Vakıf Finans Faktoring Hizmetleri Anonim Şirketi

Transcription

1 (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Section 2.I) Vakıf Finans Faktoring Hizmetleri Anonim Şirketi Financial Statements As At For the Year Ended 31 December 2011 With Independent Auditors Report Thereon Convenience Translation to English of Financial Statements And Notes To The Financial Statements Originally Issued In Turkish Akis Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik Anonim Şirketi 15 March 2012 This report includes 2 pages of independent auditors report and 42 pages of financial statements and notes to the financial statements.

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4 CONTENTS PAGE Balance sheet (Statement of Financial Position) 1-2 Statement of off-balance sheet items 3 Income statement 4 Statement of recognised income and expense in equity 5 Statement of changes in shareholders equity 6 Statement of cash flows 7 Statement of profit distribution 8 Notes to the financial statements 9-42 Note 1 Organization and nature of business 9 Note 2 Basis of preparation of financial statements 9-20 Note 3 Cash items 20 Note 4 Available for sale financial assets 20 Note 5 Factoring receivables and payables Note 6 Tangible assets 23 Note 7 Intangible assets 24 Note 8 Deferred tax assets and liabilities Note 9 Information on assets held for sale and assets related to discontinued operations 25 Note 10 Other assets 26 Note 11 Funds borrowed 26 Note 12 Miscellanous payables 27 Note 13 Taxes and duties payable 27 Note 14 Provisions Note 15 Equity Note 16 Operating income 30 Note 17 Operating expenses 30 Note 18 Other income 31 Note 19 Finance expenses 31 Note 20 Specific provision for doubtful receivables 31 Note 21 Other income 31 Note 22 Taxes Note 23 Related party disclosures Note 24 Commitments and contingencies Note 25 Financial risk management Note 26 Subsequent events 42

5 BALANCE SHEET AT 31 DECEMBER STATEMENT OF FINANCIAL POSITION -ASSETS Audited Current Period 31 December 2011 Restated (*) Audited Prior Period 31 December 2010 Note TL FC TOTAL TL FC TOTAL I. CASH AND CASH EQUIVALENTS II. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR Financial assets held for trading purpose Financial assets designated at fair value through profit or loss Derivative financial assets held for trading purpose III. BANKS , , ,526 IV. RECEIVABLES FROM REVERSE REPURCHASE AGREEMENTS V. AVAILABLE FOR SALE FINANCIAL ASSETS (Net) 4 2,322-2,322 2,322-2,322 VI. FACTORING RECEIVABLES 5 577,291 40, , ,170 15, , Discounted factoring receivables 126,704 3, ,912 53,851 2,770 56, Domestic 133, ,536 54,913-54, Foreign - 3,532 3,532-3,169 3, Unearned income (6,832) (324) (7,156) (1,062) (399) (1,461) 6.2 Other factoring receivables 450,587 37, , ,319 12, , Domestic 444, , , , Foreign 6,354 37,305 43,659 7,566 12,433 19,999 VII. FINANCING LOANS Consumer loans Credit cards Installment based commercial loans VIII. RECEIVABLES FROM LEASING ACTIVITIES Receivables from leasing activities Finance lease receivables Operational lease receivables Others Unearned income Investment in progress subject to leases Advances given due to leasing activities IX. LOANS AND RECEIVABLES UNDER FOLLOW-UP Factoring receivables under follow-up 6,377-6,377 6,166-6, Financing loans under follow-up Receivables from leasing activities under follow-up Specific provisions (-) (6,377) - (6,377) (6,166) - (6,166) X. DERIVATIVE FINANCIAL ASSETS HELD FOR RISK Fair value hedges Cash flow hedges Hedges of net investment in foreign operations XI. HELD-TO-MATURITY INVESTMENTS (Net) XII. INVESTMENTS IN SUBSIDIARIES (Net) XIII. INVESTMENTS IN ASSOCIATES (Net) XIV. INVESTMENTS IN JOINT-VENTURES (Net) XV. TANGIBLE ASSETS (Net) XVI. INTANGIBLE ASSETS (Net) Goodwill Other intangibles XVII. DEFERRED TAX ASSETS 8 2,019-2,019 1,868-1,868 XVIII. ASSETS HELD FOR SALE AND ASSETS RELATED TO THE DISCONTINUED OPERATIONS (Net) Assets held for sale Assets related to the discontinued operations XIX. OTHER ASSETS TOTAL ASSETS 582,794 41, , ,264 15, ,925 (*) Please refer to note for restatement effects on financial statements The accompanying notes are an integral part of these financial statements. 1

6 BALANCE SHEET AT 31 DECEMBER STATEMENT OF FINANCIAL POSITION - LIABILITIES AND EQUITY Restatement (*) Audited Current Period 31 December 2011 Audited Prior Period 31 December 2010 Note TL FC TOTAL TL FC TOTAL I. DERIVATIVE FINANCIAL LIABILITIES HELD FOR TRADING PURPOSE II. FUNDS BORROWED , , , ,305 10, ,854 III. FACTORING PAYABLES IV. PAYABLES DUE TO LEASING OPERATIONS Finance lease payables Operational lease payables Others Deferred finance leasing expenses ( - ) V. SECURITIES ISSUED (Net) Bills Asset backed securities Bonds VI. MISCELLANEOUS PAYABLES VII. OTHER EXTERNAL RESOURCES PAYABLE DERIVATIVE FINANCIAL LIABILITIES HELD FOR RISK MANAGEMENT PURPOSE VIII. 8.1 Fair value hedges Cash flow hedges Hedges of net investment in foreign operations IX. TAXES AND DUTIES PAYABLES 13 1,754-1,754 1,190-1,190 X. PROVISIONS Restructuring reserves Reserve for employee benefits Other provisions XI. DEFERRED TAX LIABILITIES XII. PAYABLES FOR ASSETS HELD FOR SALE AND ASSETS RELATED TO DICONTINUED OPERATIONS (Net) Payables related to the assets held for sale Payables related to the discontinued operations XIII. SUBORDINATED LOANS XIV. EQUITY 15 84,763-84,763 71,520-71, Paid-in capital 22,400-22,400 22,400-22, Capital reserves 28,831-28,831 28,831-28, Share premium Share cancellation profits Valuation differences of the marketable securities Revaluation surplus on tangible and intangible assets Bonus shares of associates, subsidiaries and joint-ventures Hedging reserves (effective portion) Revaluation surplus on assets held for sale and assets related to the discontinued operations Other capital reserves 28,831-28,831 28,831-28, Profit reserves 20,289-20,289 10,717-10, Legal reserves 3,790-3,790 3,157-3, Status reserves Extraordinary reserves 16,499-16,499 7,560-7, Other profit reserves Profit or (loss) 13,243-13,243 9,572-9, Prior years profit/(losses) Current year s profit/(losses) 13,243-13,243 9,572-9,572 TOTAL LIABILITIES AND EQUITY 496, , , ,231 10, ,925 (*) Please refer to note for restated effects on financial statements. The accompanying notes are an integral part of these financial statements. 2

7 OFF BALANCE SHEET ITEMS AS AT 31 DECEMBER 2011 OFF-BALANCE SHEET ITEMS Audited Current Period 31 December 2011 Audited Prior Period 31 December 2010 Note TL FC TOTAL TL FC TOTAL I. REVOCABLE FACTORING TRANSACTIONS 29,455 5,546 35,001 14,539 2,143 16,682 II. IRREVOCABLE FACTORING TRANSACTIONS 196, ,687 65,137-65,137 III. COLLATERALS RECEIVED ,463-18,463 20,029-20,029 IV. COLLATERALS GIVEN V. COMMITMENTS Irrevocable commitments Revocable commitments Revocable lease granting commitments Finance lease commitments Operational lease commitments Other revocable commitments VI. DERIVATIVE FINANCIAL INSTRUMENTS Derivative financial instruments held for risk management purpose Fair value hedges Cash flow hedges Net foreign investment hedges Derivative financial instruments held for trading purpose Forwards purchases and sales Swaps purchases and sales Options purchases and sales Futures purchases and sales Others VII. ITEMS HELD IN CUSTODY ,631 47, , ,528 31, ,115 TOTAL OFF-BALANCE SHEET ITEMS 398,474 53, , ,448 33, ,178 The accompanying notes are an integral part of these financial statements. 3

8 STATEMENT OF INCOME FOR THE YEAR ENDED 31 DECEMBER 2011 INCOME STATEMENT Note Audited Current Period 1 January 31 December 2011 Restated (*) Audited Prior Period 1 January 31 December 2010 I. MAIN OPERATING INCOME INCOME FROM FACTORING OPERATIONS 63,193 53, Interest income from factoring receivables 62,010 52, Discounted 9,917 5, Others 52,093 47, Fees and commissions received from factoring receivables 1, Discounted Others 1, INCOME FROM FINANCING LOANS Interest income from financing loans Fees and commissions received from financing loans INCOME FROM LEASING OPERATIONS Finance lease income Operational lease income Fees and commission income on leasing operations - - II. MAIN OPERATING EXPENSES (-) 17 5,044 4, Personnel expenses 3,149 2, Provision expense for employee termination indemnity Research and development expenses General administrative expenses 1,810 2, Others - - III. OTHER OPERATING INCOME , , Interest income on banks 1,197 15, Interest income on reverse repurchase agreements Interest income on securities Interest income on trading financial assets Interest income on financial assets designated at fair value through profit or loss Interest income on available for sale financial assets Interest income on held to maturity investments Dividend income Trading income Derivatives Others Foreign exchange gains 432, , Others IV. FINANCING EXPENSES (-) 19 43,440 48, Interest expense on funds borrowed 42,996 48, Interest expense on factoring payables Interest expense on financial leases Interest expense on securities issued Other interest expenses Fees and commission expenses V. SPECIFIC PROVISIONS FOR LOANS AND RECEIVABLES UNDER FOLLOW-UP VI. OTHER OPERATING EXPENSES (-) , , Impairment in value of securities Impairment in value of financial assets designated at fair value through profit or loss Impairment in value of available for sale financial assets Impairment in value of held to maturity investments Impairment in value of non current assets Impairment in value of tangible assets Impairment in value of assets held for sale and assets related to discontinued operations Impairment in value of goodwill Impairment in value of other intangible assets Impairment in value of subsidiaries, associates and joint-ventures Trading losses from derivatives Foreign exchange losses 431, , Others - 3,866 VII. OPERATING PROFIT/(LOSSES), NET (I+ +VI) 16,450 11,885 VIII. INCOME RESULTED FROM MERGERS - - IX. GAINS/(LOSSES) ON NET MONETARY POSITION - - X. PROFIT/(LOSSES) FROM CONTINUING OPERATIONS BEFORE TAXES (VII+VIII+IX) 16,450 11,885 XI. PROVISION FOR TAXES FROM CONTINUING OPERATIONS (±) 22 (3,207) (2,313) 11.1 Current tax charge (3,359) (3,048) 11.2 Deferred tax charges due to deferred tax assets Deferred tax charges due to deferred tax liabilities XII. NET PROFIT/(LOSSES) AFTER TAXES FROM CONTINUING OPERATIONS (X±XI) 13,243 9,572 XIII. INCOME FROM DISCONTINUED OPERATIONS Income from assets held for sale Income from sale of associates, subsidiaries and joint-ventures Other income from discontinued operations - - XIV. EXPENSES FROM DISCONTINUED OPERATIONS (-) Expense from assets held for sale Expense from sale of associates, subsidiaries and joint-ventures Other expense from discontinued operations - - XV. PROFIT/(LOSSES) BEFORE TAXES ON DISCONTINUED OPERATIONS (XIII-XIV) - - XVI. PROVISION FOR TAXES FROM DISCONTINUED OPERATIONS (±) Current tax charge Deferred tax charges/credits due to deferred tax assets Deferred tax charges/credits due to deferred tax liabilities - - XVII. NET PROFIT/(LOSSES) AFTER TAXES FROM DISCONTINUED OPERATIONS (XV±XVI) - - XVIII. NET PROFIT/(LOSSES) FOR THE YEAR (XVII+XVIII) 13,243 9,572 (*) Please refer to note for restated effects on financial statements. The accompanying notes are an integral part of these financial statements. 4

9 STATEMENT OF INCOME AND EXPENSE ITEMS ACCOUNTEED UNDER SHAREHOLDER S EQUITY FOR THE YEAR ENDED 31 DECEMBER 2011 Audited Current Period 31 December 2011 Restated (*) Audited Prior Period 31 December 2010 STATEMENT OF INCOME AND EXPENSE ITEMS ACCOUNTED UNDER SHAREHOLDERS EQUITY I. ADDITIONS TO MARKETABLE SECURITIES REVALUATION DIFFERENCES FOR AVAILABLE FOR SALE FINANCIAL ASSETS 1.1 Net change in the fair value of available for sale financial assets Fair value changes transferred to profit or loss due to disposal of related financial assets - - II. TANGIBLE ASSETS REVALUATION DIFFERENCES - - III. INTANGIBLE ASSETS REVALUATION DIFFERENCES - - IV. FOREIGN EXCHANGE DIFFERENCES FOR FOREIGN CURRENCY TRANSACTIONS - - V. PROFIT/LOSS FROM DERIVATIVE FINANCIAL INSTRUMENTS FOR CASH FLOW HEDGE PURPOSES (Effective portion of fair value - - differences) 5.1 Change in fair values (Effective portion) Portion reclassified and presented in the statement of income - - VI. PROFIT/LOSS FROM DERIVATIVE FINANCIAL INSTRUMENTS FOR HEDGE OF NET INVESTMENTS IN FOREIGN OPERATIONS - - (Effective portion of fair value differences) 6.1 Change in fair values (Effective portion) Portion reclassified and presented in the statement of income - - VII. THE EFFECT OF CORRECTIONS OF ERRORS AND CHANGES IN ACCOUNTING POLICIES - - VIII. OTHER PROFIT LOSS ITEMS ACCOUNTED UNDER EQUITY DUE TO TAS - - IX. DEFERRED TAX OF VALUATION DIFFERENCES - - X. TOTAL NET PROFIT/LOSS ACCOUNTED UNDER EQUITY (I+II+ +IX) - - XI. PROFIT/LOSS 13,243 9,572 XII. TOTAL PROFIT/LOSS ACCOUNTED FOR THE PERIOD (X±XI) 13,243 9,572 (*) Please refer to note for restatement effects on financial statements. The accompanying notes are an integral part of these financial statements. 5

10 STATEMENT OF CHANGES IN SHAREHOLDER S EQUITY FOR THE YEAR ENDED 31 DECEMBER 2011 CHANGES IN EQUITY Paid-in Capital Capital Reserves from Inflation Adj.s to Paid in Capital Share Premium Share Cancellation Profits Legal Reserves Status Reserves Extraordinary Reserves Other Profit Reserves Net Profit/(Losses) For the Year Prior Years Net Profit / (Losses) Valuation Differences of the Marketable Securities Revaluation Surplus on Tangible and Intangible Assets Bonus Shares of Equity Participations Hedging Reserves Revaluation Surp. On Assets Held for Sale and Assets of Discount. Op.s Prior Year ( ) Audited I. Balances at the beginning of the year 22,400 28, , , ,695 II. Corrections per TAS Effects of correction of errors Effects of changes in accounting policies III. Adjusted balances at the beginning of the year (I+II) 22,400 28, , , ,695 Changes during the year IV. Increase/decrease related to mergers V. Hedging reserves Cash Flow Hedges Hedging net investment in foreign operations VI. Valuation differences of the marketable securities VII. Revaluation surplus on tangible assets VIII. Bonus shares of associates, subsidiaries and jointventures IX. Translation differences X. Changes resulted from disposal of the assets XI. Changes resulted from reclassifications of the assets XII. Changes resulted from reclassifications of the assets XIII. Issuances of share certificates XIV. Capital reserves from inflation adjustments to paid-in capital XV. Bonds Convertible to Share Certificates XVI. Subordinated loans XVII. Net profit/(losses) of the year , ,572 XVIII. Profit distribution ,209-6, (13,878) (5,747) Dividends (5,747) (5,747) 18.2 Transferred to reserves ,209-6, (8,131) Others Restated (*) Balances at the end of the year (31 December 2010) 22,400 28, ,157-7,560-9, ,520 Current year (1 January - 31 January 2011) Audited I. Balance at the beginning of the year 22,400 28, ,157-7,560-9, ,520 Changes during the year II. Increase/decrease related to mergers III. Hedging reserves Cash Flow Hedges Hedging net investment in foreign operations IV. Valuation differences of the marketable securities V. Revaluation surplus on tangible assets VI. Bonus shares of associates, subsidiaries and jointventures VII. Translation differences VIII. Changes resulted from disposal of the assets IX. Changes resulted from reclassifications of the assets X. Cash Capital Increase XI. Issuances of share certificates XII. Capital reserves from inflation adjustments to paid-in - capital XIII. Bonds Convertible to Share Certificates XIV. Subordinated loans XV. Net profit/(losses) of the year , ,243 XVI. Profit distribution ,939 - (9,572) XVII. Dividends Transferred to reserves ,939 - (9,572) Others Balance at the end of the year (31 December 2011) 22,400 28, ,790-16,499-13, ,763 Total Equity (*) Please refer to note for restatement effects on financial statements. The accompanying notes are an integral part of these consolidated financial statements. 6

11 STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2011 A. CASH FLOWS FROM OPERATING ACTIVITIES Note Audited Current Period Restated (*) Audited Prior Period 1.1 Operating profit before changes in operating assets and liabilities 21,142 64, Interests received/lease income 63,205 52, Lease expenses Dividends received Fee and commissions received 1, Other income Collections from previously written-off receivables Payments to personnel and service suppliers (3,164) (2,636) Taxes paid (2,355) (3,048) Others (37,727) 16, Changes in operating assets and liabilities (150,106) 125, Net (increase) decrease in factoring receivables (152,635) (111,565) Net (increase) decrease in financing loans Net (increase) decrease in receivables from leasing operations Net (increase) decrease in other assets 2,896 (6,128) Net increase (decrease) in factoring payables Net increase (decrease) in payables due to leasing activities Net increase (decrease) in funds borrowed - 244, Net increase (decrease) in overdue payables Net increase (decrease) in other liabilities (367) (906) I. Net cash from operating activities (128,964) 189,768 B. YATIRIM FAALİYETLERİNE İLİŞKİN NAKİT AKIŞLARI 2.1 İktisap Edilen Bağlı Ortaklık ve İştirakler ve İş Ortaklıkları Elden Çıkarılan Bağlı Ortaklık ve İştirakler ve İş Ortaklıkları Satın Alınan Menkuller ve Gayrimenkuller 6 (19) (8) 2.4 Elden Çıkarılan Menkul ve Gayrimenkuller Elde Edilen Satılmaya Hazır Finansal Varlıklar Elden Çıkarılan Satılmaya Hazır Finansal Varlıklar Satın Alınan Vadeye Kadar Elde Tutulacak Yatırımlar Satılan Vadeye Kadar Elde Tutulacak Yatırımlar Diğer II. Net cash from operating activities (19) 20 C. CASH FLOWS FROM INVESTING ACTIVITIES 3.1 Cash obtained from funds borrowed and securities issued 527, Cash used for repayment of funds borrowed and securities issued (744,424) (48,478) 3.3 Equity instruments issued Dividends paid - (5,747) 3.5 Payments for finance leases Others - - III. Net cash from/(used in) financing activities (216,527) (54,225) IV. Effect of change in foreign exchange rates on cash and cash equivalents V. Net increase in cash and cash equivalents (345,510) 135,563 VI. Cash and cash equivalents at the beginning of the year 3 346, ,804 VII. Cash and cash equivalents at the end of the year 3 1, ,500 (*) Please refer to note for restatement effects on financial statements. The accompanying notes are an integral part of these financial statements. 7

12 STATEMENT OF PROFIT DISTRIBUTION FOR THE YEAR ENDED 31 DECEMBER 2011 I. DISTRIBUTION OF CURRENT YEAR PROFIT Current Period 31 December 2011 (**) Restated (*) Prior Period 31 December NET PROFTI FOR THE YEAR 16,450 11, TAXES AND LEGAL DUTIES PAYABLE (-) (3,207) (2,313) Corporate tax (income tax) (3,359) (3,048) Withholding tax Other taxes and duties (*) A. NET PROFIT FOR THE YEAR ( ) 13,243 9, ACCUMULATED LOSSES (-) FIRST LEGAL RESERVES (-) - (633) 1.5 OTHER STATUTORY RESERVES (-) (152) (735) B NET PROFIT AVAILABLE FOR DISTRIBUTION [(A-( )] 13,091 8, FIRST DIVIDEND TO SHAREHOLDERS (-) To owners of ordinary shares To owners of privileged shares To owners of redeemed shares To profit sharing bonds To holders of profit and loss sharing certificates DIVIDENDS TO PERSONNEL (-) DIVIDENDS TO BOARD OF DIRECTORS (-) SECOND DIVIDEND TO SHAREHOLDERS (-) To owners of ordinary shares To owners of privileged shares To owners of redeemed shares To profit sharing bonds To holders of profit and loss sharing certificates SECOND LEGAL RESERVES (-) STATÜ S RESERVES (-) EXTRAORDINARY RESERVES - (8,939) 1.13 OTHER RESERVES SPECIAL FUNDS - - II. DISTRIBUTION FROM RESERVES DISTRIBUTION OF RESERVES SECOND LEGAL RESERVES (-) DIVIDENTS TO SHAREHOLDERS (-) To owners of ordinary shares To owners of privileged shares To owners of redeemed shares To profit sharing bonds To holders of profit and loss sharing certificates DIVIDENDS TO PERSONNEL (-) DIVIDENDS TO BOARD OF DIRECTORS (-) - - III. EARNINGS PER SHARE 3.1 TO OWNERS OF ORDINARY SHARES (TL) TO OWNERS OF ORDINARY SHARES ( % ) TO OWNERS OF PRIVILEGED SHARES (TL) TO OWNERS OF PRIVILEGED SHARES ( % ) - - IV. DIVIDEND PER SHARE TO OWNERS OF ORDINARY SHARES (TL) TO OWNERS OF ORDINARY SHARES ( % ) TO OWNERS OF PRIVILEGED SHARES (TL) TO OWNERS OF PRIVILEGED SHARES ( % ) - - (*) Please refer to note for restatement effects on financial statements. (**) The Board of Directors has not made any decision regarding to profit distribution. The accompanying notes are an integral part of these financial statements. 8

13 1 ORGANIZATION AND NATURE OF BUSINESS Vakıf Finans Faktoring Hizmetleri Anonim Şirketi ( the Company ) was incorporated on 28 January 1998 to provide factoring services to industrial and commercial firms. The Company maintains its operations in accordance with the the requirements of the Communiqué on the Regulation on Procedures and Principles for Establishment and Operations of Financial Leasing, Factoring and Consumer Financing Companies as promulgated by the Banking Regulation and Supervision Agency ( BRSA ). As at 31 December 2011 and 2010, the composition of the authorized and paid-in share capital are as follows: 31 December 2011 Share (%) 31 December 2010 Share (%) Türkiye Vakıflar Bankası TAO 17, , Güneş Sigorta A.Ş Vakıf Finansal Kiralama A.Ş Vakıf Per. Öz. Sos. Güv. Vakfı Vakıf Pazarlama Sanayi ve Tic. AŞ Share capital 22, , The Company has 34 employees as at 31 December 2011 (2010: 31 employees). The Company is registered in Turkey and located in the address below: Gazeteciler Sitesi, Yazarlar Sokak, No:10, Esentepe, Şişli / İSTANBUL. The Company carries its operations mainly in one geographical region (Turkey). 2 BASIS OF PREPARATION OF FINANCIAL STATEMENTS 2.1 Basis of Preparation Basis of Preparation of Financial Statements The accompanying financial statements are prepared in accordance with the Communiqué Uniform Chart of Accounts to be implemented by Financial Leasing, Factoring and Consumer Financing Companies and its Explanation as well as the Form and Scope of Financial Statements to be announced to Public published on the Official Gazette no dated 17 May 2007 promulgated by Banking Regulation and Supervision Agency ( BRSA ), Turkish Accounting Standards ( TAS ), Turkish Financial Reporting Standards ( TFRS ) and the appendices and interpretations promulgated by Turkish Accounting Standards Board ( TASB ) and the statements and guidance published by BRSA on accounting and financial reporting principles (together referred as Reporting Standards ). Per decree no 660 published on the Official Gazette dated 2 November 2011 and became effective, additional article no:1 of the 2499 numbered Law on establishment of TASB has been abrogated and establishment of Public Oversight, Accounting and Auditing Standards Association ( Board ) has been decided by the Council of Ministers. In accordance with this additional temporary article no 1 of the decree, current regulations will prevail until related standards and regulations will be issued by the Board become effective. The balance sheet and income statement prepared as at 31 December 2011 were authorized for issue by the Board of Directors of the Company on 15 March The General Assembly and certain regulatory bodies have the power to amend the statutory financial statements after issue. 9

14 2 BASIS OF PREPARATION OF FINANCIAL STATEMENTS 2.1 Basis of Preparation (continued) Basis of Preparation of Financial Statements (continued) Additional Paragraph for Convenience Translation to English The differences between accounting principles, as described in the preceding paragraphs, and the accounting principles generally accepted in countries, in which the accompanying financial statements are to be distributed, and International Financial Reporting Standards ( IFRS ), may have significant influence on the accompanying financial statements. Accordingly, the accompanying financial statements are not intended to present the financial position and results of operations in accordance with the accounting principles generally accepted in such countries and IFRS Resatement of Financial Statements of Prior Period The impairment loss on the available for sale financial assets recognised in 2010 is revised on the financial statements as at 31 December 2011 according to the Accounting Policies, Changes in Accounting Estimates and Errors ( IAS 8 ). The effect of the corrections are presented below as at 31 December The corrections do not have any effect on the financial statements as at 1 January December 2010 Statement of Financial Position Published Adjustments Restated Available for sale financial assets 6,188 (3,866) 2,322 Deferred tax assets 1, ,868 Total assets 823,018 (3,093) 819,925 Net profit/loss 12,665 (3,093) 9, Income Statement Published Adjustments Restated Other operating income / expense - (3,866) (3,866) Deferred tax income / expense (38) Net profit/loss 12,665 (3,093) 9, Functional and Presentation Currency The presentation and functional currency of the Company is Turkish Lira (TL). The financial statements of the Company have been adjusted for the effects of inflation in accordance with TAS 29 Financial Reporting in Hyperinflationary Economies until 31 December By a circular issued on 28 April 2005, BRSA declared that the application of inflation accounting has been ceased to be applied for the companies operating in Turkey starting from 1 January 2005, since the provisions of hyperinflationary economy do not exist anymore. 10

15 2 BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued) 2.1 Basis of Preparation (Continued) Accounting estimates The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. In preparation of the financial statements, the significant estimates and judgments used by the Company are included in the following notes: Note 5 Receivables under follow-up Note 6 Tangible assets Note 7 Intangible assets Note 8 Deferred tax assets and liabilities Note 14 Provisions and contingent liabilities Note 25 Fair value of financial instruments for disclosure purposes Changes in Accounting Policies Material changes in accounting policies are adjusted retrospectively and prior periods financial statements are restated. The accounting policies set out below have been applied consistently to all periods presented in these financial statements Changes in accounting estimates and errors If the changes in accounting estimates relate to a specific period, they are applied in the period they relate to whereas if the changes are related to future periods, they are applied both in the period the change is made and prospectively in the future periods. There have been no material changes in current period s accounting estimates. Material accounting errors are adjusted retrospectively and prior periods financial statements are restated Comparative Information and Restatement of Prior Period Financial Statements The Company s financial statements have been prepared comparatively with the prior period in order to give information about financial position and performance. If the presentation or classification of the financial statements is changed, in order to maintain consistency, financial statements of the prior periods are also reclassified in line with the related changes with respective disclosures for the major differences. Prior period financial statements restated and presented of the effects on Note Standards and interpretations came into force in 2011 The Company applied all of the relevant and required standards and interpretations promulgated by TASB as at 31 December New standards and interpretations not yet adopted as at 31 December 2011 A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 31 December 2011, and have not been applied in preparing these financial statements. None of these are expected to have a significant effect on the financial statements of the Company, except for TFRS 9 Financial Instruments, which is published in Official Gazette No on 27 April

16 2 BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued) 2 BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued) 2.1 Basis of Preparation (Continued) Offsetting The Company s financial assets and liabilities are offset and the net amount is presented in the balance sheet if and only if there is a legally enforceable right to set off the amounts and there is an intention to settle on a net basis or to realize the asset and settle the liability simultaneously. 2.2 Summary of significant accounting policies (a) Financial instruments Non-derivative financial instruments Non-derivative financial instruments comprise cash and cash equivalents, factoring receivables, available for sale financial assets, funds borrowed, and other miscellanous payables. Non-derivative financial instruments are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition non-derivative financial instruments are measured as described below. Cash items comprise cash balances. Cash at banks comprises time deposits with an original maturity less than three months. Cash at banks reflects short-term investments; highly liquid, with an original maturity less than three months. Time deposits are recognised at discounted values by using effective interest rate. The Company initially recognizes factoring receivables and payables on the date that they are originated. Such assets are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, factoring receivables are measured at amortized cost using the effective interest method, less any impaired losses. The Company recognizes bad debt provisions for factoring receivables and for other assets that meet criteria published in the Communiqué No on the Communiqué on Procedures and Principles for the Provisions to be set aside by Financial Leasing, Factoring and Financing Companies for their Receivables issued at 20 July 2007 by BRSA. Doubtful receivables are derecognized after all legal procedures are completed and net loss is determined. Funds borrowed are recognized initially at cost, net of any transaction costs incurred. Subsequent to initial recognition, bank borrowings are stated at amortized cost with any difference between cost and redemption value being recognized in the income statement over the period of the borrowings. Interest income and expense are accounted as described in Note 2.2.(h). Other non-derivative financial instruments are measured at amortized cost using the effective interest method less any impairment. A financial instrument is recognised if the Company becomes a party to the contractual provisions of the instrument. Financial assets are derecognised if the Company s contractual rights to the cash flows from the financial assets expire or if the Company transfers the financial asset to another party without retaining control or with all risks and rewards of the asset. Regular way purchases and sales of financial assets are accounted for at trade date, i.e., the date that the Company commits itself to purchase or sell the asset. Financial liabilities are derecognised if the Company s obligations specified in the contract expire or are discharged or cancelled. 12

17 2 BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued) 2.2 Summary of significant accounting policies (Continued) (b) (c) (d) Tangible assets and depreciation Items of tangible assets acquired before 1 January 2005 are measured at cost restated for the effects of inflation in TL units current at 31 December 2004 pursuant to TAS 29 less accumulated depreciation and impairment losses. Tangible assets acquired after 31 December 2004 are measured at cost, less accumulated depreciation and impairment losses. (i) Subsequent costs The cost of replacing part of an item of tangible assets is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company and its cost can be measured reliably. The costs of the day-to-day servicing of tangible assets are recognized in the income statement as incurred. (ii) Depreciation Depreciation is recognised in the income statement on a straight-line basis over the estimated useful lives of each part of an item of tangible assets. The estimated useful lives for the current and comparative periods are as follows: Furniture and fixtures 5 years Motor vehicles 5 years Leasehold 5 years Leasehold improvements are amortized over the periods of the respective leases on a straight-line basis. Intangible assets Intangible assets represent computer software licenses and rights. Intangible assets acquired before 1 January 2005 are measured at cost restated for the effects of inflation in TL units current at 31 December 2004 pursuant to TAS 29, less accumulated amortization, and impairment losses. Intangible assets acquired after 31 December 2004 are measured at cost, less accumulated amortisation, and impairment losses. Amortization is recognized in the income statement on a straight-line basis over the estimated useful lives of intangible assets. Definition Year Computer software license 3-5 years Impairment Financial Assets A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. 13

18 2 BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued) 2.2 Summary of significant accounting policies (Continued) (d) (e) (f) Impairment (continued) All impairment losses are recognised in the income statement. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost and available-for-sale financial assets that are debt and equity securities, the reversal is recognised in the income statement to the extent that the impairment loss in respect of a financial asset was not recognized in the previous year. The Company recognizes specific provision for factoring receivables in accordance with the Communiqué No on the Communiqué on Procedures and Principles for the Provisions to be set aside by Financial Leasing, Factoring and Financing Companies for their Receivables issued at 20 July 2007 by BRSA. Non-financial assets The carrying amounts of the Company s non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset s recoverable amount is estimated. For intangible assets that have indefinite lives or that are not yet available for use, recoverable amount is estimated at each reporting date. An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. A cash-generating unit is the smallest identifiable asset group that generates cash flows that largely are independent from other assets and groups. Impairment losses are recognised in the income statement. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses recognised in prior years are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised Capital increases Share capital increases from existing shareholders are accounted for at par value as approved at the annual meeting of shareholders. Reserve for severance payments In accordance with the existing social legislation in Turkey, the Company is required to make lump-sum payments to employees whose employment is terminated due to retirement or for reasons other than resignation or misconduct. Those payments are calculated with basis of taking the upper limit of severance payment at the balance sheet date 14

19 2 BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued) 2.2 Summary of significant accounting policies (Continued) In accordance with TAS 19, Employee Benefits, the Company calculated the severance pay liability incurred due to retirement of its employees by discounting the future liabilities to their present values, by using statistical method and reflected to the financial statements. The main estimates used are as follows: Discount Rate 3.78% 4.66% Expected Salary/Limit Increase Rate 5% 5.1% Expected severance payment benefit ratio 100% 99% (g) The principal assumption is that the maximum liability for each year of service will increase in line with inflation. Thus, the discount rate applied represents the expected real rate after adjusting for the anticipated effects of future inflation. Since the upper limit of reserve for severance payment has been adjusted two times in a year, the Company has used the upper limit amounting TL 2,732 as at 31 December 2011 (31 December 2010: TL 2,517) for the calculation of reserve for severance payments. Provisions, contingent assets and liabilities In accordance with TAS 37, Provisions, Contingent Liabilities and Contingent Assets, a provision is recognized when the Company has a legal or constructive obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. If the specified criteria are not met, the Company discloses the related issues in the accompanying notes. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability if the time value of the money is significant to the provision. Contingent assets are disclosed in the notes and not recognized unless it is realized. (h) Income and expense recognition (i) Factoring income Factoring revenue consists of factoring interest and commission income collected or accrued on advances given to the customers. Factoring interest and commission income is recognized on accrual basis. (ii) Other income and expenses Other income and expenses are recognized on an accrual basis. (iii) Finance expenses Other interest income and expense are recognized on an accrual basis using effective interest method. 15

20 2 BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued) 2.2 Summary of significant accounting policies (Continued) (i) (j) (k) Income tax Tax provision of the period includes the current and deferred tax. Corporate Tax Current tax is the tax payable on the taxable income for the year, using tax rates enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred Tax Deferred tax is recognized using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or their tax assets and liabilities will be realized simultaneously. According to TAS 12, Income Taxes ; deferred tax assets and liabilities are recognized in the accompanying financial statements, using the balance sheet method, on all taxable temporary differences to the extent that they are expected to increasing or decrease on the income tax payable in the period when they will reverse. A deferred tax asset is recognized for unused tax losses, investment incentives, tax credits and deductable temporary differences, to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized. Related parties In accordance with TAS 24, Related Party Disclosures shareholders, key management and board members, in each case together with companies controlled by or affiliated with them, and associated companies are considered and referred to as related parties. Related party transactions consist of the transfer of the assets and liabilities between related parties by a price or free of charge. For the purpose of the accompanying financial statements, shareholders of the Company the companies controlled by/associated with them, key management and the Board members of the Company are referred to as related parties. Subsequent events Subsequent events mean the events occurred between the reporting date and the authorization date for the announcement of the financial statements. In accordance with TAS 10, Subsequent Events ; post-balance sheet events that provide additional information about the Company s position at the balance sheet dates (adjusting events) are reflected in the financial statements. Postbalance sheet events that are not adjusting events are disclosed in the notes when material. 16

21 2 BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued) 2.2 Summary of significant accounting policies (Continued) (l) Statement of cash flows The Company prepares cash flow statements to inform the users of the financial statements about the changes in its net assets, its financial structure and its ability to affect the amount and timing of its cash flows with respect to changing external conditions. In the statement of cash flows, cash flows of the period are reported with a classification based on operating, investing and financing activities. Cash flows from operating activities represent cash flows from activities within the scope of business. Cash flows relating to investment activities represent cash flows used and generated from investment activities (fixed investments and financial investments). Cash flows relating to financing activities represent the sources of financing the Company used and the repayments of these sources. As at 31 December 2011 and 2010, the cash and cash equivalents are as follows: Cash - 2 Banks Time deposits - 348,028 Demand deposits 1,109 1,498 Accrual of interest - (3,028) 1, ,500 (m) Segment reporting As the Company solely operates in Turkey and maintains factoring operations, operating segments are not presented. 17

22 2 BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued) 2.2 Summary of significant accounting policies (Continued) (n) Foreign currency transactions Income and expenses deriving from transactions in foreign currencies have been translated into TL at the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies have been translated into TL at the exchange rates prevailing at the balance sheet date. Exchange gains or losses arising from conversion of foreign currency items have been included in the income statement. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to TL at the exchange rate at the date that the fair value was determined. The foreign exchange rates used by the Company as at 31 December 2011 and 2010 are as follows: US Dollar ( USD ) Euro GBP (o) Leases Rentals income under operating leases are recognised in profit or loss on a straight-line basis over the term of the relevant lease. Initial costs incurred in negotiating and arranging to lease in the same way are included in the cost of the leased asset and is amortized straight-line basis over the lease term. (p) Earnings per share Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Entities, whose ordinary shares or potential ordinary share are not publicly-traded, are not required to disclose earnings per share in accordance with TAS 33, Earnings per Share. Therefore, earnings per share have not been calculated in the accompanying financial statements since the ordinary shares of the Company are not publicly-traded. 2.3 Financial Risk Management The Company has exposure to the following risks during the course of its operations: Credit risk Liquidity risk Market risk This note presents information about the Company s exposure to each of the above risks, the Company s objectives, policies and processes for measuring and managing risk. 18