consolidated financial statements.

B Group accounts (1) Subsidiaries 1p99(b)

Subsidiaries, which are those companies and other entities (including Special Purpose Entities) in which the Group, directly or indirectly, has power to govern the financial and operating policies, are consolidated.

SIC–33p3

The existence and effect of potential voting rights that are presently exercisable or presently convertible are considered when assessing whether the Group controls another entity.

1p99(c)

Subsidiaries are consolidated from the date on which control is transferred to the Group and are no longer consolidated from the date that control ceases. The purchase method of accounting is used to account for the acquisition of subsidiaries. The cost of an acquisition is measured at the fair value of the assets given up, shares issued or liabilities undertaken at the date of acquisition, plus costs directly attributable to the acquisition. The excess of the cost of acquisition over the fair value of the net assets of the subsidiary acquired is recorded as goodwill. See note K for the accounting policy on goodwill. Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated; unrealised losses are also eliminated unless cost cannot be recovered. Where necessary, accounting policies of subsidiaries have been changed to ensure consistency with the policies adopted by the Group.

(2) Associates 1p99(b)

Investments in associates are accounted for by the equity method of accounting. Under this method, the Group’s share of the post-acquisition profits or losses of associates is recognised in the income statement, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the cost of the investment.

28p27(b)

Associates are entities over which the Group has between 20% and 50% of the voting rights, or over which the Group has significant influence, but which it does not control. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates; unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. The Group’s investment in associates includes goodwill (net of accumulated amortisation) on acquisition. When the Group’s share of losses in an associate equals or exceeds its interest in the associate the Group does not recognise further losses unless the Group has incurred obligations or made payments on behalf of the associates.

PricewaterhouseCoopers

9

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

Accounting policies (continued) B Group accounts (continued) (3) Foreign currency translation Items included in the financial statements of each entity of the Group are measured using the currency that best reflects the economic substance of the underlying events and circumstances relevant to that entity (“the measurement currency”). The consolidated financial statements are presented in [name of local currency] which is the measurement currency of the parent. 1p99(p) 1p74(b)

Income statements and cash flows of foreign entities are translated into the Group’s reporting currency at average exchange rates for the year and their balance sheets are translated at the exchange rates ruling on 31 December. Exchange differences arising from the translation of the net investment in foreign entities and of borrowings and other currency instruments designated as hedges of such investments, are taken to shareholders’ equity. When a foreign entity is sold, such exchange differences are recognised in the income statement as part of the gain or loss on sale.

21p45

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

1p99(p)

Foreign currency transactions are translated into the measurement currency at the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies, are recognised in the income statement.

39p78

Translation differences on debt securities and other monetary financial assets measured at fair value are included in foreign exchange gains and losses. Translation differences on nonmonetary items such as equities held for trading are reported as part of the fair value gain or loss. Thus, underlying translation differences on available-for-sale equities are included in the revaluation reserve in equity.

C Derivative financial instruments and hedging 32p47(b) 32p52 32p54 1p99(i) 39p167(a)

Derivative financial instruments including foreign exchange contracts, interest rate futures, forward rate agreements, currency and interest rate swaps, currency and interest rate options (both written and purchased) and other derivative financial instruments are initially recognised in the balance sheet at cost (including transaction costs) and subsequently are remeasured at their fair value. Fair values are obtained from quoted market prices, discounted cash flow models and options pricing models as appropriate. All derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative.

39p23

Certain derivatives embedded in other financial instruments, such as the conversion option in a convertible bond, are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contract and the host contract is not carried at fair value with unrealised gains and losses reported in income. Changes in the fair value of derivatives held for trading are included in net trading income.

39p103(a) 39p137

On the date a derivative contract is entered into, the Group designates certain derivatives as either (1) a hedge of the fair value of a recognised asset or liability (fair value hedge); or, (2) a hedge of a future cash flow attributable to a recognised asset or liability, a forecasted transaction or a firm commitment (cash flow hedge). Hedge accounting is used for derivatives designated in this way provided certain criteria are met.

39p142

The Group’s criteria for a derivative instrument to be accounted for as a hedge include: a) formal documentation of the hedging instrument, hedged item, hedging objective, strategy and relationship is prepared before hedge accounting is applied; b) the hedge is documented showing that it is expected to be highly effective in offsetting the risk in the hedged item throughout the reporting period; and c) the hedge is highly effective on an ongoing basis.

10

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International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

Accounting policies (continued) C Derivative financial instruments and hedging (continued) 39p153

Changes in the fair value of the effective portions of derivatives that are designated and qualify as fair value hedges and that prove to be highly effective in relation to hedged risk, are recorded in the income statement, along with the corresponding change in fair value of the hedged asset or liability that is attributable to that specific hedged risk.

39p156 39p157

If the hedge no longer meets the criteria for hedge accounting, an adjustment to the carrying amount of a hedged interest-bearing financial instrument is amortised to net profit or loss over the period to maturity. The adjustment to the carrying amount of a hedged equity security remains in retained earnings until the disposal of the equity security.

39p158 39p160 39p162 39p163

Changes in the fair value of the effective portion of derivatives that are designated and qualify as cash flow hedges and that prove to be highly effective in relation to the hedged risk, are recognised in the hedge reserve in equity. Where the forecasted transaction or firm commitment results in the recognition of an asset or of a liability, the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability. Otherwise, amounts deferred in equity are transferred to the income statement and classified as revenue or expense in the periods during which the hedged firm commitment or forecasted transaction affects the income statement.

39p165

Certain derivative transactions, while providing effective economic hedges under the Group’s risk management policies, do not qualify for hedge accounting under the specific rules in IAS 39 and are therefore treated as derivatives held for trading with fair value gains and losses reported in income.

8p46 39p172

The fair values of derivative instruments held for trading and hedging purposes are disclosed in Note 15.

D Offsetting financial instruments 32p33 32p41

Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.

E Interest income and expense 30p8(a) 1p99(a) 18p35(a) 39p73 39p116

Interest income and expense are recognised in the income statement for all interest bearing instruments on an accrual basis using the effective yield method based on the actual purchase price. Interest income includes coupons earned on fixed income investment and trading securities and accrued discount and premium on treasury bills and other discounted instruments. When loans become doubtful of collection, they are written down to their recoverable amounts and interest income is thereafter recognised based on the rate of interest that was used to discount the future cash flows for the purpose of measuring the recoverable amount.

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11

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

Accounting policies (continued) F Fee and commission income Fees and commissions are generally recognised on an accrual basis when the service has been provided. Loan origination fees for loans which are probable of being drawn down, are deferred (together with related direct costs) and recognised as an adjustment to the effective yield on the loan. Commission and fees arising from negotiating, or participating in the negotiation of a transaction for a third party, such as the acquisition of loans, shares or other securities or the purchase or sale of businesses, are recognised on completion of the underlying transaction. Portfolio and other management advisory and service fees are recognised based on the applicable service contracts. Asset management fees related to investment funds are recognised ratably over the period the service is provided. The same principle is applied for wealth management, financial planning and custody services that are continuously provided over an extended period of time.

G Trading securities 39p10 39p66,68 39p167(a) 30p8(b) 32p47(b) 1p99(i) 18p35(b)

Trading securities are securities which were either acquired for generating a profit from shortterm fluctuations in price or dealer’s margin, or are securities included in a portfolio in which a pattern of short-term profit taking exists. Trading securities are initially recognised at cost (which includes transaction costs) and subsequently re-measured at fair value based on quoted bid prices. All related realised and unrealised gains and losses are included in net trading income. Interest earned whilst holding trading securities is reported as interest income. Dividends received are included in dividend income.

39p30 39p167(c)

All purchases and sales of trading securities that require delivery within the time frame established by regulation or market convention (‘regular way’ purchases and sales) are recognised at trade date, which is the date that the Group commits to purchase or sell the asset. Otherwise such transactions are treated as derivatives until settlement occurs.

H Sale and repurchase agreements and lending of securities 32p47(b) 1p99(i) 39p73

Securities sold subject to a linked repurchase agreements (‘repos’) are retained in the financial statements as trading or investment securities and the counterparty liability is included in amounts due to other banks, deposits from banks, other deposits, or deposits due to customers, as appropriate. Securities purchased under agreements to resell (‘reverse repos’) are recorded as loans and advances to other banks or customers as appropriate. The difference between sale and repurchase price is treated as interest and accrued over the life of repo agreements using the effective yield method. Securities lent to counterparties are also retained in the financial statements. Securities borrowed are not recognised in the financial statements, unless these are sold to third parties, in which case the purchase and sale are recorded with the gain or loss included in trading income. The obligation to return them is recorded at fair value as a trading liability.

I

Investment securities and purchased loans and receivables

39p10 39p68 30p8(b) 32p47(b) 1p99(i) 39p167(b)

The Group classified its investment securities and purchased loans and receivables into the following two categories: held-to-maturity and available-for-sale assets. Investment securities and purchased loans and receivables with fixed maturity where management has both the intent and the ability to hold to maturity are classified as held-to-maturity. Investment securities and purchased loans and receivables intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or equity prices are classified as available-for-sale. Management determines the appropriate classification of its investments at the time of the purchase.

39p20

Purchased loans and receivables, including sub-participations acquired subsequent to the provision of the original loan, are categorised as held-to maturity or available-for-sale depending on management’s intent.

12

PricewaterhouseCoopers

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

Accounting policies (continued) I 39p66 39p167(a) 39p70 39p43 39p117

Investment securities and purchased loans and receivables (continued) Investment securities and purchased loans and receivables are initially recognised at cost (which includes transaction costs). Available-for-sale financial assets are subsequently re-measured at fair value based on quoted bid prices or amounts derived from cash flow models. Fair values for unlisted equity securities are estimated using applicable price/earnings or price/cash flow ratios refined to reflect the specific circumstances of the issuer. Unrealised gains and losses arising from changes in the fair value of securities classified as available-for-sale are recognised in equity. Equity securities for which fair values cannot be measured reliably are recognised at cost less impairment When the securities are disposed of or impaired, the related accumulated fair value adjustments are included in the income statement as gains and losses from investment securities. [The Group could adopt the alternative policy under IAS 39 under which gains and losses arising from changes in the fair value of securities available-for-sale are recognised as they arise in the income statement.]

39p73

Held-to-maturity investments are carried at amortised cost using the effective yield method, less any provision for impairment.

39p109 39p111 39p118

A financial asset is impaired if its carrying amount is greater than its estimated recoverable amount. The amount of the impairment loss for assets carried at amortised cost is calculated as the difference between the asset’s carrying amount and the present value of expected future cash flows discounted at the financial instrument’s original effective interest rate. By comparison, the recoverable amount of an instrument measured at fair value is the present value of expected future cash flows discounted at the current market rate of interest for a similar financial asset.

39p83 39p87

[The Group cannot classify any financial asset as held-to-maturity if it has, during the current financial year or during two preceding financial years sold or transferred held-to-maturity investments before maturity (unless they met the specific exceptions in IAS 39.]

18p35 (b)

Interest earned whilst holding investment securities is reported as interest income. Dividends receivable are included separately in dividend income when a dividend is declared.

39p30 39p167(c)

All regular way purchases and sales of investment securities are recognised at trade date, which is the date that the Group commits to purchase or sell the asset. All other purchases and sales are recognised as derivative forward transactions until settlement

J

Originated loans and provisions for loan impairment

39p19 39p69

Loans originated by the Group by providing money directly to the borrower or to a subparticipation agent at draw down, other than those that are originated with the intent of being sold immediately or in the short term which are recoded as trading assets, are categorised as loans originated by the Group and are carried at amortised cost, which is defined as the fair value of cash consideration given to originate those loans as is determinable by reference to market prices at origination date. Third party expenses, such as legal fees, incurred in securing a loan are treated as part of the cost of the transaction.

39p167(c)

All loans and advances are recognised when cash is advanced to borrowers.

39p109 39p111,113 30p43(d) 32p47(b) 1p99(i) 30p43(a) 30p8(d)

An allowance for loan impairment is established if there is objective evidence that the Group will not be able to collect all amounts due according to the original contractual terms of loans. The amount of the provision is the difference between the carrying amount and the recoverable amount, being the present value of expected cash flows, including amounts recoverable from guarantees and collateral, discounted at the original effective interest rate of loans.

PricewaterhouseCoopers

13

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

Accounting policies (continued) J

Originated loans and provisions for loan impairment (continued) The loan loss provision also covers losses where there is objective evidence that probable losses are present in components of the loan portfolio at the balance sheet date. These have been estimated based upon historical patterns of losses in each component, the credit ratings allocated to the borrowers and reflecting the current economic climate in which the borrowers operate. When a loan is uncollectable, it is written off against the related provision for impairments; subsequent recoveries are credited to the provision for loan losses in the income statement.

30p44 30p8(e)

Statutory and other regulatory loan loss reserve requirements that exceed these amounts are dealt with in the general banking reserve as an appropriation of retained earnings.

39p114

If the amount of the impairment subsequently decreases due to an event occurring after the writedown, the release of the provision is credited as a reduction of the provision for loan losses.

K Goodwill 1p99(c) 22p99

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net assets of the acquired subsidiary/associate at the date of acquisition. Goodwill on acquisitions of subsidiaries occurring on or after 1 January 1995 is reported in the balance sheet as an intangible asset and is amortised using the straight-line method over its estimated useful life. Goodwill on acquisitions of subsidiaries that occurred prior to 1 January 1995 was charged in full to retained profits in shareholders’ equity; such goodwill has not been retroactively capitalised and amortised.

22p88(a) 22p88(b)

Goodwill is amortised using the straight-line method over its estimated useful life. Management determines the estimated useful life of goodwill based on its evaluation of the respective companies at the time of the acquisition, considering factors such as existing market share, potential growth and other factors inherent in the acquired companies. Goodwill arising on major strategic acquisitions of the Group to expand its product or geographical market coverage is amortised over a maximum period of 15 years. For all other acquisitions goodwill is generally amortised over 5 years. [Where goodwill is amortised over a period exceeding 20 years, the Group should disclose the reasons including describing the factor(s) that played a significant role in determining the useful life of the goodwill.]

36p80

At each balance sheet date the Group assesses whether there is any indication of impairment. If such indications exist an analysis is performed to assess whether the carrying amount of goodwill is fully recoverable. A write down is made if the carrying amount exceeds the recoverable amount. The gain or loss on disposal of an entity includes the related unamortised balance of goodwill relating to the entity disposed of or, for pre 1 January 1995 acquisitions, any goodwill previously charged to shareholders’ equity.

L Computer software development costs 1p99(e) 38p107(a) 38p107(b)

Costs associated with maintaining computer software programmes are recognised as an expense as incurred. Costs that are directly associated with identifiable and unique software products controlled by the Group and will probably generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Direct costs include staff costs of the software development team and an appropriate portion of relevant overheads. Expenditure which enhances or extends the performance of computer software programmes beyond their original specifications is recognised as a capital improvement and added to the original cost of the software. Computer software development costs recognised as assets are amortised using the straight-line method over their useful lives, not exceeding a period of 3 years.

14

PricewaterhouseCoopers

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

Accounting policies (continued) M Property, plant and equipment 16p60(a) 1p99(e) 16p60(b)

All property, plant and equipment is stated at historical cost less accumulated depreciation.

16p60(c)

Buildings 25-40 years Leasehold improvements 25 years, or over the period of the lease if less than 25 years Equipment and motor vehicles 3-8 years

36p58 16p56

Property, plant and equipment are periodically reviewed for impairment. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. Gains and losses on disposal of property and equipment are determined by reference to their carrying amount and are taken into account in determining operating profit. Repairs and renewals are charged to the income statement when the expenditure is incurred.

Depreciation is calculated on the straight line method to write down the cost of such assets to their residual values over their estimated useful lives as follows:

Property held for resale is recorded at lower of cost or recoverable value.

N Leases (1) A group company is the lessee 1p99(j)

To date, the leases entered into by the Group are operating leases. The total payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease. When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised as an expense in the period in which termination takes place. (2) A group company is the lessor

1p99(j)

When assets are held subject to a finance lease, the present value of the lease payments is recognised as a receivable. The difference between the gross receivable and the present value of the receivable is recognised as unearned finance income. Lease income is recognised over the term of the lease using the net investment method (before tax), which reflects a constant periodic rate of return. To date, the Group has not entered into operating leases over group assets.

O Cash and cash equivalents 7p45 1p99(r)

For the purposes of the cash flow statement, cash and cash equivalents comprise balances with less than 3 months maturity from the date of acquisition including: cash and balances with central banks, treasury bills and other eligible bills, amounts due from other banks and trading securities.

P Provisions 1p99(n)

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made.

1p99(o)

Employee entitlements to annual leave and long service leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave and long-service leave as a result of services rendered by employees up to the balance sheet date.

PricewaterhouseCoopers

15

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

Accounting policies (continued) Q Employee benefits (1) Pension obligations 1p99(o)

Group companies have various pension schemes in accordance with the local conditions and practices in the countries in which they operate. The schemes are generally funded through payments to insurance companies or trustee-administered funds as determined by periodic actuarial calculations. A defined benefit plan is a pension plan that defines an amount of pension benefit to be provided, usually as a function of one or more factors such as age, years of service or compensation. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity (a fund) and will have no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees benefits relating to employee service in the current and prior periods.

19p120(a,b)

The liability in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date minus the fair value of plan assets, together with adjustments for unrecognised actuarial gains/losses and past service cost. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by the estimated future cash outflows using interest rates of government securities which have terms to maturity approximating the terms of the related liability. Most of the pension plans are final salary plans and the charge for such pension plans, representing the net periodic pension cost less employee contributions is included in staff costs. Actuarial gains and losses arising from experience adjustments, changes in actuarial assumptions and amendments to pension plans are charged or credited to income over the service lives of the related employees.

1p99(o)

For defined contribution plans, the company pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. Once the contributions have been paid, the company has no further payment obligations. The regular contributions constitute net periodic costs for the year in which they are due and as such are included in staff costs. (2) Other post-retirement obligations

1p99(o)

Some Group companies provide post-retirement healthcare benefits to their retirees. The entitlement to these benefits is usually based on the employee remaining in service up to retirement age and the completion of a minimum service period. The expected costs of these benefits are accrued over the period of employment, using a methodology similar to that for defined benefit pension plans. These obligations are valued annually by independent qualified actuaries.

19p147(b)

(3) Equity compensation benefits

19p147(c) SIC-17p6

Share options are granted to directors and to employees with more than four years service. No compensation cost is recognised as the options are granted at the market price on the date of the grant and are exercised at that price. When the options are exercised, the proceeds received net of any transaction costs are credited to share capital (par value) and the surplus to share premium.

R Deferred income taxes 1p99(m)

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Currently enacted tax rates are used in the determination of deferred income tax.

12p47

The principal temporary differences arise from depreciation of property, plant and equipment, revaluation of certain financial assets and liabilities including derivative contracts, provisions for pensions and other post retirement benefits and tax losses carried forward; and, in relation to acquisitions, on the difference between the fair values of the net assets acquired and their tax base. The rates enacted or substantively enacted at the balance sheet date are used to determine deferred income tax.

12p24,34

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

12p39,44

Deferred income tax is provided on temporary differences arising from investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference can be controlled and it is probable that the difference will not reverse in the foreseeable future.

16

PricewaterhouseCoopers

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

Accounting policies (continued) R Deferred income taxes (continued) Income tax payable on profits, based on the applicable tax law in each jurisdiction is recognised as an expense in the period in which profits arise. The tax effects of income tax losses available for carry forward are recognised as an asset when it is probable that future taxable profits will be available which these losses can be utilised against. 12p61

Deferred tax related to fair value re-measurement of available-for-sale investments and cash flow hedges, which are charged or credited directly to equity, is also credited or charged directly to equity and is subsequently recognised in the income statement together with the deferred gain or loss.

S Borrowings, including preference shares 32p47(b) 39p66,93

Borrowings are recognised initially at ‘cost’, being their issue proceeds (fair value of consideration received) net of transaction costs incurred. Borrowings are subsequently stated at amortised cost and any difference between net proceeds and the redemption value is recognised in the income statement over the period of the borrowings using the effective yield method. Hedge accounting rules are applied to deposits hedged by derivative instruments.

32p47(b) 32p50 32p23

When convertible bonds are issued, the fair value of the conversion option is determined. This amount is recorded separately in shareholders’ equity. The Group does not recognise any change in the value of this option in subsequent periods. The remaining obligation to make future payments of principal and interest to bondholders is calculated using a market interest rate for an equivalent non-convertible bond and is presented on the amortised cost basis in other borrowed funds until extinguished on conversion or maturity of the bonds.

32p47(b) 32p50

Preference shares, which carry a mandatory coupon, or are redeemable on a specific date or at the option of the shareholder, are classified as financial liabilities and are presented in other borrowed funds. The dividends on these preference shares are recognised in the income statement as interest expense on an amortised cost basis using the effective yield method.

39p63

If the Group purchases its own debt, it is removed from the balance sheet and the difference between the carrying amount of a liability and the consideration paid is included in net trading income.

T Share capital and treasury stock (1) Share issue costs SIC-17p6

Incremental external costs directly attributable to the issue of new shares, other than on a business combination, are deducted from equity net of any related income taxes. (2) Dividends on ordinary shares

10p11

Dividends on ordinary shares are recognised in equity in the period in which they are declared.

32p30

Dividends for the year which are declared after the balance sheet date are dealt with in the subsequent events note. (3) Preferred shares

32p47(b) 32p50

Preferred shares that are non-redeemable and upon which dividends are declared at the discretion of the directors are classified as equity. (4) Treasury shares

SIC-16p4 SIC-17p5 32p47(b)

Where the Company or its subsidiaries purchases the Company’s equity share capital, the consideration paid including any attributable incremental external costs net of income taxes is deducted from total shareholders’ equity as treasury shares until they are cancelled. Where such shares are subsequently sold or reissued, any consideration received is included in shareholders’ equity.

PricewaterhouseCoopers

17

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

Accounting policies (continued) U Acceptances 32p47(b) 30p8(c) 1p101

Acceptances comprise undertakings by the Group to pay bills of exchange drawn on customers. The Group expects most acceptances to be settled simultaneously with the reimbursement from the customers. Acceptances are accounted for as off-balance sheet transactions and are disclosed as contingent liabilities and commitments.

32p47(b)

[Acceptances may also be accounted for and disclosed as liabilities with corresponding contra-assets.]

V Fiduciary activities Assets and income 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.

W Segment reporting [listed companies] 1p99(q)

Business segments provide products or services that is subject to risks and returns that are different from those of other business segments. Geographical segments provide products or services within a particular economic environment that is subject to risks and returns that are different from those of components operating in other economic environments.

X Comparatives 1p40

18

Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current year.

PricewaterhouseCoopers

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

Financial risk management 32p43A 39p169(a)

A Strategy in using financial instruments By its nature the Group’s activities are principally related to the use of financial instruments including derivatives. The Group accepts deposits from customers at both fixed and floating rates and for various periods and seeks to earn above average interest margins by investing these funds in high quality assets. The Group seeks to increase these margins by consolidating short-term funds and lending for longer periods at higher rates whilst maintaining sufficient liquidity to meet all claims that might fall due. The Group also seeks to raise its interest margins by obtaining above average margins, net of provisions, through lending to commercial and retail borrowers with a range of credit standing. Such exposures involve not just on-balance sheet loans and advances but the Group also enters into guarantees and other commitments such as letters of credit and performance, and other bonds. The Group also trades in financial instruments where it takes positions in traded and over the counter instruments including derivatives to take advantage of short-term market movements in the equity and bond markets and in currency, interest rate and commodity prices. The Board places trading limits on the level of exposure that can be taken in relation to both overnight and intra-day market positions. With the exception of specific hedging arrangements, foreign exchange and interest rate exposures associated with these derivatives are normally offset by entering into counterbalancing positions, thereby controlling the variability in the net cash amounts required to liquidate market positions.

39p169(a)

Fair value hedges

39p169(b)

The Group hedges a proportion of its existing foreign exchange risk in available-for-sale equity securities by fair value hedges in the form of currency futures. The net fair value of currency futures at 31 December 2002 was LC 84 (2001: LC (16)). The Group also hedges part of its existing interest rate risk resulting from any potential decrease in the fair value of fixed rate assets or increase in fair value of term deposits from customers denominated both in local and foreign currencies using interest rate and cross currency interest rate swaps. The net fair value of these swaps at 31 December 2002 was LC 1,441 (2001: LC 6).

39p169(a)

Cash flow hedges

39p169(b)

The Group hedges a portion of foreign exchange risks it expects to assume as a result of certain foreign acquisitions and cash flows from floating rate customer deposits and held-to-maturity debt securities using currency options and currency swaps. At 31 December 2002, currency options with an aggregate notional principal amount of LC 5,020 and a positive fair value of LC 112 (2001: Nil) were designated as cash flow hedges of an acquisition expected to occur within one year. Currency swaps with an aggregate notional principal amount of LC 4,018 (2001: currency swaps and currency options of LC 1,005) and a net fair value of LC 490 (2001: LC (97) were designated as hedges of future cash flows from floating rate customer deposits and held-tomaturity debt securities. These amounts will be reported in income in 2003. At 1 January 2001 currency options with a positive fair value of LC 38 and currency swaps with a net negative fair value of LC 135 met the Group’s new criteria for cash flow hedge recognition. All transactions hedged by these foreign exchange derivatives were settled before 31 December 2001. There were no transactions for which cash flow hedge accounting had to be ceased in 2002 or 2001 as a result of a failure to undertake the expected transaction.

39p169(a)

Net investment hedges

39p169(b)

The Group hedges part of the currency translation risk of net investments in foreign entities through currency borrowings. Borrowings amounting to LC 140 (2001: LC 140) were designated as hedges and gave rise to currency losses for the year of LC 2 (2001: LC 3) which have been deferred in equity. No amounts were withdrawn from equity during the year (2001: nil).

PricewaterhouseCoopers

19

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

Financial risk management (continued) B Capital adequacy To monitor the adequacy of its capital the Group uses ratios established by the Bank for International Settlements (BIS). These ratios measure capital adequacy (minimum 8% as required by BIS) by comparing the Group’s eligible capital with its balance sheet assets, off-balance-sheet commitments and market and other risk positions at weighted amounts to reflect their relative risk. [The Group may also elect to calculate its capital requirement for market risk using an internal Value at Risk (VAR) model. This approach is permitted in the BIS 1996 market risk amendment to the Basle Accord of July 1988. The use of the internal model approach has to be accepted by the (country) regulator.] The market risk approach covers the general market risk and the risk of open positions in currencies and debt and equity securities. Assets are weighted according to broad categories of notional risk, being assigned a risk weighting according to the amount of capital deemed to be necessary to support them. Four categories of risk weights (0%, 20%, 50%, 100%) are applied; for example cash and money market instruments have a zero risk weighting which means that no capital is required to support the holding of these assets. Property and equipment carries a 100% risk weighting, meaning that it must be supported by capital equal to 8% of the carrying amount. Off-balance-sheet credit related commitments and forwards and options based derivative instruments are taken into account by applying different categories of conversion factors, designed to convert these items into balance sheet equivalents. The resulting equivalent amounts are then weighted for risk using the same percentages as for on-balance-sheet assets. Tier 1 capital consists of shareholders’ equity less goodwill. Tier 2 capital includes the Group’s eligible long-term debt and general provisions. The Group’s capital adequacy level was as follows: Balance sheet/ Risk weighted Notional amount 2002

amount

2001

2002

2001

Balance sheet assets (net of provisions) Due from other banks

8,576

6,604

1,715

1,320

Derivative financial instruments

5,325

5,442

535

545

Loans and advances to customers

59,203 53,208 41,081 36,031

Trading and investment securities

16,726 11,586

Investment in associated undertakings

6,338

2,644

112

108

112

108

Property and equipment

1,519

1,555

1,519

1,555

Other assets

2,383

2,366

1,549

1,350

Off-balance sheet positions Credit related commitments

26,653 20,317

8,061

7,626

Forwards-based derivative instruments

278,644 214,503

1,251

634

Options-based derivative instruments

89,079 49,160

843

398

3,405

1,014

Unassigned market-risk components Total risk-weighted assets

66,409 52,974

BIS Capital Ratios

Capital

BIS%

2002

2001

2002

Tier 1 capital

5,379

4,241

8.1

8.0

Tier 1 + Tier 2 capital

8,025

6,791

12.1

12.8

[Banks may wish to disclose capital adequacy outside the audited financial statements.]

20

PricewaterhouseCoopers

2001

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

Financial risk management (continued) C Credit risk 39p169(a)

The Group takes on exposure to credit risk which is the risk that a counterparty will be unable to pay amounts in full when due. The Group structures the levels of credit risk it undertakes by placing limits on the amount of risk accepted in relation to one borrower, or groups of borrowers, and to geographical and industry segments. Such risks are monitored on a revolving basis and subject to an annual or more frequent review. Limits on the level of credit risk by product, industry sector and by country are approved quarterly by the Board of Directors. The exposure to any one borrower including banks and brokers is further restricted by sub-limits covering on and off-balance sheet exposures and daily delivery risk limits in relation to trading items such as forward foreign exchange contracts. Actual exposures against limits are monitored daily. Exposure to credit risk is managed through regular analysis of the ability of borrowers and potential borrowers to meet interest and capital repayment obligations and by changing these lending limits where appropriate. Exposure to credit risk is also managed in part by obtaining collateral and corporate and personal guarantees, but a significant portion is personal lending where no such facilities can be obtained.

Derivatives The Group maintains strict control limits on net open derivative positions, i.e. the difference between purchase and sale contracts, by both amount and term. At any one time the amount subject to credit risk is limited to the current fair value of instruments that are favourable to the Group (i.e. assets), which in relation to derivatives is only a small fraction of the contract or notional values used to express the volume of instruments outstanding. This credit risk exposure is managed as part of the overall lending limits with customers, together with potential exposures from market movements. Collateral or other security is not usually obtained for credit risk exposures on these instruments, except where the group requires margin deposits from counterparties. 32p66

Master netting arrangements The Group further restricts its exposure to credit losses by entering into master netting arrangements with counterparties with which it undertakes a significant volume of transactions. Master netting arrangements do not generally result in an offset of balance sheet assets and liabilities as transactions are usually settled on a gross basis. However, the credit risk associated with favourable contracts is reduced by a master netting arrangement to the extent that if an event of default occurs, all amounts with the counterparty are terminated and settled on a net basis. The Group’s overall exposure to credit risk on derivative instruments subject to master netting arrangements can change substantially within a short period since it is affected by each transaction subject to the arrangement.

30p26

32p66(a)

39p30

Credit related commitments The primary purpose of these instruments is to ensure that funds are available to a customer as required. Guarantees and standby letters of credit, which represent irrevocable assurances that the Group will make payments in the event that a customer cannot meet its obligations to third parties, carry the same credit risk as loans. Documentary and commercial letters of credit, which are written undertakings by the Group on behalf of a customer authorising a third party to draw drafts on the Group up to a stipulated amount under specific terms and conditions, are collateralised by the underlying shipments of goods to which they relate and therefore carry less risk than a direct borrowing. Commitments to make loans at a specific rate of interest during a fixed period of time are accounted for as derivatives and accounted for as such unless these commitments do not extend beyond the period expected to be needed to perform appropriate underwriting, in which case they considered to be “regular way” transactions.

PricewaterhouseCoopers

21

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

Financial risk management (continued) C Credit risk (continued) Commitments to extend credit represent unused portions of authorisations to extend credit in the form of loans, guarantees or letters of credit. With respect to credit risk on commitments to extend credit, the Group is potentially exposed to loss in an amount equal to the total unused commitments. However, the likely amount of loss is less than the total unused commitments since most commitments to extend credit are contingent upon customers maintaining specific credit standards. The Group monitors the term to maturity of credit commitments because longerterm commitments generally have a greater degree of credit risk than shorter-term commitments. 32p66 32p74 14p69 30p40

Geographical concentrations of assets, liabilities and off-balance sheet items [The following note incorporates IAS 32 credit risk disclosures, IAS 30 geographical concentrations of assets, liabilities and off balance sheet items disclosures and a public enterprise’s IAS 14 (r) secondary segment disclosures.] Total assets

Total Credit Capital liabilities commitments Revenues expenditure

As at 31 December 2002 [Home country] [Other individual countries in Europe over 10% reporting threshold] Other European countries Canada and USA Australasia South East Asia Other countries

Share of associates Unallocated assets / liabilities

23,938

22,092

6,716

1,561

187

29,543 20,298 15,390 6,421 3,372 2,075

33,211 16,789 10,019 5,212 2,760 520

10,537 4,981 2,789 1,069 561 –

3,335 1,974 1,075 566 270 88

168 73 39 – – –

101,037

90,603

26,653

8,869

467

112 382

– 5,391

101,531

95,994

16,361

14,606

5,986

1,465

143

25,868 16,437 11,390 6,769 4,892 678

23,433 15,735 9,742 6,241 3,772 490

5,218 3,873 2,663 1,367 1,210 –

2,951 1,662 1,109 458 367 9

157 40 17 15 8 2

82,395

74,019

20,317

8,021

382

108 315

– 7,658

82,818

81,694

As at 31 December 2001 [Home country] [Other individual countries in Europe over 10% threshold] Other European countries Canada and USA Australasia South East Asia Other countries

Share of associates Unallocated assets / liabilities

22

PricewaterhouseCoopers

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

Financial risk management (continued) Geographical concentrations of assets, liabilities and off balance sheet items (continued) 14p81 1p99(q)

Although the Group’s three business segments are managed on a worldwide basis, they operate in eight main geographical areas. The Group’s exposure to credit risk is concentrated in these areas [Name of country] is the home country of the parent Bank which is also the main operating company. The areas of operation include all the primary business segments. [Name of the individual countries in Europe which are over the 10% reporting threshold in revised IAS 14] – the areas of operation in these countries include all the primary business segments. Other European countries [it is assumed that the countries in this category are individually less than the 10% threshold for a separately reportable segment] – in these countries, the Group operates retail and corporate banking services. Canada and the United States of America, and Latin America – in these countries the predominant activity is corporate banking services. Australasia and South East Asia – the main activities are corporate banking and corporate finance services. In South East Asia the principal countries in which the Group operates are Japan, China and Thailand. As one of the largest [Home country] banks, the Group accounts for a significant share of credit exposure to many sectors of the economy. However, credit risk is spread over a diversity of personal and commercial customers.

32p66(b)

As an active participant in the international banking markets, the Group has a significant concentration of credit risk with other financial institutions. In total, credit risk exposure to financial institutions is estimated to have amounted to LC 13,637 million at 31 December 2002 (2001: LC 12,457) of which LC 5,061 (2001: LC 3,367) million consisted of derivative financial instruments.

39p169(a)

The Group restricts its exposure to credit losses on sale and repurchase agreements by entering into master netting arrangements and by holding the underlying securities as collateral. As at 31 December 2002, master-netting arrangements reduced the credit risk by approximately LC 2,734 million (2001: LC 2,963 million). With the exception of [home country] and [other individual countries in Europe over 10% reporting threshold] no other individual country contributed more than 10% of consolidated income or assets. Interest and fee income, total assets, total liabilities and contingent liabilities has generally been based on the country in which the branch or subsidiary is located, with adjustments made for branches in offshore centres to reflect customers and counterparties that are based elsewhere. The analysis would not be materially different if based on the country in which the counterparty is located.

14p81

Capital expenditure is shown by the geographical area in which the buildings and equipment are located.

30p40

Geographic sector risk concentrations within the customer loan portfolio were as follows:

[Home country] [Other individual countries in Europe over 10% reporting threshold] Other European countries Canada and USA Australasia South East Asian countries Other countries

2002

2002 %

2001

2001 %

10,064

17

11,707

22

23,113 13,617 4,736 4,144 1,753 1,776

39 23 8 7 3 3

19,153 11,174 4,785 2,128 3,726 535

36 21 9 4 7 1

59,203

100

53,208

100

PricewaterhouseCoopers

23

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

Financial risk management (continued) Geographical concentrations of assets, liabilities and off-balance sheet items (continued) 30p40

Economic sector risk concentrations within the customer loan portfolio were as follows: 2002

2002

2001

% Government bodies Manufacturing Agricultural Private individuals Other

2001 %

349

1

331

1

17,180

29

12,157

23

2,737

5

2,363

4

29,696

50

30,337

57

9,241

15

8,020

15

59,203

100

53,208

100

D Market risk 39p169(a)

The group takes on exposure to market risks. Market risks arise from open positions in interest rate, currency and equity products, all of which are exposed to general and specific market movements. The Group applies a ‘value at risk’ methodology to estimate the market risk of positions held and the maximum losses expected, based upon a number of assumptions for various changes in market conditions. The Board of Directors sets limits on the value of risk that may be accepted, which is monitored on a daily basis. The daily market value at risk measure (VAR) is an estimate, with a confidence level set at 97.5%, of the potential loss which might arise if the current positions were to be held unchanged for one business day. The measurement is structured so that daily losses exceeding the VAR figure should occur, on average, not more than once every sixty days. Actual outcomes are monitored regularly to test the validity of the assumptions and parameters/factors used in the VAR calculation. Since VAR constitutes an integral part of the Group’s market risk control regime, VAR limits are established by the Board for all trading and portfolio operations; actual exposure against limits, together with a consolidated Group-wide VAR, is reviewed daily by management. Average daily VAR for the Group was LC 187 in 2002 (2001: LC 173). However, the use of this approach does not prevent losses outside of these limits in the event of more significant market movements.

E Currency risk 39p169(a)

24

The Group takes on exposure to effects of fluctuations in the prevailing foreign currency exchange rates on its financial position and cash flows. The Board of Directors sets limits on the level of exposure by currency and in total for both overnight and intra-day positions, which are monitored daily. The table below summarises the Group’s exposure to foreign currency exchange rate risk at 31 December. Included in the table are the Group’s assets and liabilities at carrying amounts, categorised by currency. The off-balance sheet gap represents the difference between the notional amounts of foreign currency derivative financial instruments, which are principally used to reduce the Group’s exposure to currency movements, and their fair values.

PricewaterhouseCoopers

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

Financial risk management (continued) E Currency risk (continued) 30p40

Concentrations of assets, liabilities and off balance sheet items EURO USD GBP As at 31 December 2002 Assets Cash and balances with central banks Treasury bills and other eligible bills Due from other banks Trading securities Derivative financial instruments Loans and advances to customers Investment securities-available – for-sale – held-to-maturity Investments in associates Goodwill Property and equipment Other assets, including tax assets Total assets Liabilities Due to other banks Other deposits Derivative financial instruments and trading liabilities Due to customers Debt securities in issue Other borrowed funds Other liabilities, including tax Liabilities Retirement benefit obligations Total liabilities

1,824 912 100 235 2,572 1,876 1,435 2,324 1,643 1,459 20,264 15,987

LC

1,216 150 1,715 1,365 398 6,984

1,236 1,000 1,849 3,397 1,627 7,873

Other

Total

892 6,080 – 1,485 564 8,576 200 8,721 198 5,325 8,095 59,203

1,555 998 45 52 903

501 880 21 43 275

432 – 35 27 261

1,379 2,001 – – –

139 120 11 – 80

4,006 3,999 112 122 1,519

1,156

264

589

275

99

2,383

32,547 24,777 13,172 20,637 10,398 101,531

5,785 6,076

3,532 2,478

1,156 589 16,155 12,354 1,194 189 2,212 93

2,784 3,218

1,169 3,804

1,769 15,039 673 16,249

432 1,576 3,278 14,839 183 200 177 251

286 4,039 5,149 51,775 – 1,766 75 2,808

749

561

634

1,458

679

4,081

64

32

45

18

78

237

33,391 19,828 10,751 23,315

Net on-balance sheet position

(844)

4,949

Off-balance sheet net notional Position

4,763 (9,557)

Credit commitments

7,432

4,562

2,421 (2,678)

8,709 95,994 1,689

5,537

8,423

2,840 (2,140)

4,329

3,278

1,324 10,057 26,653

As at 31 December 2001 Total assets

29,772 19,675 11,956 12,905 11,851 86,159

Total liabilities

36,147 16,945

9,657 10,270

8,675 81,694

Net on-balance sheet position

(6,375)

2,730

2,299

2,635

3,176

4,465

Off-balance sheet net notional Position

(5,318)

6,592 (1,754)

339

9,660

9,519

Credit commitments

6,234

3,654

2,976

1,234

6,219 20,317

[Where other currencies are individually significant they should be separately disclosed.] PricewaterhouseCoopers

25

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

Financial risk management (continued) F Interest rate risk Interest sensitivity of assets, liabilities and off balance sheet items – repricing analysis 39p169(b)

The Group takes on exposure to the effects of fluctuations in the prevailing levels of market interest rates on its financial position and cash flows. Interest margins may increase as a result of such changes but may reduce or create losses in the event that unexpected movements arise. The Board of Directors sets limits on the level of mismatch of interest rate repricing that may be undertaken, which is monitored daily.

39p169(b)

The table below summarises the Group’s exposure to interest rate risks. Included in the table are the Group’s assets and liabilities at carrying amounts, categorised by the earlier of contractual repricing or maturity dates. The carrying amounts of derivative financial instruments which are principally used to reduce the Group’s exposure to interest rate movements are included in ‘Other assets’ and ‘Other liabilities’ under the heading ‘Non-interest bearing’. The off-balance sheet gap represents the net notional amounts of all interest-rate sensitive derivative financial instruments.

32p59

Expected repricing and maturity dates do not differ significantly from the contract dates, except for the maturity of LC 27,456 (2001: LC 18,670) of Due to customers up to 1 month, of which 74 % (2001: 73%) represent balances on current accounts considered by the Group as a relatively stable core source of funding of its operations.

32p56(a) 32p64(b)

As at 31 December 2002

Up to 1 month

1-3 months

3-12 months

1–5 years

Over 5 years

Noninterest bearing

Total

6,080

–

–

–

–

–

6,080 1,485

Assets Cash and central banks balances Treasury and other eligible bills

712

773

–

–

–

–

Due from other banks

3,157

3,647

1,507

265

–

–

8,576

Trading securities

1,643

1,619

1,798

1,705

739

1,217

8,721

12,676 19,583 22,008

4,432

492

12

59,203 4,006

Loans to customers Investment securities – available-for-sale

–

–

–

892

1,616

1,498

– held-to-maturity

–

1,000

899

888

1,212

–

3,999

328

342

15

12

2

8,762

9,461

24,596 26,964 26,227

8,194

Other assets Total assets

4,061 11,489 101,531

Liabilities Due to other banks

9,345

4,764

413

381

136

–

15,039

Other deposits

3,736 10,639

1,219

390

265

–

16,249

27,456 11,987

9,673

1,345

1,284

30

51,775

1,076

566

–

–

1,766

Due to customers Debt securities in issue

55

69

Other borrowed funds

35

439

868

295

1,171

–

2,808

Other liabilities

12

12

267

13

–

8,053

8,357

40,639 27,910 13,516

2,990

2,856

8,083

95,994

Total liabilities On balance sheet Interest sensitivity gap

(16,043)

(946) 12,711

5,204

1,205

3,367

1,937 (1,732)

(845)

(476)

(12,676)

991 10,979

4,359

729

Off balance sheet Interest sensitivity gap Total interest sensitivity gap

26

PricewaterhouseCoopers

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

Financial risk management (continued) F Interest rate risk (continued) The table below summarises the effective interest rate by major currencies for monetary financial instruments: 32p56(b)

As at 31 December 2002

32p64(d) Assets Cash and balances with central banks Treasury bills and other eligible bills Due from other banks Trading securities – debt securities Loans and advances to customers Investment securities available-for-sale – debt securities

EURO

USD

GBP

LC

%

%

%

%

4.76 4.52 5.01 5.02 8.04

5.34 5.65 5.21 5.78 7.31

6.71 6.92 6.45 6.83 7.28

4.16 4.23 4.22 4.35 6.02

6.81

6.49

7.85

5.30

Investment securities held-to-maturity

6.83

6.52

7.90

5.21

Liabilities Due to other banks Other deposits Due to customers Debt securities in issue

4.93 5.22 5.90 5.32

5.20 5.18 4.39 6.32

6.44 6.32 5.49 6.87

4.20 4.18 3.99 4.43

Other borrowed funds

5.35

6.41

6.91

4.45

DV,32p65

Assuming the financial assets and liabilities at 31 December 2002 were to remain until maturity or settlement without any action by the Group to alter the resulting interest rate risk exposure, an immediate and sustained increase of 1% in market interest rates across all maturities would reduce net income for the following year by approximately LC 90 (2001: LC 75) and the Group’s equity by approximately LC 270 (2001: 240).

32p56(a) 32p64(b)

As at 31 December 2001

1-5 years

Over 5 years

4,315 – – 532 239 – 2,257 2,426 1,507 1,643 1,110 1,898 8,676 16,583 23,008 – – – 228 242 13

– – 414 1,305 4,567 392 10

– – – 2,239 324 1,616 5

Total assets

17,651 20,600 26,426

6,688

4,184 10,610 86,159

Liabilities Due to other banks Other deposits Due to customers Debt securities in issue Other borrowed funds Other liabilities

8,345 3,764 1,015 1,736 8,639 950 18,670 11,232 10,276 59 45 870 67 564 1,244 14 8 7

489 297 2,365 258 637 34

20 409 134 – – –

– 13,633 – 12,031 21 42,698 – 1,232 – 2,512 9,525 9,588

Total liabilities

28,891 24,252 14,362

4,080

563

9,546 81,694

(11,240) (3,652) 12,064

2,608

3,621

2,960 (1,574) (2,115)

(491)

(692) 10,490

3,130

On balance sheet Interest sensitivity gap Off balance sheet Interest sensitivity gap Total interest sensitivity gap

1,220 (10,020)

1-3 months

Noninterest bearing

3-12 months

Assets Cash and central banks balances Treasury and other eligible bills Due from other banks Trading securities Loans to customers Investment securities Other assets

Up to 1 month

493

Total

– 4,315 – 771 – 6,604 1,181 9,376 50 53,208 202 2,210 9,177 9,675

PricewaterhouseCoopers

27

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

Financial risk management (continued) F Interest rate risk (continued) The table below summarises the effective interest rate by major currencies for monetary financial instruments: As at 31 December 2001 32p56(b)

Assets

32p64(d)

Cash and balances with central banks

EURO

USD

GBP

LC

%

%

%

%

4.65

5.84

6.51

4.26

Treasury bills and other eligible bills

4.41

6.05

6.72

4.43

Due from other banks

5.12

5.71

6.25

4.32

Trading securities – debt securities

5.11

6.28

6.63

4.45

Loans and advances to customers

8.13

7.81

7.08

5.62

Investment securities – debt securities

6.18

6.92

7.70

5.31

Due to other banks

4.83

5.70

6.24

4.30

Other deposits

5.12

5.68

6.02

4.28

Due to customers

5.80

4.89

5.29

4.19

Debt securities in issue

5.22

6.82

6.67

4.53

Other borrowed funds

5.15

6.51

6.71

4.55

Liabilities

G Liquidity risk 39p169(a)

The Group is exposed to daily calls on its available cash resources from overnight deposits, current accounts, maturing deposits, loan draw downs, guarantees and from margin and other calls on cash settled derivatives. The group does not maintain cash resources to meet all of these needs as experience shows that a minimum level of reinvestment of maturing funds can be predicted with a high level of certainty. The Board sets limits on the minimum proportion of maturing funds available to meet such calls and on the minimum level of interbank and other borrowing facilities that should be in place to cover withdrawals at unexpected levels of demand. The table below analyses assets and liabilities of the Group into relevant maturity groupings based on the remaining period at balance sheet date to the contractual maturity date.

28

PricewaterhouseCoopers

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

Financial risk management (continued) G Liquidity risk (continued) 30p30

Maturities of assets and liabilities

1p54 As at 31 December 2002

Up to 1 month

1-3 months

3-12 months

1-5 years

Over 5 years

Total

6,080

–

–

–

–

6,080

712

773

–

–

–

1,485

Due from other banks

2,157

3,127

2,507

785

–

8,576

Trading securities

1,640

1,309

1,898

1,915

1,959

8,721

Derivative financial instruments

1,301

1,453

1,258

991

322

5,325

Loans to customers

4,676

Assets Cash and central banks balances Treasury and other eligible bills

11,583 24,008 14,432

4,504 59,203

Investment securities – available-for-sale

–

–

–

692

3,314

– held-to-maturity

–

–

1,499

988

1,512

3,999

328

342

15

12

3,439

4,136

Other assets Total assets

16,894

4,006

18,587 31,185 19,815 15,050 101,531

Liabilities Due to other banks

4,145

4,564

3,813

1,681

836 15,039

Other deposits

3,706

4,639

3,219

3,390

1,295 16,249

1,072

1,062

580

8,387 12,973

2,445

Derivative financial instruments and trading liabilities Due to customers

1,140 26,056

185

4,039

1,914 51,775

Debt securities in issue

55

69

1,076

566

–

1,766

Other borrowed funds

–

–

–

937

1,871

2,808

Other liabilities

1,316

367

926

597

1,112

4,318

Total liabilities

36,418

Net liquidity gap

(19,524)

19,098 23,069 10,196 (511)

8,116

9,619

7,213 95,994 7,837

5,537

As at 31 December 2001 30p30

Total assets

17,055

11,703 13,342 24,129 19,930 86,159

Total liabilities

38,428

25,159

Net liquidity gap

(21,373) (13,456)

6,266

6,404

5,437 81,694

7,076 17,725 14,493

4,465

The matching and controlled mismatching of the maturities and interest rates of assets and liabilities is fundamental to the management of the Group. It is unusual for banks ever to be completely matched since business transacted is often of uncertain term and of different types. An unmatched position potentially enhances profitability, but also increases the risk of losses. The maturities of assets and liabilities and the ability to replace, at an acceptable cost, interest– bearing liabilities as they mature, are important factors in assessing the liquidity of the Group and its exposure to changes in interest rates and exchange rates. Liquidity requirements to support calls under guarantees and standby letters of credit are considerably less than the amount of the commitment because the Group does not generally expect the third party to draw funds under the agreement. The total outstanding contractual amount of commitments to extend credit does not necessarily represent future cash requirements, since many of these commitments will expire or terminate without being funded.

PricewaterhouseCoopers

29

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

Financial risk management (continued) H Fair values of financial assets and liabilities 32p77

The following table summarises the carrying amounts and fair values of those financial assets and liabilities not presented on the Group’s balance sheet at their fair value. Bid prices are used to estimate fair values of assets, whereas offer prices are applied for liabilities.

30p24

Carrying value

Fair value

2002

2001

2002

2001

8,576

6,604

8,742

6,608

Financial assets Due from other banks Loans and advances to customers Investment securities (held-to-maturity)

59,203 53,208 59,461 53,756 3,999

2,210

3,872

2,220

Financial liabilities Due to other banks

15,039 13,633 14,962 13,541

Other deposits

16,249 12,031 16,221 11,997

Due to customers

51,775 42,698 52,032 42,695

Debt securities in issue

1,766

1,232

1,785

1,301

Other borrowed funds

2,808

2,512

2,895

2,678

Due from other banks Due from other banks includes inter-bank placements and items in the course of collection. The fair value of floating rate placements and overnight deposits is their carrying amount. The estimated fair value of fixed interest bearing deposits is based on discounted cash flows using prevailing money market interest rates for debts with similar credit risk and remaining maturity. Loans and advances to customers Loans and advances are net of provisions for impairment. The estimated fair value of loans and advances represents the discounted amount of estimated future cash flows expected to be received. Expected cash flows are discounted at current market rates to determine fair value. Investment securities Investment securities include only interest-bearing assets held to maturity, as assets available-forsale are measured at fair value. Fair value for held to maturity assets is based on market prices or broker/dealer price quotations. Where this information is not available, fair value has been estimated using quoted market prices for securities with similar credit, maturity and yield characteristics, or in some cases by reference to the net tangible asset backing of the investee. Deposits and borrowings The estimated fair value of deposits with no stated maturity, which includes non-interest-bearing deposits, is the amount repayable on demand. The estimated fair value of fixed interest bearing deposits and other borrowings without quoted market price is based on discounted cash flows using interest rates for new debts with similar remaining maturity. Debt securities in issue The aggregate fair values are calculated based on quoted market prices. For those notes where quoted market prices are not available, a discounted cash flow model is used based on a current yield curve appropriate for the remaining term to maturity.

30

PricewaterhouseCoopers

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

Financial risk management (continued) I

Fiduciary activities The Group provides custody, trustee, corporate administration, investment management and advisory services to third parties which involve the Group making allocation and purchase and sale decisions in relation to a wide range of financial instruments. Those assets that are held in a fiduciary capacity are not included in these financial statements. Some of these arrangements involve the Group accepting targets for benchmark levels of returns for the assets under the Group’s care. These services give rise to the risk that the Group will be accused of maladministration or under-performance. At the balance sheet date the Group had investment custody accounts amounting to approximately LC 87,000 (2001: LC 68,000) and financial assets under administration estimated to amount to approximately LC 63,000 (2001: LC 45,000).

PricewaterhouseCoopers

31

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

Notes to the consolidated financial statements Index to the notes to the consolidated financial statements

Page

1

Business segments

33

2

Net interest income

36

3

Net fee and commission income

36

4

Dividend income

36

5

Net trading income

36

6

Other operating expenses

37

7

Staff costs

37

8

Provision for losses on loans and advances

37

9

Income tax expense

37

10

Earnings per share

38

11

Cash and balances with central bank

38

12

Treasury bills and other eligible bills

39

13

Loans and advances to

39

14

Trading securities

39

15

Derivative financial instruments and trading liabilities

40

16

Loans and advances to customers

43

17

Investment securities

45

18

Investment in associates

46

19

Goodwill

47

20

Property, plant and equipment

48

21

Other assets

48

22

Due to other banks

48

23

Other deposits

48

24

Due to customers

49

25

Debt securities in issue

49

26

Other borrowed funds

50

27

Convertible bond

50

28

Redeemable preference shares

51

29

Other liabilities

51

30

Other provisions

51

31

Deferred income taxes

52

32

Retirement benefit obligations

54

33

Contingent liabilities and commitments

56

34

Minority interest

57

35

Ordinary shares, share premium and treasury shares

57

36

Reserves and retained earnings

58

37

Dividends per share

61

38

Cash and cash equivalents

61

39

Related party transactions

62

40

Acquisitions and disposals

63

41

Principal subsidiaries

64

42

Post balance sheet events

64

32

PricewaterhouseCoopers

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

Notes to the consolidated financial statements 1p46(d,e)

(In the notes all amounts are shown in [name of currency] millions unless otherwise stated)

1 Business segments Segment information is only required for enterprises whose securities are publicly traded and for enterprises that are in the process of issuing equity or debt securities in public securities markets. In this example the primary reporting format comprises the business segments, whilst the secondary reporting format comprises the geographical segments which is contained in Section C to ‘Financial risk management’ on pages 22-24. 14p81 1p99(q)

The Group is organised on a world wide basis into three main business segments: • Retail banking – incorporating private banking services, private customer current accounts, savings, deposits, investment savings products, custody, credit and debit cards, consumer loans and mortgages. • Corporate banking – incorporating direct debit facilities, current accounts, deposits, overdrafts, loan and other credit facilities, foreign currency and derivative products. • Investment banking – incorporating financial instruments trading, structured financing, corporate leasing, merger and acquisitions advice. Other operations of the Group comprise funds management, institutional finance and providing computer services, none of which constitutes a separately reportable segment.

14p75

Transactions between the business segments are on normal commercial terms and conditions.

14p51

Funds are ordinarily reallocated between segments, resulting in funding cost transfers disclosed in operating income. Interest charged for these funds is based on the Group’s cost of capital. There are no other material items of income or expense between the business segments. Segment assets and liabilities comprise operating assets and liabilities, being the majority of the balance sheet but excluding items such as taxation and borrowings. Internal charges and transfer pricing adjustments have been reflected in the performance of each business. Revenue sharing agreements are used to allocate external customer revenues to a business segment on a reasonable basis.

PricewaterhouseCoopers

33

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

1 Business Segments (continued) Year ended

Retail banking

Corporate banking

Investment banking

Other

Eliminations

Group

External revenues

3,074

2,441

3,181

173

–

8,869

Revenues from other segments

1,017

221

–

–

(1,238)

–

Total revenues

4,091

2,662

3,181

173

(1,238)

8,869

Segment result

664

346

307

66

–

1,383

31 December 2002 14p74

14p51 14p67 14p52

Unallocated costs

(135)

14p67

Profit from operations

1,248

14p64

Share of results of associates before tax

6

6

1,260

Income tax expense

(382)

Profit from ordinary activites after tax

878

Minority interest 14p67

Net profit

14p55

Segment assets

14p66

Associates

(7) 871 57,614

22,903

20,098

35

422 77

Unallocated assets 14p67

Total assets

14p56

Segment liabilities

101,037 112 382 101,531

61,185

20,753

8,351

314

Unallocated liabilities 14p67

12

Profit before tax

90,603 5,391

Total liabilities

95,994

Other segment items 14p57

Capital expenditure

257

116

32

64

469

14p58

Depreciation

173

127

17

6

323

14p58

Amortisation

108

–

2

–

110

36p116(a)

Impairment charge

68

72

35

24

199

14p61

Other non-cash expenses

256

113

155

30

554

DV,14p59

Restructuring costs

283

–

–

–

283

34

PricewaterhouseCoopers

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

1 Business Segments (continued) Year ended 31 December 2001 14p74

External revenues

Retail banking

Corporate banking

Investment banking

Other

Eliminations

Group

4,308

2,096

1,492

125

–

8,021

Revenues from other segments

517

63

–

12

(592)

–

14p51 14p67

Total revenues

4,825

2,159

1,492

137

(592)

8,021

14p52

Segment result

755

318

183

51

–

1,307

Unallocated costs

(111)

14p67

Profit from operations

1,196

14p64

Share of results of associates before tax

6

5

11

Profit before tax

1,207

Income tax expense

(379)

Profit from ordinary activities after tax

828

Minority interest 14p67

Net profit

14p55

Segment assets

14p66

Associates

(8) 820 56,585

20,654

4,798

32

3,699

85,376

76

108

Unallocated assets 14p67

Total assets

14p56

Segment liabilities

315 86,159 47,163

23,591

2,955

3,651

77,360

Unallocated liabilities 14p67

4,334

Total liabilities

81,694

Other segment items 14p57

Capital expenditure

205

121

31

25

382

14p58

Depreciation

170

126

15

4

315

14p58

Amortisation

96

–

12

–

108

36p116(a)

Impairment charge

12

83

30

2

127

14p61

Other non-cash (income)/expenses

180

136

125

28

469

DV,14p59

Restructuring costs

–

–

–

–

–

Capital expenditure comprises additions to property and equipment (Note 20) and goodwill (Note 19) including additions resulting from acquisitions through business combinations. Geographical segments are set out on page 22.

PricewaterhouseCoopers

35

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

2 Net interest income 2002

2001

Interest income 30p11

Cash and short term funds

617

550

30p16

Trading securities

429

367

Investment securities

159

177

Securities borrowed and reverse repos

104

97

5,606

4,975

328

317

7,243

6,483

3,751

3,238

105

89

30p10

Loans and advances Other

39p170(c) 30p12

Interest expense

30p16

Banks and customers Debt securities in issue Securities lent and repos Other borrowed funds Other

98

84

191

199

511

469

4,656

4,079

2002

2001

Credit related fees and commissions

675

631

Corporate finance fees

201

176

39p170(c)

3 Net fee and commission income Fee and commission income DV

Portfolio and other management fees

74

98

140

135

5

4

1,095

1,044

42

48

6

4

48

52

2002

2001

Trading securities

64

22

Available-for-sale securities

23

11

87

33

2002

2001

– translation gains less losses

100

100

– transaction gains less losses

80

76

Asset management and related fees Other fees Fee and commission expense Brokerage fees paid Other fees paid

4 Dividend income 39p170(c) 18p35(b) 30p10

5 Net trading income 30p10 21p42(a)

Foreign exchange

Interest rate instruments

55

59

Equities

33

16

268

251

39p170(c)

Foreign exchange net trading income includes gains and losses from spot and forward contracts, options, futures and translated foreign currency assets and liabilities. Interest rate instruments includes the results of making markets in instruments in government securities, corporate debt securities, money market instruments, interest rate and currency swaps, options and other derivatives. Equities trading income includes the results of making markets globally in equity securities and equity derivatives such as swaps, options, futures and forward contracts. 36

PricewaterhouseCoopers

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

6 Other operating expenses 8p16 1p83 1p83 22p88(d) 36p113(a)

38p115 17p27(c) 8p16

Staff costs (Note7) Administrative expenses Depreciation (Note 20) (Profit)/loss on sale of property and equipment Amortisation of goodwill (Note 19) Impairment charges – Property and equipment (Note 20) – Goodwill (Note 19) Software costs Operating lease rentals Restructuring costs (Note 30) Other

2002

2001

1,352 397 323 15 110

1,266 466 298 (5) 108

2 5 14 198 283 98 2,797

– – 11 194 – 220 2,558

2002

2001

880 264 132 66 10

835 250 114 58 9

1,352

1,266

7 Staff costs

19p46 19p120(f) 19p131

1p102(d)

Wages and salaries Social security costs Pension costs – defined contribution plans Pension costs – defined benefit plans (Note 32) Other post retirement benefits (Note 32)

The average number of persons employed by the Group during the year was 22,150 (2001: 21,350).

8 Impairment losses on loans and advances 30p43(b) Amounts due from other banks (Note 13) Loans and advances to customers (Note 16) 30p10

2002

2001

7 113 120

– 136 136

2002

2001

312

321

65

54

5 382

4 379

9 Income tax expense 12p79

Current tax

12p79

Deferred tax (Note 31)

28p28

Share of tax of associates (Note 18)

12p81(c)

Further information about deferred income tax is presented in Note 33. The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the basic tax rate of the home country of the parent as follows: 2002 2001 Profit before tax 1,260 1,207 Tax calculated at a tax rate of 40% (2001: 40%) 504 483 Effect of different tax rates in other countries (118) (88) Income not subject to tax (23) (21) Expenses not deductible for tax purposes: – Buildings depreciation 14 11 – Goodwill amortisation and impairment 46 43 Utilisation of previously unrecognised tax losses (41) (49) Income tax expense 382 379

PricewaterhouseCoopers

37

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

10 Earnings per share Earnings per share information is only required for enterprises whose ordinary shares are publicly traded and for enterprises that are in the process of issuing ordinary shares in public securities markets. Basic earnings per share is calculated by dividing the net profit attributable to shareholders by the weighted average number of ordinary shares in issue during the year, excluding the average number of ordinary shares purchased by the company and held as treasury shares. 2002 33p49(a)

Net profit attributable to shareholders (millions)

33p49(b)

Weighted average number of ordinary shares in issue (millions) Basic earnings per share (expressed in LC per share)

2001

871

820

1,149

1,108

0.76

0.74

For the diluted earnings per share the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The Company has two categories of dilutive potential ordinary shares: convertible debt and share options granted to employees. The convertible debt is assumed to have been converted into ordinary shares and the net profit is adjusted to eliminate the applicable interest expense less the tax effect. For the share options the number of shares that could have been acquired at market price (determined as the average annual share price of the Company’s shares) based on the monetary value of the subscription rights attached to outstanding share options is determined; the residual bonus shares are added to the ordinary shares outstanding, but no adjustment is made to net profit. 2002

2001

871

820

8

8

879

828

Weighted average number of ordinary shares in issue (millions)

1,149

1,108

Adjustments for: – bonus element on conversion of convertible debt (millions)

25

25

– share options (millions)

23

27

1,197

1,160

0.73

0.71

2002

2001

Net profit attributable to shareholders (millions) Elimination of interest expense on convertible debt (net of tax effect) 33p49(a)

33p49(b)

Net profit used to determine diluted earnings per share (millions)

Weighted average number of ordinary shares for diluted earnings per share (millions) Diluted earnings per share (expressed in LC per share)

11 Cash and balances with central banks 30p21 Cash in hand

1,778

791

Other money market placements

3,395

2,608

892

903

6,065

4,302

15

13

6,080

4,315

Balances with central banks other than mandatory reserve deposits Included in cash and cash equivalents (Note 38) Mandatory reserve deposits with central banks

7p48

38

Mandatory reserve deposits are not available for use in the Group’s day to day operations.

PricewaterhouseCoopers

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

12 Treasury bills and other eligible bills 1p72

2002

2001

Treasury bills

579

228

Other eligible bills

906

543

1,485

771

Treasury bills and other eligible bills (Note 38)

Treasury bills and other eligible bills are debt securities issued by the [name of country]. Treasury department for a term of three months, six months or a year. Bills are categorised as assets held for trading and carried at their fair value.

13 Due from other banks 1p72

2002 Items in course of collection from other banks

30p21(b)

2001

163

109

Placements with other banks

4,988

2,982

Included in cash equivalents (Note 38)

5,151

3,091

Loans and advances to other banks

3,432

3,513

(7)

–

8,576

6,604

Less: allowance for losses on amounts due from other banks (Note 8)

The provision for impairment of loans to other banks was created during the year. It relates to country exposure to counterparties in a country subject to a International Monetary Fund support programme. All loans have been written down to their estimated recoverable amount. The Group accepted treasury bills at fair value of LC 262 (2001: Nil) as collateral for a loan to a bank, which is due on 1 July 2003 and subsequently sold these bills on the money market.

14 Trading securities 1p72

2002

2001

Government bonds included in cash equivalents (Note 38)

1,949

2,676

Other government bonds

3,019

1,440

– Listed

1,195

1,050

– Unlisted

1,341

3,029

1,083

1,080

134

101

8,721

9,376

Other debt securities

Equity securities – Listed – Unlisted

30p53

Included in government bonds are securities pledged under repurchase agreements with other banks whose market value at 31 December 2002 was LC 939 (2001: LC 1,041). Included in listed debt securities are securities pledged under repurchase agreements with other banks whose market value at 31 December 2002 was LC 31 (2001: LC 23). All repurchase agreements mature within twelve months from the inception.

PricewaterhouseCoopers

39

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

15 Derivative financial instruments and trading liabilities 39p169(b)

The Group utilises the following derivative instruments for both hedging and non-hedging purposes: Currency forwards represent commitments to purchase foreign and domestic currency, including undelivered spot transactions. Foreign currency and interest rate futures are contractual obligations to receive or pay a net amount based on changes in currency rates or interest rates or buy or sell foreign currency or a financial instrument on a future date at a specified price established in an organised financial market. Since futures contracts are collateralised by cash or marketable securities and changes in the futures contact value are settled daily with the exchange, the credit risk is negligible. Forward rate agreements are individually negotiated interest rate futures that call for a cash settlement at a future date for the difference between a contracted rate of interest and the current market rate, based on a notional principal amount. Currency and interest rate swaps are commitments to exchange one set of cash flows for another. Swaps result in an economic exchange of currencies or interest rates (for example, fixed rate for floating rate) or a combination of all these (i.e. cross-currency interest rate swaps). Except for certain currency swaps, no exchange of principal takes place. The Group’s credit risk represents the potential cost to replace the swap contracts if counterparties fail to perform their obligation. This risk is monitored on an ongoing basis with reference to the current fair value, a proportion of the notional amount of the contracts and the liquidity of the market. To control the level of credit risk taken, the Group assesses counterparties using the same techniques as for its lending activities. Foreign currency and interest rate options are contractual agreements under which the seller (writer) grants the purchaser (holder) the right, but not the obligation, either to buy (a call option) or sell (a put option) at or by a set date or during a set period, a specific amount of a foreign currency or a financial instrument at a predetermined price. In consideration for the assumption of foreign exchange or interest rate risk, the seller receives a premium from the purchaser. Options may be either exchange-traded or negotiated between the Group and a customer (OTC). The Group is exposed to credit risk on purchased options only, and only to the extent of their carrying amount, which is their fair value. The notional amounts of certain types of financial instruments provide a basis for comparison with instruments recognised on the balance sheet but do not necessarily indicate the amounts of future cash flows involved or the current fair value of the instruments and, therefore, do not indicate the Group’s exposure to credit or price risks. The derivative instruments become favourable (assets) or unfavourable (liabilities) as a result of fluctuations in market interest rates or foreign exchange rates relative to their terms. The aggregate contractual or notional amount of derivative financial instruments on hand, the extent to which instruments are favourable or unfavourable and, thus the aggregate fair values of derivative financial assets and liabilities can fluctuate significantly from time to time. The fair values of derivative instruments held are set out in the following table.

32p47(a)

Contract/notional amount

32p77

Fair values Assets Liabilities

Year ended 31 December 2002 Derivatives held for trading Foreign exchange derivatives Currency forwards

74,210

1,162

(1,314)

Currency swaps

4,580

99

(268)

OTC currency options bought and sold

8,597

Total OTC derivatives Currency futures Exchange traded currency options – bought and sold

40

PricewaterhouseCoopers

37

(57)

1,298

(1,639)

5,531

53

(67)

470

3

(26)

1,354

(1,732)

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

15 Derivative financial instruments and trading liabilities (continued) Contract/notional amount

Fair values Assets Liabilities

Interest rate derivatives Interest rate swaps

57,217

634

(611)

Cross-currency interest rate swaps

28,609

314

(590)

Forward rate agreements

54,875

51

(55)

OTC interest rate options

5,954

6

–

193

2

–

1,007

(1,256)

Other interest rate contracts Total OTC derivatives Exchange traded interest rate futures

38,534

5

(20)

Exchange traded interest rate options

37,918

29

(31)

34

(51)

65

–

2,460

(3,039)

Embedded equity derivatives Share conversion option on convertible bonds

1,120

Total derivative assets/(liabilities) held for trading Derivatives held for hedging Derivatives designated as fair value hedges Currency futures

4,300

110

(26)

Interest rate swaps

25,262

1,286

(311)

Cross currency interest rate swaps

11,315

554

(88)

1,950

(425)

Derivatives designated as cash flow hedges Currency swaps

4,018

803

(313)

Exchange traded currency options bought

5,020

112

–

Total derivative assets/(liabilities) held for hedging

2,865

(738)

Total recognised derivative assets/(liabilities)

5,325

(3,777)

Other trading liabilities Treasury bills sold not yet re-purchased (Note 12) Total recognised derivative and other trading liabilities

(262) (4,039)

PricewaterhouseCoopers

41

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

15 Derivative financial instruments and trading liabilities (continued) 32p77

Contract/notional amount

32p47(a)

Fair values Assets Liabilities

Year ended 31 December 2001 Derivatives held for trading and hedging of trading Foreign exchange derivatives Currency forwards Currency swaps OTC currency options Total OTC derivatives Currency futures Exchange traded currency options

75,277 2,439 9,994

989 27 80 1,096

(1,250) (198) (92) (1,540)

350 4,293

15 41

– (47)

1,152

(1,587)

Interest rate derivatives Interest rate swaps Forward rate agreements OTC interest rate options Other interest rate contracts Total OTC derivatives

43,847 26,784 5,167 50

879 43 5 7 934

(1,158) (51) (7) – (1,216)

Exchange traded interest rate futures Exchange traded interest rate options

24,061 19,519

1 14 949

(11) (15) (1,242)

2,101

(2,829)

Total derivative assets/(liabilities) held for trading

32p66(b)

42

Derivatives held for hedging Derivatives designated as fair value hedges Currency futures Interest rate swaps Cross currency interest rate swaps

2,300 41,262 7,315

110 3,044 114 3,268

(126) (2,974) (178) (3,278)

Derivatives designated as cash flow hedges Currency swaps Exchange traded currency options bought

818 187

35 38

(170) –

Total derivative assets/(liabilities) held for hedging

3,341

(3,448)

Total recognised derivative assets/(liabilities)

5,442

(6,277)

The Group undertakes approximately 85% of its transactions in foreign exchange and interest rate contracts with other financial institutions. Management have established limits such that at any time, less than 10% of the fair value of favourable contracts outstanding are with any individual counterparty.

PricewaterhouseCoopers

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

16 Loans and advances to customers 2002

2001

Loans originated by the Group Loans to individuals: Overdrafts

2,198

2,432

Credit cards

2,817

2,876

Term loans

2,827

2,633

Mortgages

30,942

30,625

15,695

12,201

1,222

1,222

667

492

56,368

52,481

Sub-participation loans held-to-maturity

3,014

1,126

Other purchased loans held-to-maturity

764

652

60,146

54,259

(943)

(1,051)

59,203

53,208

Loans to corporate entities: Direct commercial loans Sub-participation loans Other

Loans to corporate entities purchased by the Group

Gross loans and advances 30p43(c) Less allowance for losses on loans and advances

The Group accepted listed securities at fair value of LC 1,800 (2001: 1,650) as collateral for commercial loans, which it is permitted to sell or repledge, of which LC 242 (2001: Nil) were repledged or lent to third parties for periods not exceeding three months from the transfer. Included within loans and advances to banks is related accrued interest receivable of LC 587 (2001: LC 547). Allowance for losses on loans and advances 30p43(b)

Movement in allowance for losses on loans and advances as follows: Balance at 1 January Provision for loan impairment Loans written off during the year as uncollectible Balance at 31 December

30p40

2002

2001

1,051

987

113

136

(221)

(72)

943

1,051

The allowance for losses on loans includes LC 61 (2001: LC 15) relating to exposure to counterparties in countries which were subject to International Monetary Fund support programmes.

PricewaterhouseCoopers

43

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

16 Loans and advances to customers (continued) The loans and advances to customers include finance lease receivables, which may be analysed as follows: 17p39(a)

2002

2001

167

121

Later than 1 year and not later than 5 years

389

283

Later than 5 years

103

72

659

476

(134)

(101)

525

375

Gross investment in finance leases, receivable: Not later than 1 year

17p39(b)

Unearned future finance income on finance leases Net investment in finance leases

17p39(a)

The net investment in finance leases may be analysed as follows: Not later than 1 year

121

88

Later than 1 year and not later than 5 years

308

224

96

63

525

375

Later than 5 years

17p39(d)

44

The allowance for uncollectable finance lease receivables included in the provision for loan losses amounted to LC 9 at 31 December 2002 (2001: LC 9).

PricewaterhouseCoopers

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

17 Investment securities 1p72

2002

2001

945

610

1,563

342

– Listed

834

65

– Unlisted

664

186

–

(2)

4,006

1,201

Securities available-for-sale Debt securities – at fair value – Listed – Unlisted Equity securities – at fair value

39p109

Provision for impairment

39p117 39p170(f) Total securities available-for-sale Securities held-to-maturity Debt securities – at amortised cost

39p109

– Listed

1,955

–

– Unlisted

2,063

1,009

(19)

–

Total securities held-to-maturity

3,999

1,009

Total investment securities

8,005

2,210

Provision for impairment

39p111 39p170(f)

32p56

Unlisted debt securities available-for-sale include LC 482 (2001: Nil) of convertible bond with a fixed interest rate of 5.5% and maturity date of 16 December 2003. The bonds can be converted into ordinary shares of a bank listed on the stock exchange in [country] at any time before the maturity of the bond and are separately presented under embedded derivatives.

30p53 39p170(d)

Listed debt securities held-to-maturity at fair value of LC 34 (2001: LC 19) had been pledged to third parties in sale and repurchase agreements for periods not exceeding six months.

39p170(c)

Gains and losses from investment securities comprise: 2002 Derecognition of available-for-sale financial assets Other

2001

112

–

–

156

112

156

PricewaterhouseCoopers

45

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

17 Investment securities (continued) The movement in investment securities may be summarised as follows: Available-

Held-to-

for-sale

maturity

Total

1,201

1,009

2,210

343

81

424

2,759

3,093

5,852

Disposals (sale and redemption)

(192)

(165)

(357)

Losses from changes in fair value Provision for impairment

(105) –

– (19)

(105) (19)

At 31 December 2002

4,006

3,999

8,005

At 1 January 2002 21p15

Exchange differences on monetary assets Additions

39p170(a) 39p170(f)

21p11(c) 21p11(b)

Exchange differences on non-monetary items which are carried at fair value (available-forsale equity securities) are included in gains/(losses) from changes in fair value (unless fair value hedging rules of 39p153(b) apply), whereas non-monetary items carried at cost are included at historical exchange rates.

18 Investment in associates 2002

2001

Opening net book amount

108

107

Share of results before tax

12

11

Share of tax (Note 8)

(5)

(4)

Dividends paid

(2)

(4)

Exchange differences

(1)

(2)

112

108

Country of incorporation

% Interest held

[Associate X]

[Country]

30

[Associate Y]

[Country]

33

28p28 Associates 28p27(a)

The principal associates, which are unlisted, are:

There were no changes in the ownership interests in 2001 or 2002.

46

PricewaterhouseCoopers

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

19 Goodwill 22p88(e)

2002 Opening net book amount

36p113(a)

204

327

Exchange differences

(5)

(15)

Acquisition of a subsidiary (Note 40)

38

–

Impairment charge

(5)

–

(110)

(108)

122

204

Amortisation charge

Cost Accumulated amortisation

36p117(a-c) 36p117(e)

2001

565

540

(443)

(336)

122

204

The impairment charge in 2002 represents the full write-off of goodwill as part of the restructuring of the North American retail banking segment. [IAS 22 (revised) does not require the above analysis of goodwill for the comparative year.]

PricewaterhouseCoopers

47

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

20 Property, plant and equipment 1p73(a) 16p60(d)

Leasehold Buildings Improvements

Accumulated depreciation Net book amount

16p60(d)

931

116

1,401

2,448

(155)

(66)

(672)

(893)

776

50

729

1,555

1,555

Year ended December 2002 Opening net book amount

36p113(a)

Total

At 31 December 2001 Cost

16p60(e)

Equipment

776

50

729

Additions

71

10

350

431

Disposals

(43)

–

(37)

(80)

–

(2)

–

(2)

Impairment charge Depreciation charge

(34)

(7)

(282)

(323)

Exchange rate adjustments

(30)

(3)

(29)

(62)

Closing net book amount

740

48

731

1,519

922

122

1,655

2,699

(182)

(74)

(924)

(1,180)

740

48

731

1,519

At 31 December 2002 Cost Accumulated depreciation and impairment Net book amount

36p117(a-c) 36p117(e-f)

The impairment charge in 2002 relates to the restructuring of the North American retail banking segment. The recoverable amount of the impaired leasehold improvement represents the net selling price, determined by reference to the market price of a similar asset.

16p60(e)

[Comparative information is not required for the reconciliation of movements on property, plant and equipment.]

21 Other assets 2002

2001

1,003

990

45

39

Accrued income

730

737

Other

332

345

2,110

2,111

2002

2001

1p72 Accounts receivable and prepayments 12p69

Prepaid taxes

22 Due to other banks 1p72 Items in course of collection Deposits from other banks

103

197

14,936

13,436

15,039

13,633

2002

2001

23 Other deposits 1p72 Other money market deposits Certificates of deposits

48

PricewaterhouseCoopers

12,074

8,369

4,175

3,662

16,249

12,031

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

24 Due to customers 1p72

2002

2001

– Current/settlement accounts

6,975

5,471

– Term deposits

3,938

2,625

– Current/settlement accounts

4,569

3,656

– Term deposits

3,938

3,308

Large corporate customers

Small and medium sized enterprises

Retail customers – Current/demand accounts – Term deposits

6,520

4,583

25,835

23,055

51,775

42,698

Included in customer accounts were deposits of LC 615 (2001: LC 591) held as collateral for irrevocable commitments under import letters of credit. Term deposits of customers are in part hedged against a potential decrease in market interest rates by interest rate and cross currency interest rate swaps.

25 Debt securities in issue 32p56(a)

Average interest

35p56(b)

rate (%)

2002

EURO medium term notes

7.4 (2001: 6.2)

642

79

USD medium term notes

5.9 (2001: 5.8)

69

66

GBP medium term notes

6.3 (2001: 5.5)

183

183

LC medium term notes

2001

8.4 (2001: 5.5)

250

82

GBP 95m floating rate notes due 2002

LIBOR + 0.03

–

129

USD 256m floating rate notes due 2002

LIBOR + 0.01

120

435

EURO 260m floating rate notes due 2003

LIBOR + 0.02

552

258

1,816

1,232

(50)

–

1,766

1,232

Less: own LC medium term notes held

8.4 (1997: 8.5)

PricewaterhouseCoopers

49

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

26 Other borrowed funds 32p56(a) 32p56(b)

Interest rate %

2002

2001

EURO 450m floating rate notes

LIBOR + 0.25

296

310

EURO 388m floating rate notes EURO 220m floating rate notes

LIBOR + 0.22 LIBOR + 0.31

255 149

268 155

700

733

31 38 89 296 44 94 207 45 93 457

35 38 105 311 37 179 217 45 99 –

1,394

1,066

Loan capital perpetual subordinated notes

Subordinated notes Lira 63bn fixed rate notes due 2004 GBP 25m fixed rate notes due 2005 LC 100m fixed rate notes due 2005 EURO 460m floating rate notes due 2005 FRF 299m fixed rate notes due 2005 GBP 60m floating rate notes due 2006 EURO 320m floating rate notes due 2006 GBP 30m floating rate notes due 2007 USD 100m fixed rate notes due 2007 EURO 700m fixed rate notes due 2014

6.125 4.89 5.12 LIBOR + 0.09 7.91 LIBOR + 0.11 EURIBOR + 0.10 LIBOR + 0.15 7.84 6.50

Redeemable preference shares (Note 28)

6.50

552

552

Convertible bond (Note 27) LC 200m fixed rate notes due 2026

6.00

162

161

2,808

2,512

Floating rate notes bear interest at rates fixed in advance for periods of six months. The perpetual subordinated notes are repayable, at the option of the Group, in whole or in part on any interest payment date. The perpetual subordinated notes rank behind the claims against the Group depositors and other unsecured unsubordinated creditors. The bank’s dated subordinated notes are repayable only on maturity, except for the EURO notes due in 2014, which are repayable in 2009 at the option of the holder. None of the Group’s subordinated notes are secured.

27 Convertible bond 32p56(b) 32p56(a)

On 4 January 2001 the Company issued 200 million 6% convertible bonds at nominal value of LC 1 per bond. The bonds mature 25 years from the issue date at nominal value unless converted into the Company’s ordinary shares at the holder’s option at the rate of 25 shares per LC 200. The convertible bond is presented in the consolidated balance sheet as follows: 2002

2001

– Face value of convertible bond issued

–

200

– Equity conversion component net of deferred tax liability

–

(24)

– Deferred tax liability Liability component at 1 January

– 161

(16) 160

Interest expense Interest paid

13 (12)

13 (12)

Liability component at 31 December

162

161

Initial recognition:

50

PricewaterhouseCoopers

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

27 Convertible bond (continued) 32p77

The carrying amount of the liability component of the convertible bond reflects its current fair value.

32p56(b)

Interest on the bond is calculated on the effective yield basis by applying the effective interest rate (7.9%) for an equivalent non convertible bond to the liability component of the convertible bond and for the year ended 31 December 2002 amounted to LC 12.7 million (2001: LC 12.6 million). The actual interest paid in 2002 was LC 12 million (2001: LC 12 million).

28 Redeemable preference shares 32p18 32p22 32p56(a)

On 4 January 2001 the Company issued 552 million cumulative redeemable preference shares with a par value of LC 1 per share which are redeemable at par on 1 January 2011 or by the Company at any time before that date.

32p56(b) 32p50

Dividends are set at 6.5% of the issue price and rank above ordinary dividends. If the Company is unable to pay a dividend in a given year, the dividend accumulates. The redeemable preferred shares rank ahead of the ordinary shares in the event of liquidation.

29 Other liabilities 1p72 Creditors Dividends payable Accruals

2002

2001

1,367

1,311

57

44

796

534

Other provisions (Note 30)

467

229

Other

184

106

2,871

2,224

30 Other provisions 1p73(d) 37p84(a)

2002 At 1 January

229

Exchange differences

3

37p84(b)

Additional provisions charged to income statement

283

37p84(c)

Utilised during year

(48)

37p84(a)

At 31 December

467

37p84

[IAS 37 does not require the above analysis of provisions for the comparative year.]

37p85(a)

The restructuring of part of the retail banking segment in North America started in 2002, and will result in reductions in personnel. An agreement had been reached by December 2001 with the local union representatives that specified the number of staff involved and quantified the amounts payable to those made redundant. The full amount of the costs estimated to be incurred has been recognised as a restructuring provision in the current period and is expected to be fully utilised during 2003.

34p26 37p85(a)

The provision charged of LC 283 million is an update of the estimated amount of LC 149 million that was shown in the group’s published interim financial report for the six months ended June 2002; the change in the estimate is due to further agreements reached with the local union.

PricewaterhouseCoopers

51

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

31 Deferred income taxes Deferred income taxes are calculated on all temporary differences under the liability method using an effective tax rate of 40% (2001: 40%). The movement on the deferred income tax account is as follows:

At 1 January Income statement charge 12p81(a)

Convertible bond – initial recognition Available-for-sale securities – fair value remeasurement – transfer to net profit Cash-flow hedges

– fair value remeasurement – transfer to net profit – transfer to cost of acquisition

Exchange differences At 31 December

2002

2001

438

100

65

54

–

16

66 18

(42) 45

142 93 5

229 50 –

6

(14)

833

438

Deferred income tax assets and liabilities are attributable to the following items: 12p81(g)(i)

2002

2001

Deferred income tax liabilities Accelerated tax depreciation

342

223

Convertible bond

15

16

Available-for-sale securities

84

86

Cash-flow hedges

235

272

Other temporary differences

433

96

1,109

693

62

51

Deferred income tax assets Pensions and other post retirement benefits Provision for loan impairment

7

34

187

92

Cash-flow hedges

–

32

Hedged deposits from customers

–

4

20

42

276

255

Other provisions

Tax losses carried forward

52

PricewaterhouseCoopers

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

31 Deferred income taxes (continued) 12p81(g)(ii)

The deferred tax charge in the income statement comprises the following temporary differences: 2002

2001

Accelerated tax depreciation

119

59

Pensions and other post retirement benefits

(11)

(12)

Provisions for loan losses Other provisions Tax loss carry forwards Other temporary differences

27

(15)

(95)

10

22

10

3

2

65

54

[Deferred income tax assets and liabilities can be offset only when the income taxes relate to the same fiscal authority.] 12p81(e)

Deferred income tax assets are recognised for tax loss carry forwards only to the extent that realisation of the related tax benefit is probable. One Group subsidiary has tax losses of LC 85 (2001: LC 187) to carry forward against future taxable income; these tax losses will expire in 2005. The benefit of these tax losses has not been recognised in these financial statements due to uncertainty of their recoverability.

12p81(f)

Deferred income tax liabilities have not been established for the withholding tax and other taxes that would be payable on the unremitted earnings of certain subsidiaries, as such amounts are permanently reinvested; such unremitted earnings totalled LC 834 at 31 December 2002 (2001: LC 712).

PricewaterhouseCoopers

53

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

32 Retirement benefit obligations Amounts recognised in the balance sheet: 1p73(d) Pension schemes Other post retirement benefits

2002

2001

182

170

55

51

237

221

Pension schemes 19p120(b)

The Group has established a number of pension schemes around the world covering substantially all employees. Most of the pension schemes are final salary defined benefit plans and are either funded or unfunded. The assets of the funded plans are held independently of the Group’s assets in separate trustee administered funds. These schemes are valued by independent actuaries every three years using the projected unit credit method. The latest actuarial valuations were carried out as at 31 December 2001.

19p120(c)

The amounts recognised in the balance sheet are determined as follows:

Present value of funded obligations Fair value of plan assets

2002

2001

1,073

733

(1,051)

(699)

22

34

167

153

Unrecognised actuarial losses

(5)

(9)

Unrecognised prior service cost

(2)

(8)

182

170

Present value of unfunded obligations

Liability in the balance sheet 19p120(d)

The pension plan assets include the Company’s ordinary shares with a fair value of LC 25 (2001: LC 29) and a property occupied by the Company with a fair value of LC 12 (2001: LC 12).

19p120(f)

The amounts recognised in the income statement are as follows: 2002

2001

Current service cost

74

60

Interest cost

76

56

(96)

(59)

Net actuarial (gains) losses recognised in year

4

(5)

Past service cost

6

6

Losses (gains) on curtailment

2

–

Total, included in staff costs

66

58

Expected return on plan assets

19p120(g)

54

The actual return on plan assets was LC 118 (2001: LC 73).

PricewaterhouseCoopers

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

32 Retirement benefit obligations (continued) 19p120(e)

Movement in the liability recognised in the balance sheet:

At 1 January Exchange differences

19p122(b)

2001

170

161

3

(2)

66

58

Contributions paid

(57)

(47)

At 31 December

182

170

2002

2001

Total expense – as above

19p120(h)

2002

The principal actuarial assumptions used were as follows:

Discount rate

7.0%

6.8%

Expected return on plan assets

8.5%

8.3%

Future salary increases

5.0%

4.5%

Future pension increases

3.0%

2.5%

Other post retirement benefits Apart from the pension schemes, the Group operates a number of other post retirement benefit schemes. The method of accounting and the frequency of valuations are similar to those used for defined benefit pension schemes.

19p120(h)

In addition to the assumptions used for the pension schemes, the main actuarial assumption is a long-term increase in health costs of 8.0% per year (2001: 8.0%). The amounts recognised in the balance sheet are as follows: 2002

19p120(c) Present value of funded obligations Fair value of plan assets

19p120(f)

47

35

(44)

(32)

3

3

Present value of unfunded obligations

54

50

Unrecognised actuarial losses

(2)

(2)

Liability in the balance sheet

55

51

2002

2001

Current service cost

9

9

Interest cost

4

3

(4)

(3)

1

–

10

9

PricewaterhouseCoopers

55

The amounts recognised in the income statement are as follows:

Expected return on plan assets Net actuarial losses recognised in year Total included in staff costs 19p120(g)

2001

The actual return on plan assets was LC 6 (2001: LC 4).

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

32 Retirement benefit obligations (continued) 19p120(e)

The movement in the liability recognised in the balance sheet is reconciled as follows:

At 1 January Exchange differences

2002

2001

51

50

2

(1)

Total expense - as above

10

9

Contributions paid

(8)

(7)

At 31 December

55

51

33

Contingent liabilities and commitments

37p86(a)

Legal proceedings. There were a number of legal proceedings outstanding against the Group at 31 December 2002. No provision has been made as professional advice indicates that it is unlikely that any significant loss will arise.

16p61(d)

Capital commitments. At 31 December 2002 the Group had capital commitments of LC 73 (2001: LC 68) in respect of buildings and equipment purchases. The Group’s management is confident that future net revenues and funding will be sufficient to cover this commitment. The following table indicates the contractual amounts of the Group’s off-balance sheet financial instruments that commit it to extend credit to customers.

Guarantees and standby letters of credit Documentary and commercial letters of credit Commitments to extend credit: – Original term to maturity of one year or less – Original term to maturity of more than one year

30p53

2001

2,660

1,789

415

391

18,742

14,107

4,836

4,030

26,653

20,317

Assets pledged. Assets are pledged as collateral under repurchase agreements with other banks and for security deposits relating to local futures, options and stock exchange memberships. Mandatory reserve deposits are also held with local central banks in accordance with statutory requirements. These deposits are not available to finance the Group’s day to day operations. Asset 2002 Balances with central banks Trading securities Investment securities

56

2002

PricewaterhouseCoopers

2001

Related liability 2002

2001

15

13

–

–

970

1,064

780

835

34

19

20

15

1,019

1,096

800

850

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

33 Contingent liabilities and commitments (continued) 17p27(a)

Operating lease commitments. Where a group company is the lessee the future minimum lease payments under non cancellable building operating leases are as follows:

Not later than 1 year Later than 1 year and not later than 5 years Later than 5 years

2002

2001

205

195

920

880

1,150

1,320

2,275

2,395

2002

2001

37

34

34 Minority interest

At 1 January Share of net profit of subsidiaries

7

8

Dividend for 2001 (2001: dividend for 2000)

(8)

(5)

At 31 December

36

37

35 Ordinary shares, share premium and treasury shares 1p74(a)

At 1 January 2001 Issue of shares – share option scheme Purchases/sales of treasury Shares At 31 December 2001 /1 January 2002 Issue of shares – share option Scheme Purchases/sales of treasury Shares At 31 December 2002

Number of shares (millions)

Ordinary shares

Share premium

Treasury shares

Total

1,120

1,120

788

(46)

1,862

30

30

15

–

45

–

–

15

(6)

9

1,150

1,150

818

(52)

1,916

50

50

30

–

80

–

–

9

5

14

1,200

1,200

857

(47)

2,010

1p74(a)

The total authorised number of ordinary shares at year end was 1,400 million shares (2001: 1,400 million shares) with a par value of LC 1 per share (2001: LC 1 per share). All issued shares are fully paid.

1p74(a)

In the normal course of its equity trading and market activities, the Company buys and sells its own shares. This is in accordance with the Company’s constitution and complied with all aspects of the [name of local companies act] and the requirements of the [name of] Stock Exchange. These shares are treated as a deduction from the shareholders’ equity. Gains and losses on sales or redemption of own shares are credited or charged to reserves. The total number of treasury shares at the end of 2002 was 24 million shares (2001: 28 million shares).

PricewaterhouseCoopers

57

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

35 Ordinary shares, share premium and treasury shares (continued) 19p147(a)

The Group offers share options to directors and to employees with more than four years’ service. Movements in the number of share options outstanding are as follows (amounts in millions): 2002

2001

465

380

19p147(d)

At 1 January

19p147(e)

Granted

120

130

19p147(f)

Exercised

(50)

(30)

19p147(g)

Lapsed

(25)

(15)

19p147(d)

At 31 December

510

465

19p147(e) 19p147(f)

Share options were granted on 1 July 2002 at a price of LC 2.00 per share (1 July 2001: LC 1.95 per share) and expire on 1 July 2007 (prior year – 1 July 2006). Options exercised on 30 June 2002 (30 June 2001) resulted in 50 million shares (2001: 30 million shares) being issued at a price of LC 1.60 each (2001: LC 1.50 each), less transaction costs, net of income taxes, of LC 0.2 million (2001: LC 0.1 million): 2002 2001

SIC-17p9 19p147(e)

19p147(d)

Ordinary share capital – at par

50

30

Share premium

30

15

Proceeds

80

45

Share options outstanding at the end of the year were as follows: Expiry Date – 1 July

Exercise

2002

2001

price

(millions)

(millions)

2002

1.60

–

75

2003

1.75

80

80

2004

1.80

70

70

2005

1.90

110

110

2006

1.95

130

130

2007

2.00

120

–

510

465

2002

2001

General banking risks

175

125

Statutory reserve

112

102

36 Reserves and retained earnings

p86(f)

Convertible bond – equity component Translation reserves 39p169(c)

24 (147)

Revaluation reserve – available-for-sale investments

256

128

Hedging reserve – cash flow hedges

720

360

1,132

592

Total reserves at 31 December

58

24 (155)

PricewaterhouseCoopers

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

36 Reserves and retained earnings (continued) 1p86(f)

Movements in reserves were as follows:

30p50

General banking reserve

2002 At 1 January 21p42(b)

2001

125

82

Exchange differences

(8)

(6)

Transfer from retained profits

58

49

175

125

102

64

Exchange differences

(4)

(3)

Transfer from retained profits

14

41

112

102

24

–

At 31 December Statutory reserve At 1 January 21p42(b)

At 31 December Convertible bond – equity component At 1 January 12p81(a)

Issue of bond on 4 January 2001 (Note 27)

–

40

Deferred income taxes on conversion component (Note 27)

–

(16)

24

24

At 31 December

– 21p42(b)

Translation reserve At 1 January Currency translation differences arising during the year At 31 December

(147)

(62)

(8)

(85)

(155)

(147)

Revaluation reserve – available-for-sale investments At 1 January

128

124

39p170(a)(i)

Net gains/(losses) from changes in fair value

166

(105)

12p61

Deferred income taxes

(66)

42

39p170(a)(ii)

Losses transferred to net profit due to impairment

39p170(a)(ii)

Net losses transferred to net profit on disposal

12p81(a)

-

5

46

107

Deferred income taxes

(18)

(45)

At 31 December

256

128

PricewaterhouseCoopers

59

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

36 Reserves and retained earnings (continued) Hedging reserve – cash flow hedges

Balance at 1 January 2001 1p86(f)

Movements in 2001:

39p169(c)(i)

Gains/(losses) from changes in fair value Deferred income taxes

39p169(c)(ii)

Transferred to net profit Deferred income taxes (Note 31)

Currency

Currency

swaps

options

Total

(81)

23

(58)

497 (199)

75 (30)

572 (229)

298

45

343

128 (51)

(3) 1

125 (50)

77

(2)

75

490 (196)

110 (44)

600 (240)

294

66

360

– –

12 (5)

12 (5)

–

7

7

315 (126)

40 (16)

355 (142)

189

24

213

208 (83) 125 608

25 (10) 15 112

233 (93) 140 720

Balance at 31 December 2001/ 1 January 2002: 12p81(a)

Gross amount of gains and losses Deferred income taxes (Note 31)

1p86(f)

Movements in 2002:

39p169(c)(iii)

Transferred into cost of subsidiary at acquisition (Note 42) Deferred income taxes (Note 31)

39p169(c)(i)

39p169(c)(ii)

Gains/(losses) from changes in fair value Deferred income taxes (Note 31)

Transferred to net profit Deferred income taxes (Note 31) Balance at 31 December 2002

60

PricewaterhouseCoopers

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

36 Reserves and retained earnings (continued) 1p86(e)

2002

2001

1,920

1,512

Movements in retained earnings were as follows: At 1 January Net profit for year

871

820

(360)

(322)

Transfer to general banking reserve

(58)

(49)

Transfer to statutory reserve

(14)

(41)

2,359

1,920

Dividend for prior year

At 31 December 1p74(b)

In accordance with the local legislation, 5% of the net profit of the Bank is required to be transferred to a non-distributable statutory reserve until such time as this reserve represents 20% of the share capital of the Bank.

30p8(e) 1p74(b)

In addition, the Group makes an appropriation to a general banking reserve for unforeseeable risks and future losses. General banking reserves can only be distributed following approval by the shareholders in general meeting.

37 Dividends per share 1p85 1p74(c) 10p11

Final dividends are not accounted for until they have been ratified at the Annual General Meeting. At the meeting on [date] 2003, a dividend in respect of 2002 of LC 0.33 per share (2001: actual dividend LC 0.313 per share) amounting to a total of LC 396 (2001: actual LC 360) is to be proposed. The financial statements for the year ended 31 December 2002 do not reflect this resolution, which will be accounted for in shareholders’ equity as an appropriation of retained profits in the year ending 31 December 2003.

38 Cash and cash equivalents 7p45

For the purposes of the cash flow statement, cash and cash equivalents comprises the following balances with less than 90 days maturity: 2002

2001

Cash and balances with central banks (Note 11)

6,065

4,302

Treasury bills and other eligible bills (Note 12)

1,485

771

Due from other banks (Note 13)

5,151

3,091

Trading securities (Note 14)

1,949

2,676

14,650

10,840

PricewaterhouseCoopers

61

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

39 Related party transactions 1p102(c) 24p20

Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions. The Bank is controlled by Parent Ltd. (incorporated in [name of country]) which owns 60% of the ordinary shares. The ultimate parent of the group is Ultimate Parent Ltd. (incorporated in [name of country]).

24p4(c)

[No disclosure is required in respect of intra-group transactions in financial statements of a wholly-owned subsidiary if its parent is incorporated in the same country and provides consolidated financial statements in that country.] A number of banking transactions are entered into with related parties in the normal course of business. These include loans, deposits and foreign currency transactions. These transactions were carried out on commercial terms and at market rates. The volumes of related party transactions, outstanding balances at the year end, and relating expense and income for the year are as follows:

24p22

Directors

24p23

Type of related party

Associated companies

2002

2001

2002

2001

135

117

450

381

14

33

25

116

Loan repayments during the year

(18)

(15)

(58)

(47)

Loans outstanding at 31 December

131

135

417

450

11

10

35

33

24p24 30p58 30p58(a)

Loans Loans outstanding at 1 January Loans issued during the year

30p58(b)

Interest income earned

30p58(c)

No provisions have been recognised in respect of loans given to related parties (2001: nil).

30p58(a)

Deposits Deposits at 1 January

25

18

110

98

Deposits received during the year

18

21

115

107

(22)

(14)

(102)

(95)

21

25

123

110

2

2

8

7

(6)

3

4

5

Deposits repaid during the year Deposits at 31 December 30p58(b)

Interest expense on deposits Foreign exchange trading

30p58(b)

Aggregated gain/(loss)

30p58(b)

Other revenue – fee income

–

–

14

7

30p58(d)

Guarantees issued by the Group

–

–

25

12

19p151

Share options (millions) At 1 January

62

185

145

–

–

Granted

50

65

–

–

Exercised

(30)

(25)

–

–

At 31 December

205

185

–

–

PricewaterhouseCoopers

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

39 Related party transactions (continued) 24p22

Directors’ remuneration A listing of the members of the Board of Directors is shown on page XX of the Annual Report. In 2002 the total remuneration of the directors approximated LC 5.3 (2001: LC 5.1). There were no related party transactions with the ultimate parent company or with the parent company, Parent Ltd., other than the payment of dividends on ordinary shares.

40 Acquisitions and disposals 22p86 22p87(a) 27p32(b) (iv)

On 30 September 2002 the Group acquired 100% of the share capital of a small finance company in [country]. The acquired company contributed operating income of LC 2 million to the Group for the period from 30 September to 31 December 2002.

7p40(d)

The details of the assets and liabilities acquired and goodwill arising are as follows: Cash and cash equivalents

22p87(b)

10

Loans and advances to customers

122

Other assets

268

Due to customers

(95)

Other liabilities

(28)

Goodwill (Note 21)

38

7p40(a,b)

Total purchase consideration paid (discharged by cash)

315

39p160

Less: gain from foreign exchange hedge of purchase consideration previously recognised in equity

(12)

22p87(b)

Cost of acquisition

303

7p40(c)

Less: Cash and cash equivalents in subsidiary acquired

(10)

Cash outflow on acquisition

293

22p92 27p32(b)(iv)

7p40(d)

No acquisition provisions were created. There were no acquisitions in 2001. On 31 March 2002 the Group disposed of 100% of the share capital of its subsidiary in [country]. The subsidiary operated in the retail banking segment and it contributed operating income of LC 3 to the Group for the period from 1 January 2002 to 31 March 2002 (LC 14 for the period from 1 January 2001 to 31 December 2001). The details of assets and liabilities disposed and the disposal consideration are as follows: Cash and cash equivalents

12

Due from other banks

46

Loans and advances to customers

102

Due to other banks

(37)

Due to customers

(75)

Other liabilities

(6)

Net assets

42

7p40(a,b)

Proceeds from sale (discharged by cash)

58

7p40(c)

Less: cash and cash equivalents in subsidiary sold

(12)

Net cash inflow on sale

46

PricewaterhouseCoopers

63

International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

41 Principal subsidiaries 27p32(a)

Europe Name Name Name (90%) Name Name Name Name Name (75%) Name Name Name Name (55%) Name Name Name

Country of incorporation Germany UK France Switzerland Netherlands Spain Italy Hungary Sweden Malta Denmark Turkey Czech Republic Cyprus Latvia

North America Name Name Name (85%) Rest of the World Name (70%) Name Name Name Name Name (95%) Name Name Name Name

Country of incorporation USA Canada Mexico

Brazil Columbia South Africa Australia China Korea Japan UAE Singapore India

All subsidiaries are wholly owned unless otherwise stated. All holdings are in the ordinary share capital of the undertaking concerned and are unchanged from 2002, except for the acquisition of [Name of company] and the disposal of [Name of company].

42 Post balance sheet events 10p20 22p97

On 13 March 2003, the Group announced its intention to acquire ANM Bank. The transaction has still to be approved by the Group’s shareholders. Regulatory approval is not expected until the end of 2003. Due to the stage of negotiations the estimate of financial effect cannot be made.

10p20 22p97

On 30 March 2003, the Group gained control of [Name] Bank, incorporated in [country] by acquisition of 60 % of its ordinary shares. The whole purchase proceeds of LC 1,845 have been paid in cash in USD and the fair value of the related cash flow hedge has been included in the cost of this acquisition.

64

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International Financial Reporting Standards – Illustrative Bank Financial Statements ABC Banking Group – Year ended 31 December 2002

Report of the auditors To the Members of ABC Bank Holdings We have audited the accompanying balance sheet of ABC Bank Holdings (the Company) and its subsidiaries (the Group) as of 31 December 2002 and the related income and cash flow statements for the year then ended. These financial statements set out on pages 4 to 64 are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion the financial statements give a true and fair view of [or ‘present fairly in all material respects’] the financial position of the Group as of 31 December 2002 and of the results of its operations and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

Date

Address

[The format of the audit report will need to be tailored to reflect the legal framework of particular countries. In certain countries the audit report covers both the current year and the comparative year.]

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International Financial Reporting Standards – Illustrative Bank Financial Statements

Index of International Financial Reporting Standards disclosure requirements This index identifies the financial statement, or note to the financial statements, in which the disclosure requirements of a particular International Financial Reporting Standard have been demonstrated in this publication. IAS 2, 11, 15, 20, 23, 26, 29, 31, 32, 34, 35, 39 and 40 are not applicable to these financial statements. Key

G IS BS SE

= = = =

Para IAS 1

General Information Income Statements Balance Sheet Statement of Changes in Shareholders’ Equity Refer

. . . . . . . . .1 . . . . . . . . .1 . . . . . . . . .1 . . . . . . . . .1

Refer

54 . . . . . . . . .2 63 . . . . . . . .NA 66-67 . . . . .BS 72.13,14,15,18 . .22,23,24,25 73(a) . . . . . .20 73(b-c) . . . .NA 73(d) . . .35,36

73(e) . . . . . .BS 74(a) . . . . .35 74(b) . .AP, 36 74(c) . . .36, 37 74(d) . . . . .NA 86(a-e) .SE, 36 75 . . . . . . . . .IS 77 . . . . . . . . .IS

80 . . . . . . . .NA 82 . . . . . . . .NA 83 . . . . . . . .6,7 85 . . . . . . . .38 86(f) . . . .SE, 36 91(a) . . . . . .AP 97 . . . . . . . .AP 99 . . . .AP, 2, 3

99(q) . . . . . .AP 101 . . . . . . .AP 102(a-b) . . . .G 102(c) . . . . .39 102(d) . . . . . .7

18(a) . . . . . .CF 18(b) . . . . .NA 21 . . . . . . . .CF

29 . . . . . . .NA 31 . . . . . . . .CF 35 . . . . . . . .CF

39 . . . . . . . .CF 40 . . . . . . . .40 43 . . . . . . . .NA

45 . . . . .AP,40 48 . . . . . . . .12

30 . . . . . . . .NA 34 . . . . . . . .NA 37 . . . . . . . .NA

38,40 . . . . .NA 40 . . . . . . .NA 46 . . . . . . . .AP

53 (a,c,d) . .NA 53 (b) . . . . . .SE

54 . . . . . . . .NA 57 . . . . . . . .NA

16 . . . . . . . .BS

20 . . . . . . . .42

44 . . . . . . . .AP 46 . . . . . . . .AP 61 . . . . .AP,36 .............

69 . . . . .PS, 21 77 . . . . . . . . .IS 79 . . . . . . . . .9 ............

81(a) . . . .31,36 81(b) . . . . . .NA 81(c) . . . . . . .9 .............

81(d) . . . . . .NA 81(e-g) . . . . .31 81(h) . . . . . .NA 82 . . . . . . . .NA

57 58 59 61

64 66 67 69

70 72 74 75

. . . . . . . .NA . . . . . . . .NA . . . . . . . .NA . . . . . . . . .1

76 . . . . . . . .NA 81 . . . . .1,FRM 84 . . . . . . . .NA

64 . . . . . . . .NA

67 . . . . . . . .NA

. . . . . . . . .1 . . . . . . . . .1 . . . . . . . . .1 . . . . . . . . .1

. . . . . . . . .1 . . . . . . . . .1 . . . . . . . . .1 . . . . . .FRM

Property, Plant and Equipment

56 . . . . . . . .AP 60(a-c) . . . .AP

66

Para

Segment Reporting

51 52 55 56 IAS16

Refer

Income Taxes

24 . . . . . . . .AP 34 . . . . . . . .AP 39 . . . . . . . .AP ............ IAS 14

Para

Events Occurring After the Balance Sheet Date

11 . . . . .AP,37 IAS 12

Refer

Net Profit or Loss for the Period, Fundamental Errors, Changes in Accounting Policies

10 . . . . . . . . .IS 11 . . . . . . .NA 16 . . . . . . . . .6 IAS 10

Para

Cash Flow Statement Accounting Policies Note 7 to the Financial Statements Not applicable to these financial Financial Risk Management

Cash Flow Statements

10 . . . . . . . .CF 16 . . . . . . . .CF 17 . . . . . . . .CF IAS 8

Refer

= = = = =

Presentation of Financial Statements

11 . . . . . . . .AP 13 . . . . . . .NA 19 . . . . . . .NA 23 . . . . . . .NA 38 . . . . . . . . .G 46 . . . . . . . .AP 49 . . . . . . .NA 53 . . . . . . . .BS IAS 7

Para

CF AP 7 NA FRM

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60(d-e) . . . .20 61(a-c) . . . .NA

61(b) . . . . .NA 61(d) . . . . . .33

International Financial Reporting Standards – Illustrative Bank Financial Statements

Para IAS 17

Refer

. . . . . . . .28 . . . . . . . .28 . . . . . . . .AP . . . . . . . .AP . . . . . . . .AP

48 . . . . . . . .NA 56 . . . . . . . .NA

35(b) . . . .AP,5

35(c) . . . . .NA

120(g-h) . . .32 122 . . . . . . .32 125 . . . . . .NA 131 . . . . . . . .7

141-142 . .NA 147(a) . . . . .35 147(b) . . . . .AP 147(c) . . . . .AP

147(d-g) . . . .35 147(h) . . . . .NA 148 . . . . . .NA 151 . . . . . . .39

155(b)(ii) . .NA 157 . . . . . . .NA

42(a) . . . . . . .5 42(b) . . . . . .36

42(c) . . . . .NA 43 . . . . . . . .AP

44 . . . . . . . .NA

45 . . . . . . . .AP

88(c) . . . . . .NA 88(d) . . . . . . .6 .............

88(e) . . . . . .19 91 . . . . . . .NA 92 . . . . . . . .40

93-94 . . . . .NA 96 . . . . . . . .NA 97 . . . . . . . .42

99 . . . . . . . .AP 101 . . . . . . .NA 102(a) . . . . .NA

20 . . . . . . . .39

22-24 . . . . .39

26 . . . . . .IS,BS 32(a) . . . . . .41

32(b)(i-iii) ..NA

32(b)(iv) . . . .41

27(b) . . . . . .AP

28 . .IS,BS,9,18

32(c) . . . . . .NA

27(a) . . . . . .18

12 . . . . . . . . .2 16 . . . . . . . . .2 18-19 . . . . .BS 21 . . . . . .11,13 24 . . . . . . .FRM

26(a) . . . . . .33 26(b) . . . . . .33 30 . . . . . .FRM 40 . . . .FRM,16 43(a) . . . . . .AP

43(b-c) . . .8,16 43(d) . . .AP,16 44 . . . . . . . .AP 48 . . . . . . . .AP 50 . . . . .AP,36

53 . . .14,17,33 58 . . . . . . . .39

94 . . . . . . . .NA

41 . . . . . . . .AP 43(a) . . . . . .AP 47(a) . . . . . .15 47(b) . . . . . .AP 50 . . . . .AP,28

52 . . . . . . . .AP 54 . . . . . . . .AP 56 . . .FRM,17, . . .25,26,27,28 59 . . . . . .FRM

64-65 . . . .FRM 66 . . . .FRM,15 74 . . . . . . .FRM 77 .FRM,15,27 88 . . . . . . . .NA

47 . . . . . . . . .IS

49(a-b) . . . .10

51 . . . . . . . .NA

113(b-d) . . .NA 116(a) . . . . . .3 116(b) . . . .NA

117(a) . .19,20 117(b) . .19,20 117(c) . .19,20

117(d) . . . . .NA 117(e) . . .19,20 117(f) . . . . . .20

Earnings Per Share

43 . . . . . . .NA IAS 34

39(d) . . . . . .16 39(e-f) . . . . .NA

Financial Instruments: Disclosure and Presentation

18 22 23 30 33 IAS 33

39(a-b) . . . .16 39(c) . . . . .NA

Disclosures in the Financial Statements of Banks and Similar Financial Institutions

8(a-d) . . . . .AP 8(e) . . . .AP,36 9 . . . . . . . . . .IS 10 . .IS,2,3,4,5 11 . . . . . . . . .2 IAS 32

27(c) . . . . . . .6 27(d) . . . . .NA

Accounting for Investments in Associates

14 . . . . . . .NA IAS 30

Refer

Consolidated Financial Statements and Accounting for Investments in Subsidiaries

8 . . . . . . . .NA 21 . . . . . . .NA IAS 28

Para

Related Party Disclosures

4 . . . . . . . . .39 IAS 27

Refer

Business Combinations

86-87 . . . . .40 88(a-b) . . . .AP ............ IAS 24

Para

The Effects of Change in Foreign Exchange Rates

11(b,c) . . . .17 15 . . . . . . . .17 IAS 22

Refer

Employee Benefits

46 . . . . . . . . .7 120(a) . . . . .AP 120(b-e) . . .32 120(f) . . . .7,32 IAS 21

Para

Revenue

35(a) . . . . . .AP IAS 19

Refer

Leases

23 . . . . . . . NA 27(a) . . . . . .33 27(b) . . . . .NA IAS 18

Para

Interim Reporting

26 . . . . . . . .30 IAS 36

Impairment of Assets

58 . . . . . . . .AP 80 . . . . . . . .AP 113(a) 6,19,20

117(g) . . . . .NA 118 . . . . . .NA 122 . . . . . . .NA

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International Financial Reporting Standards – Illustrative Bank Financial Statements

Para IAS 37

Refer

Refer

Para

Refer

Para

Refer

85(a) . . . . . .30 85(b,c) . . . .NA

86(a) . . . . . .33 86(b) . . . . .NA

89 . . . . . . . .NA 91-93 . . . . .NA

111 . . . . . . .NA 113 . . . . . . .NA

115 . . . . . . . .6 121 . . . . . .NA

122(a) . . . . .NA

95 . . . . . . . .NA

Financial Instruments: Recognition and Measurement

10 18 19 20 23 30 43 63 66 68 SIC

Para

Intangible Assets

107(a-b) . . .AP 107(c-e) . .NA IAS 39

Refer

Provisions, Contingent Liabilities and Contingent Assets

84(a-d) . . . .30 84(e) . . . . .NA IAS 38

Para

. . . . . . . .AP . . . . . . . .AP . . . . . . . .AP . . . . . . . .AP . . . . . . . .AP . . . . . . . .AP . . . . . . . .AP . . . . . . . .AP . . . . . . . .AP . . . . . . . .AP

69 . . . . . . . .AP 70 . . . . . . . .AP 73 . . . . . . . .AP 78 . . . . . . . .AP 83 . . . . . . . .AP 87 . . . . . . . .AP 93 . . . . . . . .AP 103(a) . . . . .AP 109 . . . .AP,17 111 . . . . . . .AP

112 113 114 117 118 137 142 153 156 157

. . . . . . .AP . . . . . . .AP . . . . . . .17 . . . .AP,17 . . . . . . .AP . . . . . . .AP . . . . . . .AP . . . . . . .AP . . . . . . .AP . . . . . . .AP

158 . . . . . . .AP 160 . . . .AP, 40 162 . . . . . . .AP 163 . . . . . . .AP 165 . . . . . . .AP 167(a-c) . . .AP 169 . . . . . . .AP 169(a) . . . .FRM 169(b) .FRM,15 169(c) . . .SE,36

170(a) . . .SE,IS, . . . . . .5,17,36 170(b) . . . .NA 170(c)3,4,5,16, . . . . . . . . . . .17 170(d) . . . . .17 170(f) . . . . . .17 171 . . . . . . .36 172.AP,15,17,36

Interpretations of the International Financial Reporting Interpretation’s Committee

SIC-17(6) . .AP SIC-17(9) . .35 SIC-16(4) . .AP Note:

The remaining SICs are not shown as they do not contain any disclosure requirements relative to these illustrated financial statements.

International Financial Reporting Standards –Illustrative Bank Financial Statements 2002 is designed for the information of readers. While every effort has been made to ensure accuracy, information contained in this publication may not be comprehensive or may have been omitted which may be relevant to a particular reader. In particular, this publication is not intended as a study of all aspects of International Financial Reporting Standards, or as a substitute for reading the actual Standards and Interpretations when dealing with specific issues. No responsibility for loss to any person acting or refraining from acting as a result of any material in this publication can be accepted by PricewaterhouseCoopers. Recipients should not act on the basis of this publication without seeking professional advice.

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International Financial Reporting Standards – Illustrative Bank Financial Statements

Page Acceptances Accounting policies Acquisition of subsidiary Associates

18 8-18 14,63 9,46

Balance sheet Balances with central banks Basis of presentation Borrowed funds Business segments

5 38 9 17,50 33-35

Capital adequacy 20 Cash and cash equivalents 15,61 Cash and balances with central bank 38 Cash flow hedges 11,19,58-60 Cash flow statement 7 Commitments and contingencies 56,57 Convertible bonds 17,50-51 Credit commitments 21,23 Credit risk 21-23,43-44 Currency risk 24-25 Debt securities Deferred income taxes Depreciation Derivatives Directors remuneration Disposal of subsidiary Dividend income Dividends per share Due to customers Due from other banks Due to other banks Earnings per share Employee benefits

42 16,37,52-53 15,48 10-11,19,21,40-42 63 63 11,36 61 49 39 48 38 16

Fair value hedges 11,19 Fair values of financial instruments 30 Fees 12 Fiduciary activities 18,31 Finance leases – lessor 44 Financial instruments 19-31 Foreign currency translation 10 Foreign exchange derivatives 10-11,19,21,40-42 Foreign currency gains and losses 10 General banking reserve General information Geographical concentration Goodwill Government bonds Group accounts Hedge accounting

58-59 2 22-23 10,14,47,63 39 9-10 10,19,21

Page Impairment losses on loans Income statement Income taxes Interest income and expense Interest rate derivatives Interest rate risk Investment securities

37,43 4 37 11,36 42 26-28,42 12-13,30,45

Leases Liquidity risk Loans and advances

15 28 14,30,43-44

Market risk Master netting arrangements Maturity of assets and liabilities Minority interests

24 21 29 57

Offsetting Operating expenses Operating and financial review Originated loans Other assets

11 37 2,3 13-14 48

Pensions Post balance sheet events Post retirement benefits Preferred shares Property, plant and equipment Provisions Purchased loans and receivables

16,54 64 16,54,55 17,51 15,48 15,51 12

Redeemable preference shares Related party transactions Reserves Restructuring costs Retirement benefit obligations Sale and repurchase agreements Segment information Share capital Shareholders’ equity Share option schemes Share premium Software development costs Staff costs Statutory reserves Subordinated notes Subsidiaries

51 62-63 58-61 37,51 54-56 12 18,33-35 16,57-58 6,57-60 17,57-58 57-58 14 37 59 50 9,64

Trading income Trading securities Translation differences Treasury bills Treasury shares Value at risk

36 12,39 10,59 39 17,57 24

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International Financial Reporting Standards – Illustrative Bank Financial Statements

Notes

70

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International Financial Reporting Standards – Illustrative Bank Financial Statements

Notes

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International Financial Reporting Standards – Illustrative Bank Financial Statements

Notes

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IFRS Illustrative Bank Financial Statements 2002