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This is an English translation of the original Repo rt issued in Macedonian, in case of any discrepanci es between the English and Macedonian version the Mace donian text shall prevail.
Financial Statements and Independent Auditors’ Report
Eurostandard Banka AD, Skopje
31 December 2011
Eurostandard Banka AD, Skopje
Contents
Page
Independent Auditors’ Report 1
Income Statement 3
Statement of comprehensive income 4
Balance Sheet 5
Statement of Changes in Equity and Reserves 8
Statement of Cash Flows 12
Notes to the financial statements 14
Grant Thornton DOO
M.H.Jasmin 52 v-1/7 1000 Skopje Macedonia
T +389 (2) 3214 700 F +389 (2) 3214 710 www.grant-thornton.com.mk
Independent Auditors’ Report
To the Management and Shareholders of
Eurostandard Banka AD, Skopje
We have audited the accompanying financial statements of Eurostandard Banka AD, Skopje (the
“Bank”) which comprise of the Balance sheet as of 31 December 2011, and the Income statement,
Statement of comprehensive income, Statement of changes in equity and reserves and Statement of
cash flows for the year then ended, and a summary of significant accounting policies and other
explanatory notes, included on pages 3 to 123.
Management’s responsibility for the financial statements
Management is responsible for the preparation and fair presentation of these financial statements
in accordance with the Decision on the Methodology of recording and evaluating accounting items
and the preparation of financial statements issued by the National Bank of the Republic of
Macedonia, and for such internal control as Management determines is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud
or error.
Auditor’s responsibility
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 comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance whether the financial statements are free from material misstatement. An
audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial statements. The procedures selected depend on the auditor’s judgment, including
the assessment of the risks of material misstatement of the financial statements, whether due to
fraud or error.
Chartered Accountants
Member firm of Grant Thornton International Ltd
2
Eurostandard Banka AD, Skopje
Financial statements 31 December 2011
See accompanying Notes to the financial statements
3
Income Statement
In Denar thousand Note 2011 2010 Interest income 252,222 176,276 Interest expenses (137,564) (66,568) Net interest income / (expenses) 6 114,658 109,708 Fee and commission income 48,709 35,509 Fee and commission expenses (13,435) (10,433) Net fee and commission income/(expenses) 7 35,274 25,076 Net trading income 8 - - Net income from other financial instruments recorded at fair value 9 - - Foreign exchange gains / (losses), net 10 9,055 7,434 Other operating income 11 4,714 4,582 Participation in income of associates 24 - - Impairment losses of financial assets, net 12 25,999 17,409 Impairment losses of non – financial assets, net 13 (706) (504) Personnel expenses 14 (60,651) (58,031) Depreciation and amortization 15 (16,977) (17,938) Other operating expenses 16 (107,251) (85,582) Participation in losses of associates 24 - - Profit/(Loss) before taxation 4,115 2,154
Income tax 17 (1,221)
(583) Profit/ (loss) for the year from continuing operati ons 2,894 1,571 Profit / (loss) from group of assets and liabilities held for sale* - - Profit / (loss) for the year 2,894 1,571 Profit / (loss) for the year, attributable to:* Shareholders of the Bank - - non-controlling interest - - Earnings per share 41 basic earnings / (losses) per share (in Denar) 161 87 diluted earnings / (losses) per share (in Denar) - - * Only for consolidated financial statements
Eurostandard Banka AD, Skopje
Financial statements 31 December 2011
See accompanying Notes to the financial statements
4
Statement of comprehensive income
In Denar thousand Note 2011 2010
Profit/ (loss) for the year 2,894 1,571 Other gains/ (losses) in the period not presented i n the Income Statement (before taxation) Revaluation reserve for assets available-for-sale
- unrealized net-changes in fair value of assets available-for-sale - -
- realized net-gains/ (losses) from assets available-for-sale, reclassified in the Income Statement - - Reserve for instruments for risk protection of cash flows - - - unrealized net-changes in fair value of instruments for risk protection of cash flows - - - realized net-gains/(losses) from instruments for risk protection of cash flows, reclassified in the Income Statement - - Reserve for instruments for risk protection from net- investments in foreign operations - - Reserve of foreign exchange differences from investment in foreign operations - - Participation in other gains/ (losses) in associates not presented in the Income Statement 24 - - Other gains.(losses) not presented in the Income Statement - - Income tax from other gains/(losses) not presented in the Income Statement 17 - - Total other gains/ (losses) in the period not prese nted in the Income Statement - - Comprehensive income/ (loss) for the year 2,894 1,571 Comprehensive income/ (loss) for the year, attribut able to:* Shareholders of the Bank - - Non-controlling interest - -
* Only for consolidated financial statements
Eurostandard Banka AD, Skopje
Financial statements 31 December 2011
See accompanying Notes to the financial statements
5
Balance Sheet
In Denar thousand Notes 2011 2010
Assets
Cash and cash equivalents 18 1,283,729 663,841 Assets for trading 19 - - Financial assets at fair value through profit and loss upon initial recognition 20 - - Derivative assets held for risk management 21 - - Loans and advances to banks 22.1 209,662 70,004 Loans and advances to customers 22.2 2,292,718 1,506,557 Investments in securities 23 19,990 4,338 Investments in associates (recorded according to “equity method”) 24 - - Income tax receivables (Current) 30.1 1,758 2,979 Other receivables 25 7,006 6,438 Pledged assets 26 - - Foreclosed assets 27 242,448 46,035 Intangible assets 28 8,427 13,208 Property and equipment 29 21,971 27,472 Deferred tax assets 30.2 - - Non-current assets held for sale and disposal group 31 251,606 251,606 Total assets 4,339,315 2,592,478
Liabilities Trading liabilities 32 - - Financial liabilities at fair value through profit and loss upon initial recognition 33 - - Derivative liabilities held for risk management 21 - - Due to banks 34.1 20,135 11,872 Due to customers 34.2 3,392,983 1,741,783 Debt instruments issued 35 - - Borrowings 36 85,155 1,155 Subordinated liabilities 37 116,259 116,259 Special reserve and provisions 38 1,006 837 Income tax liabilities (Current) 30.1 - - Deferred tax liabilities 30.2 - - Other liabilities 39 6,648 6,337 Liabilities directly associated with disposal group 31 - - Total liabilities 3,622,186 1,878,243
Eurostandard Banka AD, Skopje
Financial statements 31 December 2011
See accompanying Notes to the financial statements
6
Eurostandard Banka AD, Skopje
Financial statements 31 December 2011
See accompanying Notes to the financial statements
7
Eurostandard Banka AD, Skopje
Financial statements 31 December 2011
See accompanying Notes to the financial statements
8
Statement of Changes in Equity and Reserves
In Denar thousand
Equity Revaluation reserves Other reserves Retained
earnings
(Accum.losses)
Total equity
and reserves
attributable to the
shareho. of the Bank
Non-contro
lling intere
st
Total equity
and reserves
Subs-cribed capital
Share prem-
ium (Treas. shares)
Other equity
instruments
Reval. reserve
Risk Reserv
e Forex
reserve Other reser.
Statutory reserve
Capital com. of hyb. fin. Instrum
Other reserves
Attribut. to
sharehol.
Limited for
distrib. to
sharehol
At 1 January 2010 1,100,668 - - - - - - - 24,837 - - - - (412,841) 712,664 - 712,664 Opening balance adjustments - - - - - - - - - - - - - - - - - At 1 January 2010, adjusted 1,100,668 - - - - - - - 24,837 - - - - (412,841) 712,664 - 712,664 Comprehensive income/(loss) for the year
Profit / (loss) for the year - - - - - - - - - - - 1,571 - - 1,571 - 1,571 Other gains/ (losses) for the period not presented in the Income Statement - - - - - - - - - - - - - - - - - Changes in fair value of assets available – for – sale - - - - - - - - - - - - - - - - - Changes in fair value of risk protection of cash flows - - - - - - - - - - - - - - - - - Changes in fair value of risk protection of net investments in foreign operations - - - - - - - - - - - - - - - - -
Eurostandard Banka AD, Skopje
Financial statements 31 December 2011
See accompanying Notes to the financial statements
9
Statement of Changes in Equity and Reserves (contin ued)
(Accum. losses)
Total equity
and reserve
s attributable to
the shareho
. of the Bank
Non-controlling inter
est
Total equity
and reserve
s In Denar thousand
Equity Revaluation reserves Other reserves Retained
earnings
Subs-cribed capital
Share prem-
ium (Treas. shares)
Other equity
instruments
Reval. reserve
Risk Reserve
Forex reserve
Other reser.
Statutory reserve
Capital com. of hyb. fin. Instrum
Other reserv
es
Attribut. to
sharehol.
Limited for
distrib. to
sharehol
Foreign exchange differences from investments in foreign operations - - - - - - - - - - - - - - - - - Deferred tax (assets) / liabilities recognized in equity - - - - - - - - - - - - - - - - - Other - - - - - - - - - - - - - - - - - Total unrealized profit / (loss) recognized in equity and reserves - - - - - - - - - - - - - - - - - Total comprehensive income/ (loss) for the year - - - - - - - - - - - 1,571 - - 1,571 - 1,571 Transactions with shareholders, recognized in equity and reserves: Shares issued during the period - - - - - - - - - - - - - - - - - Distribution to statutory reserve - - - - - - - - - - - - - - - - Distribution to other reserves - - - - - - - - - - - - - - - - - Dividends - - - - - - - - - - - - - - - - - Purchase of treasury shares - - - - - - - - - - - - - - - - - Sale of treasury shares - - - - - - - - - - - - - - - - -
Other changes in equity and reserves - - - - - - - - - - - - - - - - - Transactions with shareholders, recognized in equity and reserves: - - - - - - - - - - - - - - - - - At 31 December 2010 / 1 January 2011 1,100,668 - - - - - - - 24,837 - - 1,571 - (412,841) 714,235 - 714,235
Eurostandard Banka AD, Skopje
Financial statements 31 December 2011
See accompanying Notes to the financial statements
10
Statement of Changes in Equity and Reserves (contin ued)
(Accum.
losses)
Total equity
and reserve
s attributable to
the shareho
. of the Bank
Non-contro
lling intere
st
Total equity
and reserv
es In Denar thousand
Equity Revaluation reserves Other reserves Retained earnings
Subs-cribed capital
Share prem-
ium (Treas. shares)
Other equity
instruments
Reval. reserve
Risk Reserve
Forex reserve
Other reser.
Statutory reserve
Capital com. of hyb. fin. Instrum
Other reserves
Attribut. to
sharehol.
Limited for
distrib. to sharehol
Comprehensive income/(loss) for the year Profit / (loss) for the year - - - - - - - - - - - 2,894 - - 2,894 - 2,894 Other gains/(losses) for the period not presented in the Income Statement - - - - - - - - - - - - - - - - - Changes in fair value of assets available – for – sale - - - - - - - - - - - - - - - - - Changes in fair value of risk protection of cash flows - - - - - - - - - - - - - - - - - Changes in fair value of risk protection of net investments in foreign operations - - - - - - - - - - - - - - - - - Foreign exchange differences from investments in foreign operations - - - - - - - - - - - - - - - - - Deferred tax (assets) / liabilities recognized in equity - - - - - - - - - - - - - - - - - Other - - - - - - - - - - - - - - - - - Total unrealized profit / (loss) recognized in equity and reserves - - - - - - - - - - - - - - - - - Total comprehensive income/ (loss) for the year - - - - - - - - - - - 2,894 - - 2,894 - 2,894
Eurostandard Banka AD, Skopje
Financial statements 31 December 2011
See accompanying Notes to the financial statements
11
Statement of Changes in Equity and Reserves (contin ued)
Equity Revaluation reserves Other reserves Retained
earnings
(Accum. losses)
Total equity
and reserves attributa
ble to the
shareho. of the Bank
Non-contro
lling intere
st
Total equity
and reserve
s In Denar thousand
Subs-cribed capital
Share prem-
ium
(Treas. shares
)
Other equity
instruments
Reval. reserve
Risk Reserve
Forex reserve
Other reser.
Statutory reserve
Capital com. of hyb. fin. Instrum
Other reserves
Attribut. to
sharehol.
Limited for
distrib. to
sharehol
Transactions with shareholders, recognized in equity and reserves: Shares issued during the period - - - - - - - - - - - - - Distribution to statutory reserve - - - - - - - - 236 - - (236) - - - - - Distribution to other reserves - - - - - - - - - - - - - - - - - Dividends - - - - - - - - - - - - - - - - - Purchase of treasury shares - - - - - - - - - - - - - - - - - Sale of treasury shares - - - - - - - - - - - - - - - - - Covering losses from previous years - - - - - - - - - - - (1,335) - 1,335 - - - Transactions with shareholders, recognized in equity and reserves - - - - - - - - 236 - - (1,571) - 1,335 - - -
At 31 December 2011
1,100,668 - - - - - - -
25,073 - - 2,894
-
(411,506)
717,129 -
717,129
* Only for consolidated financial statements
Eurostandard Banka AD, Skopje 12
Statement of Cash Flows
In Denar thousand
Note 2011 2010
Operating activities Profit / (Loss) before taxation 4,115 2,154 Adjustment for: Non-controlling interest, included in consolidated income statement * - - Amortization and depreciation of: Intangible assets 5,041 5,340 Property and equipment 11,936 12,598 Capital gain from: Sale of intangible assets - - Sale of property and equipment - - Sale of foreclosed assets - - Capital loss from: Sale of intangible assets - - Sale of property, plant and equipment - -
Sale of foreclosed assets - - Interest, fee and commission income (252,222) (176,276) Interest, fee and commission expense 137,564 66,568 Net trading (income)/ expenses - -
Impairment losses of financial assets, net additional impairment losses 195,566 193,529 release of impairment losses (221,565) (210,938) Impairment losses of non – financial assets, net additional impairment losses 706 504 release of impairment losses - - Special reserve
additional provisions 3,122 5,291 release of provisions (2,963) (7,478)
Dividend income (717) (494) Participation of profit / (loss) of associates - -
Other adjustments - - Received interest 245,145 169,817 Paid interest (126,182) (58,804) Profit from operations before changes in operating assets (454) 1,811 (Increase) / decrease of operating assets: Trading assets - - Derivatives held for risk management - - Loans and advances to banks (185,453) (42,301) Loans and advances to customers (951,327) (734,895) Assets pledged as collateral - - Foreclosed assets 3,375 - Obligatory deposit in foreign currency (22,932) (14,731)
Eurostandard Banka AD, Skopje 13
Notes to the financial statements (continued)
In Denar thousand
Statement of Cash Flows (continued)
Year ended 31 December
2011 2010 Obligatory deposit held with NBRM according to special regulations - -
Other receivables (3,429) 1,602
Deferred tax assets - -
Non – current assets held for sale and disposal group - -
Increase / (decrease) in operating liabilities: - -
Trading liabilities - -
Derivative liabilities held for risk management - -
Due from banks 8,256 11,022
Due form customers 1,640,356 748,344
Other liabilities 311 21
Liabilities related to group or assets for disposal - -
Net cash flow from operating activities before taxa tion 488,703 (29,127)
(Paid) / received income tax - -
Net cash flow from operating activities 488,703 (29,127)
Cash flow from investment activity
(Investments in securities) (15,052) -
Inflows from sale of investment in securities - -
(Outflows from investment in subsidiaries and associates) - - Inflows from disposal of investment in subsidiaries and associates - -
(Purchase of intangible assets) (260) (5,383)
Inflows from sale of intangible assets - -
(Purchase of property and equipment) (4,051) (6,790)
Inflows from sale of property and equipment - -
(Outflows from non - current assets held for sale) - -
Inflows from non - current assets held for sale - -
(Other outflows from investing activity) - -
Other inflows from investing activity 117 134
Net cash flow from investing activity (19,246) (12,039)
Cash flow from financing activity - -
(Repayment of debt securities issued) - -
Issued debt securities - -
(Repayment of borrowings) - (1,243)
Increase of borrowings 81,085 -
(Repayment of issued subordinary debts) - -
Issued subordinated debts - 116,259 Inflows from issued shares / equity instruments during the period - -
(Purchase of treasury shares) - -
Selling of treasury shares - -
(Dividends paid) - -
(Other outflows from financing) - -
Other inflows from financing - -
Net cash flow from financing activity 81,085 115,016
Effect from allowance for impairment of cash and cash equivalents - - Effect from foreign exchange differences of cash and cash equivalents - -
Net increase / (decrease) of cash and cash equivale nts 550,542 73,850
Cash and cash equivalents as of 1 January 598,374 524,524
Cash and cash equivalents as of 31 December 18 1,148,916 598,374
* Only for consolidated financial statements
Eurostandard Banka AD, Skopje 14
Notes to the financial statements
1 General
Eurostandard Banka AD, Skopje (“the Bank”) is a Shareholding Company incorporated in the
Republic of Macedonia. The Bank’s registered head office is located at 27 Mart no. 2, Skopje,
Republic of Macedonia.
The Bank is licensed by the National Bank of the Republic of Macedonia for conducting payment
transfers, and deposit services in the country and abroad and credit services in the country.
The Bank owns 66.66% of the shares of Postenska Banka A.D. Skopje, with voting right acquired
by realization of pledge recorded as non-current assets held for sale.
As of 31 December 2011 and 2010, the Bank performed its business activities with 99 and 91
employees, respectively.
1.1 Basis of preparation of financial statements Financial statements of Eurostandard Banka AD Skopje are prepared in accordance with the Law
on Banks and bylaws prescribed by the National Bank of the Republic of Macedonia effective as of
31 December 2011, the Law on Trade Companies (Official Gazette of RM No. 28/04; 84/05;
25/07; 87/08; 42/10; 48/10 and 24/11) and Rulebook on Accounting (Official Gazette of RM No.159/09;
164/10). According this Rulebook the accounting standards adopted in the Republic of Macedonia are
the International Financial Reporting Standards (IFRS).
Financial statements of the Bank are presented in accordance with the format and content of balance
schemes published in the Decision on the types and content of financial statements of banks, published in
the Official Gazette of RM No.169/2010 and 152/2011, which is based on the Methodology for recording
and valuation of accounting items and preparation of financial statements, published in Official Gazette
of RM No. 169/2010.
Eurostandard Banka AD, Skopje 15
Notes to the financial statements (continued)
Basis of preparation of financial statements (conti nued)
The preparation of financial statements in accordance with accounting standards applicable in the
Republic of Macedonia and requires use of estimates and assumptions that affect the presented
assets and liabilities, potential assets and liabilities at the date of financial statements and the
presented amounts of revenues and expenses during the reporting period. These estimates are
based on Management's best knowledge of the current events and activities and are disclosed in
Note 1.3.
Additional information is presented in accounting policies and appropriate notes to the financial
statements.
The financial statements have been prepared as of and for the years ended 31 December 2011 and
2010 and represent individual unconsolidated financial statements. Current and comparative data
stated in these financial statements are expressed in Denar thousand. Where necessary, the
presentation of comparative data is adjusted according to changes in presentation in the current
year.
1.2 Significant accounting policies The principal accounting policies adopted in the preparation of these financial statements are set
out below. The determination of the Bank’s accounting policies is based on acknowledged, familiar
and practical experiences of the provisions of the Decision on the Methodology for recording and
valuating of accounting items and for the preparation of financial statements, Rulebook on
accounting and the Manual on the types and content of financial statements of banks, Decision on
the types and content of financial statements of banks and other legal regulations. These policies
have been consistently applied to all the years presented, unless otherwise stated.
1.2.1 Foreign currency transactions Transactions denominated in foreign currencies have been translated into Denar at rates set by the
National Bank of the Republic of Macedonia at the dates of the transactions.
Foreign currency translation is transaction which follows a foreign currency or may be converted
into foreign currency.
Assets and liabilities denominated in foreign currencies are translated at the balance sheet date
using official rates of exchange prevailing on that date, and any foreign exchange gains or losses,
resulting from foreign currency translation, are included in the income statement in the period in
which they arose. The middle exchange rates used for conversion of the balance sheet items
denominated in foreign currencies are as follows:
31 December 2011 31 December 2010 1 EUR 61.5050 Denars 61.5050 Denars 1 USD 47.5346 Denars 46.3140 Denars 1 CHF 50.5964 Denars 49.3026 Denars
Eurostandard Banka AD, Skopje 16
Notes to the financial statements (continued)
Significant accounting policies (continued) 1.2.2 Offsetting Financial assets and liabilities are offset and reported in the Balance sheet on net basis when there
is a legally enforceable right to offset the recognized amounts.
1.2.3 Interest income and expenses Interest income and expense are recognized in the Income statement for all interest bearing
financial assets and liabilities using the effective interest method.
The effective interest method is a method of calculating the amortised cost of a financial asset or a
financial liability and of allocating the interest income or interest expense over the relevant period.
The effective interest rate is the rate that exactly discounts estimated future cash payments or
receipts through the expected life of the financial instrument or, when appropriate, a shorter
period to the net carrying amount of the financial asset or financial liability. When calculating the
effective interest rate, the Company estimates cash flows considering all contractual terms of the
financial instrument but does not consider future credit losses.
The calculation includes all fees and points paid or received between parties to the contract that are
an integral part of the effective interest rate, transaction costs and all other premiums or discounts.
1.2.4 Fee and commission income Fee and commission income, excluding the commission for loans approval, is recognized on an
accrual basis when the service has been provided. The commission for loan approval is limited and
amortised during the period of the loan, by applying the effective interest rate method.
1.2.5 Foreign exchange income and expenses Net foreign exchange income and expenses include realized and unrealized foreign exchange
differences that are derived from the reconciliation of transactions made in foreign currency, as
well as from asset and liability valuation, which are included in the Income statement in the period
when they occur. Commitments and contingencies denominated in foreign currency are translated
in Denar, by applying the official exchange rates that are valid on the Balance sheet date.
1.2.6 Dividend income Dividends are recognized in the Income statement when the entity’s right to receive payment is
established.
1.2.7 Financial assets Financial assets are classified in the following categories: loans and receivables, financial assets at
fair value through profit and loss, financial assets available-for-sale and financial assets held to
maturity. Management classifies its investments at initial recognition.
Eurostandard Banka AD, Skopje 17
Notes to the financial statements (continued)
Significant accounting policies (continued) Financial assets (continued) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that
are not quoted in an active market. They arise when the Bank provides money or services directly
to a debtor with no intention of trading the receivable. They are recognized when the cash is
advanced.
Financial assets at fair value through profits and losses This category of financial assets consists of securities held for trading and securities at fair value
through profits and losses classified as it at initial recognition. A financial asset is classified as asset
held for trading of it is acquired or incurred principally for the purpose of generating profit
through short-term fluctuations in the price or if it is included in the portfolio for which a short-
term actual form of profit gain exists. As of 31 December the bank has no assets classified under
this category.
Financial assets available-for-sale Financial assets available-for-sale are non-derivative financial assets that are either designated to
this category or do not qualify for inclusion in any of the other categories of financial assets.
Financial assets available-for-sale are those 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
share prices.
Financial assets held to maturity Financial assets held to maturity are non-derivative financial assets with fixed or determinable
payments and fixed maturities that the Bank’s Management has the positive intention and ability to
hold to maturity. If the Bank sells a significant amount of the financial assets held to maturity
before they reach the maturity date, then the entire category of these assets will be reclassified in
financial assets available-for-sale. As of 31 December 2011 the Bank has no assets classified under
this category.
Initial recognition and derecognition Purchases and sales of financial assets available – for – sale and held to maturity financial assets are
recognized on trade – date – the date on which the Bank commits to purchase or sell the asset.
Loans are recognized when cash is advanced to the borrowers. Financial assets are initially
recognized at fair value plus transaction costs for all financial assets not carried at fair value
through profit or loss.
Financial assets cease to be recognized after the rights to receive cash flows from the funds ends or
after their transfer, and the Bank transferred substantially all risks and benefits of ownership.
Eurostandard Banka AD, Skopje 18
Notes to the financial statements (continued)
Significant accounting policies (continued) Financial assets (continued) Subsequent measurement After initial recognition, the Bank measures financial assets carried at fair value through profit or
loss, or as available-for-sale, at fair values without any deduction for transaction costs it may incur
on their sale.
The fair value of quoted financial assets is their bid prices at the Balance sheet date.
If the market on which the financial asset is quoted is not active, the Bank establishes fair values by
using a valuation technique. Valuation techniques include the use of recent arm’s length market
transactions, references to the current fair value of another instrument that is substantially the
same, discounted cash flow analysis and option pricing models. If the value of equity instruments
cannot be reliably measured, they are measured at cost. Investments held to maturity and loans and
receivables are measured at amortised cost using the effective interest method, less impairment
losses.
Realised gains and losses, and unrealised gains and losses arising from changes in the fair value of
financial assets at fair value through profit or loss, are included in the profit or loss in the period in
which they arise.
Net changes in the fair value of financial assets classified as of fair value through profit and loss
includes interest income.
Unrealised gains and losses arising from changes in the fair value of financial assets available-for-
sale are recognised directly in equity, except for impairment losses and foreign exchange gains and
losses on monetary items such as debt securities, which are recognised in profit or loss.
When financial assets available-for-sale are sold or impaired, the cumulative gains or losses
previously recognised in equity are recognised in the profit or loss. Where financial assets available-
for-sale are interest bearing, interest calculated using the effective interest method is recognised in
profit or loss.
Eurostandard Banka AD, Skopje 19
Notes to the financial statements (continued)
Significant accounting policies (continued) 1.2.8 Impairment of financial assets Assets carried at amortized cost The Bank assesses at each balance sheet date whether there is objective evidence that a financial
asset is impaired. A financial asset or a group of financial assets is impaired and impairment losses
are incurred only if there is objective evidence of impairment as a result of one or more events that
occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has
an impact on the estimated future cash flows of the financial asset or group of financial assets that
can be reliably estimated.
The criteria that the Bank uses to determine that there is objective evidence of an impairment loss
include:
� Delinquency in contractual payments of principal or interest; � Days in arrears for payment of principal or interest; � Cash flow difficulties experienced by the borrower; � Breach of loan covenants or conditions; � Deterioration of the borrower’s competitive position; � Deterioration in the value of collateral; � Initiation of bankruptcy proceedings; � Activating the collateral.
The Bank assesses the existence of objective evidence for impairment on individual basis for
individually significant financial assets.
The amount of impairment loss is measured as the difference between the asset’s carrying amount
and the present value of estimated future cash flows (excluding future credit losses based on the
loan) discounted at the financial asset’s original effective interest rate. The carrying amount of the
asset is reduced through the use of an allowance for impairment and the amount of the impairment
loss is recognized in the current Income statement.
When a loan is uncollectible, it is written off against the related provision for loan impairment.
Such loans are written off after all the necessary procedures have been completed and the amount
of the loss has been determined. Subsequent recoveries of amounts previously written off decrease
the amount of the provision for loan impairment and are recognized as income in the current
period. If, in a subsequent period, the amount of the impairment loss decreases and the decrease
can be related objectively to an event occurring after the impairment was recognized (such as an
improvement in the debtor’s credit rating), the previously recognized impairment loss is reversed
by adjusting the allowance account. The amount of the reversal is recognized in the profit or loss.
Eurostandard Banka AD, Skopje 20
Notes to the financial statements (continued)
Significant accounting policies (continued) Impairment of financial assets (continued) Assets recognized at fair value The Bank assesses at each balance sheet date whether there is objective evidence that a financial
asset is impaired. Significant or prolonged decline in the fair value of the security below its cost is
considered as objective evidence in determining whether the assets are impaired. If any such
evidence exists for financial assets available-for-sale, the cumulative loss – measured as the
difference between the acquisition cost and the current fair value is recognized in the Income
statement. If, in a subsequent period, the fair value of a debt instrument classified as available-for-
sale increases and the increase can be objectively related to an event occurring after the impairment
loss was recognized in profit or loss, the impairment loss is reversed through the Income
statement.
1.2.9 Foreclosed assets Foreclosed assets consist of buildings and equipment acquired in settlement of liabilities with an
intention for its further sale. They are not used by the Bank for its core operations. These assets
are measured at the lower of carrying amount and fair value less costs to sell. The Bank plans to
dispose the collected collateral within five years of forced acquisition.
For the purposes of subsequent measurement of foreclosed assets in cases where the estimated
value of foreclosed asset is less than cost or carrying value, the Bank in the amount of their
difference recognizes an impairment loss in the Income statement.
1.2.10 Intangible assets Computer software Costs associated with development or maintaining computer software programs are recognized as
an expense as incurred. Costs directly associated with identifiable and unique software products
controlled by the Bank that will probably generate economic benefits exceeding costs beyond one
year, are recognized as intangible assets. Computer software development costs recognized as
assets are amortized using the straight-line method over a period of four years.
Other intangible assets Costs to acquire rights and licenses are capitalized and amortized using the straight-line method
over a period of four years.
Eurostandard Banka AD, Skopje 21
Notes to the financial statements (continued)
Significant accounting policies (continued) 1.2.11 Property and equipment Property, plant and equipment are carried at cost less accumulated depreciation. Cost includes all
expenses directly attributable to purchase of assets.
Depreciation is charged on a straight - line basis at prescribed rates in order to allocate the
acquisition cost of property, building, plant and equipment over their useful lives. The following
are approximations of estimated useful life applied to significant items of property, plant and
equipment:
Transportation assets 4 years Furniture and office equipment 5 years Other equipment 4, 5 and 10 years
Subsequent purchases are included in the asset’s carrying value or are recognized as a separate
asset, as appropriate, only when it is probable that future economic benefits associated with the
item will flow to the Bank and the cost of the item can be measured reliably.
All other repairs and maintenance are charged to the Income Statement during the financial period
in which they are incurred.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These
are included in the Income Statement.
1.2.12 Non-current assets held for sale and disposal group Non – current assets that are expected to be recovered through sale rather than through
continuous use are classified as held for sale. Before this classification as held for sale, they are
evaluated by the lower of their book value and fair value, less sales expenses. Loss for impairment
at their initial recognition as held for sale and losses and profit from subsequent assessment are
recognized in the Income statement. Gains are not recognized in excess of any cumulative
impairment loss.
1.2.13 Impairment of non-financial assets Assets that are subject to amortization and depreciation are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be recoverable.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s
carrying amount is greater than its estimated recoverable amount. The recoverable amount is the
higher of an asset’s net selling price and value in use.
1.2.14 Cash and cash equivalents Cash and cash equivalents comprise cash, accounts that represent deposits on demand in banks,
accounts in NBRM and term deposits in banks less than three months’ maturity from the date of
acquisition.
Eurostandard Banka AD, Skopje 22
Notes to the financial statements (continued)
Significant accounting policies (continued) 1.2.15 Provision A provision is recognized when there is a present 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. Provisions are
reviewed at each balance sheet date and adjusted to reflect the current best estimate. When the
effect of the time value of money is material, the amount of provision represents the present value
of the expenditures expected to be required to settle the obligation.
1.2.16 Employees benefits The Bank contributes to its employees as prescribed by the local social security legislation.
Contributions, based on salaries, are made to the national Pension Fund and the obligatory private
pension funds. There is no additional liability regarding these pension schemes. In addition, all
employers in the Republic of Macedonia are obligated to pay to the employees a separate minimum
amount regulated by law. The Bank has not made provisions for the employees’ minimum amount
on retirement, as this amount would not have a material effect on the financial statements.
The Bank does not operate any pension scheme or retirement benefit plans and consequentially,
has no liability for pensions. The Bank is not obliged to provide additional benefits for its current
or previous employees.
1.2.17 Current and deferred income tax Income tax at 10% rate is paid to non – deductible items for tax purposes adjusted for tax credit,
and as well as on the distributed profit for dividends to legal entities – non residents and to
individuals. Undistributed profit (retained earnings) is exempt of taxation.
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 values for financial reporting
purposes. The tax rates that are currently valid are used in determination of deferred income tax.
Deferred income tax is charged or credited in the profits and losses except when it relates to items
charged or credited directly to the equity, in which case the deferred tax is also dealt within the
equity. Deferred tax assets are recognized to the extent that it is probable that future taxable profit
will be available against which the temporary differences can be utilized. The Bank has not
recognized any deferred tax liability or asset as of 31 December 2011 and 31 December 2010, as
there are no temporary differences existing at those dates.
1.2.18 Financial liabilities Financial liabilities are classified in accordance with the substance of the contractual arrangement.
Financial liabilities consist of loans and other liabilities.
Borrowings and subordinated liabilities Borrowings and subordinated liabilities are initially recognized at fair value, being their issue
proceeds (fair value of consideration received) less transaction costs incurred. Borrowings are
subsequently carried at amortized cost. Borrowings are derecognized at the moment of their
settlement, cancellation or expiration.
Eurostandard Banka AD, Skopje 23
Notes to the financial statements (continued)
Significant accounting policies (continued) Deposits Deposits mainly present: current accounts, demand deposits and time deposits to banks, legal
entities and individuals.
The Bank recognizes deposits in the Balance sheet when the Bank becomes a party of contractual
provisions of the instrument. The deposits are measured at their objective value, plus transaction
costs, which are directly related to the undertaking or issuing of the financial liability. Deposits
consequently are measured according to their amortized cost, by using the method of effective
interest rate. Deposits are derecognized at the moment of their settlement, cancellation or
expiration.
Other liabilities Other liabilities are recognised initially at fair value, being their issue proceeds (fair value of
consideration received) net of transaction costs incurred. There are subsequently stated at
amortised cost. Other liabilities are derecognized at the moment of their settlement, cancellation or
expiration.
1.2.19 Equity, reserves and dividend payments (a) Shareholders’ capital Share capital represents the nominal value of shares that have been issued. (b) Share issue costs Incremental costs directly attributable to the issue of new shares or options or to the acquisition of a business are shown in equity as a deduction, net of tax, from the proceeds.
(c) Treasury shares Where the Bank purchases equity share capital, the consideration paid is deducted from total shareholders’ equity as treasury shares until they are cancelled. Where such shares are subsequently sold, any consideration received is included in shareholders’ equity. (d) Reserves Reserves, which comprise of revaluation and statutory reserves, are generated throughout the period, based on distribution of profit in accordance with legal regulation and the Decisions made by the Bank’s Assembly.
(e) Retained earnings/ accumulated (losses) Retained earnings/ accumulated (losses) comprise the retained earnings and accumulated losses from current and previous periods. (f) Dividends on ordinary shares Dividends on ordinary shares are recognized in equity in the period in which they are approved by the Bank’s shareholders.
Eurostandard Banka AD, Skopje 24
Notes to the financial statements (continued)
Significant accounting policies (continued) 1.2.20 Lease The determination of whether an arrangement is, or contains a lease is based on the substance of
the arrangement at inception date of whether the fulfilment of the arrangement is dependent on
the use of a specific asset or assets or the arrangement conveys a right to use the asset.
Bank as a lessee Finance leases, which transfers to the Bank substantially all the risks and benefits incidental to
ownership of the leased item, are capitalised at the inception of the lease at the fair value of the
leased vehicles and equipment or, if lower, at the present value of the minimum lease payments.
Lease payments are apportioned between the finance charges and reduction of the lease liability so
as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges
are charged directly against income.
Leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease
term, if there is no reasonable certainty that the Bank will obtain ownership by the end of the lease
term.
Payments of the operating leasing are recognized as an expense on a straight-line basis over the
lease term.
Bank as a lessor Leases where the Bank retains substantially all the risks and benefits of ownership of the asset are
classified as operating leases. Initial direct costs incurred in negotiating an operating lease are
presented as deferred expenses in the balance sheet and recognised in profit or loss over the lease
term on the same basis as rental income. Contingent rents are recognized as revenue in the period
in which they are earned. Prepaid rents are recognized as deferred income. The Bank has not
classified any assets under this category.
1.2.21 Segment reporting Segment reporting is presented by business activities according operating segments. Operating
segments of the Bank are: operations with individuals- loans and deposits, operations with financial
institutions- loans and term deposits and other operating segments. Concentration of business
activities to significant customers is reported if the Bank earns 10% or more from the total income
and expenses of the Bank from certain customer.
1.2.22 Commitments and contingencies The Bank undertakes liabilities in its operating activities arising from loan placements accounted
for in the off balance accounts, which primarily include guarantees and letter of credits and unused
credit lines. These financial liabilities are accounted for in the balance sheet when become
recoverable. Provision for impairment related to off balance commitments and contingencies are
recognized as a liability within the Balance sheet.
1.2.23 Fiduciary activities The Bank usually acts as trustee and in other fiduciary capacities that result in the holding or
placing of assets on behalf of individuals and other institutions. These assets and income arising
there on are excluded from these financial statements, as they are not assets of the Bank.
1.2.24 Events after the reporting date Events after the reporting date that provide additional information about the Bank’s position at the
balance sheet date (adjusting events) are reflected in the financial statements. Events after the
reporting date that are not adjusting events are disclosed in the notes when material.
Eurostandard Banka AD, Skopje 25
Notes to the financial statements (continued)
1.3 Critical estimates and judgments
The Bank makes estimates and assumptions which affect the reported amounts of assets and
liabilities within the next financial year. Estimates and judgments are continually evaluated and
based on historical experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
Impairment of loans and advances to customers The Bank on quarterly basis reviews its loan portfolio to assess impairment. In determining
whether an impairment loss should be recorded in the income statement, the Bank makes
judgments as to whether there is any observable data indicating that there is a measurable decrease
in the estimated future cash flows from a portfolio of loans before the decrease can be identified
with an individual loan in that portfolio. This evidence may include observable data indicating that
there has been an adverse change in the payment status of borrowers in a group, or national or
local economic conditions that correlate with defaults on assets in the group. This evidence may
include observable data indicating that there has been an adverse change in the payment status of
borrowers in a group, or national or local economic conditions that correlate with defaults on
assets in the group. Management uses estimates based on historical loss experience for assets with
credit risk characteristics and objective evidence of impairment similar to those in the portfolio
when scheduling its future cash flows. The methodology and assumptions used for estimating both
the amount and timing of future cash flows are reviewed regularly to reduce any differences
between loss estimates and actual loss experience.
Impairment of investments in available-for-sale securities The Bank determines that available – for – sale equity investments are impaired when there has
been a significant or prolonged decline in the fair value below its cost. This determination of what
is significant or prolonged requires judgment. In making this judgment, the Bank evaluates among
other factors, the normal volatility in share price. In addition, impairment may be appropriate when
there is evidence of deterioration in the financial health of the investor, industry and sector
performance, changes in technology, and operational and financing cash flows.
1.4 Change in accounting policies, accounting estima tes and correction of errors During 2011 and 2010, the Bank has made no change in accounting policies, accounting estimates and correction of errors.
1.5 Compliance with the regulations As of 31 December 2011, the Bank is in full compliance with the law and bylaws in respect of all
exposure limits arising from the Law on Banks and bylaws adopted by the Council of NBRM.
Eurostandard Banka AD, Skopje 26
Notes to the financial statements (continued)
2 Risk management
The Bank establishes an integrated system for management of all tangible and intangible risks, on which is exposed by the nature, size and complexity of the financial activities that are carried out.
Bank in its operations is exposed to the following types of risks:
� Credit risk, including country risk.
� Liquidity risk.
� Currency risk.
� Risk of change in interest rates in the portfolio of banking activities.
� Risk of concentration of the bank exposure.
� Operational risk.
� Strategic risk.
� Legal risk.
� Reputation risk.
Based on the Strategy of managing risks the Bank establishes special policies and procedures for
managing all risks to which is exposed in its operations.
Policies to manage risks include:
� Evaluation of the Bank capacity to take certain risks, and to evaluate its risk profile.
� Organizational structure in managing risks.
� Basic elements of risk management.
� Acceptable instruments to prevent or reduce risks.
� Internal control and main elements of the process of internal assessment and evaluation of the required adequacy of the bank capital.
Also, according the risk management policies Bank to pursue and establish procedures for measurement or assessment, monitoring, controlling or reducing risks that should:
� Provide timely and comprehensive identification of risks (risk mapping) facing the Bank.
� Be based on quantitative and / or qualitative estimates and measurable and non-measurable risks.
� Include rules, procedures and ways to reduce diversification, transfer and avoiding risks that are identified, measured and assessed by the Bank.
� Define the frequency and the methods for risk monitoring.
The Bank establishes an organizational structure with clearly defined powers and responsibilities in
managing risks, which corresponds to the size, type and complexity of the Bank ant the financial
activities carried out.
Eurostandard Banka AD, Skopje 27
Notes to the financial statements (continued) Risk management (continued)
The organization of the system of managing risks is established by the following hierarchy levels:
� Strategic level – risk management function is accomplished by members of the Supervisory
Board and Managing Board.
� Macro level – risk management function at the level of business unit or business line is
executed by persons with special rights and responsibilities that perform governmental
functions and/ or special organizational part responsible for monitoring the management of all
or certain risks and takes place at level of the Risk Management Directorate.
� Micro level – risk management activities are carried out by people who take risks in everyday
work, in accordance with the work procedures and the internal control systems and takes place
at the level of Risk Management Directorate and at the level of business units – sectors.
2.1 Credit risk Credit risk is a risk of financial loss for the Bank if the client or the contracting party of the
financial instrument fails to meet their obligation and it is generally derived from loans and
advances to clients and other banks, issued guarantees and securities investment. In order to
manage the risk, the Bank collectively takes into consideration all the elements of credit risk
exposure (as individual risk of the failure to meet the liabilities of the debtor, country risk and
industrial sector risk).
The Bank defines the acceptable credit exposure, with which it is expected:
� Credit risk dispersion; � Increasing the scope of the credit portfolio; � Improvement of the portfolio quality; � Increasing the bank’s profitability.
The management and control of credit risk is centralised in the Centre for risk management, which
in turn regularly informs the Risk Management Board and the Board of Directors, and through
them, the Supervisory Board and the Auditing Board.
The Bank manages limits and controls the concentration of credit risk at the time when they are
identified - particularly in terms of individual contractual parties or groups, as well as in term of
industrial sectors and countries.
The Bank structures the levels of undertaken credit risk by means of setting limits of acceptable
risk related to one lender or a group of lenders, to geographical and industrial segments.
Moreover, the exposure to credit risk is managed by regular analysis of the lenders’ capability to
meet their obligations of interest and principal, as well as through the change of these credit limits,
if at all possible.
Eurostandard Banka AD, Skopje 28
Notes to the financial statements (continued) Risk management (continued)
Credit risk (continued)
Collateral represents one of the most traditional and frequent ways to mitigate the credit risk. The
Bank applies instructions related to the acceptability of certain classes of collaterals. The basic
types of collateral for credit and advances are the following:
� Housing and business property mortgages; � Pledge on business assets, such as equipment, inventory and receivables; � Pledge on financial instruments, such as shares; � Cash deposit; � Bills of exchange.
In order to mitigate the credit risk and if the banks assesses, it can ask for additional collateral from
its customers.
Policies and procedures After the individual classification of exposure to credit risk has been made, the Bank makes an
allowance for impairment of the active balance and off – balance sheet receivables, by determining
the net present value of future cash flows that would arise based on those receivables.
The amount of the allowance for impairment for active balance sheet receivables, individually, is
determined as the difference between the carrying value of balance sheet receivables and the
current value of the assessed recoverable amounts (excluding future losses based on the credit).
The net present value of the active balances receivables is calculated by discounting expected
future cash flows for those receivables with the use of the effective interest rate based on the
contract.
The effective interest rate is the interest rate which equals, the net present value of all future cash
flows to the net present value of all future cash outflows. When calculating the effective interest
rate, the Bank:
� Takes into consideration all future cash flows (inflows and outflows) which are expected to arise in accordance with the agreed conditions;
� Takes into consideration all paid and/or collected commissions and fees which represent an integral part of the effective interest rate of the receivable;
� Does not take into consideration the fees and commissions for investment of deposit, as a collateral for the receivable;
� Does not take into consideration future losses due to credit risk of the receivable.
For the purposes of discounting the expected future cash flows, the effective interest rate on
annual basis is used.
If due to the financial difficulties of the client, the Bank approves a change of crediting conditions
in terms of the interest rate and the period of repayment of the client’s receivables, the effective
interest rate used for discounting the expected future cash flows, is the one that was valid before
the changes of the crediting conditions.
Eurostandard Banka AD, Skopje 29
Notes to the financial statements (continued) Risk management (continued)
Credit risk (continued)
For discounting the expected future cash flows of the receivables with a variable interest rate, the
Bank applies the effective interest rate, in accordance with the contract, valid on the day on which
the net present value of expected cash is determined.
In situations such as these, the effective interest rate is calculated for the entire period of the
contract’s validity (not just the remaining maturity period), by applying the interest rate, valid on
the day on which the net present value of expected cash flows is determined. If the interest rate on
the date on which the net present value is determined, is changed by less than 10% in terms of the
last interest rate used to execute the discounting of future cash flows, the Bank can apply the
previous interest rate that was used to determine the net present value of expected future cash
flows.
The Bank allows calculates impairment, and makes a special reserve within the following limits:
� From 0% to 10% of the credit risk exposure classified in risk category “A”. � Over 10% to 25% of the credit risk exposure classified in risk category “B“. � Over 25% to 50% of the exposure of credit risk classified in risk category “C“. � Over 50% to 75% of the exposure of credit risk classified in risk category “D“. � Over 75% to 100% of the exposure of credit risk classified in risk category “E“.
Maximum credit risk exposure before received collateral
The maximum exposure of credit risk is displayed through carrying values of the financial assets in
the balance sheet, shown in the table below:
Eurostandard Banka AD, Skopje 30
Notes to the financial statements (continued) Risk management (continued)
Credit risk (continued) A. Analysis of total credit risk exposure
In Denar thousand Loans and
advances to banks Loans and advances to
customers
Investment in financial assets available – for –
sale
Investment in financial assets
held – to – maturity
Cash and cash equivalent
Fee and commission receivables
Other receivables
Off-balance sheet exposure Total
2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 Carrying value of exposure with an allowance for impairment/special reserve on individual basis Carrying value of individually significant exposures, before the allowance for impairment and the special reserve, on individual basis
risk category A - - 2,140,136 1,384,829 - - - - - - 631 1,509 2,845 1,771 79,010 64,538 2,222,622 1,452,647 risk category B - - 92,305 65,464 - - - - - - - 6 83 - 2,685 1,944 95,073 67,414 risk category C - - 54,799 49,011 - - - - - - - 45 74 4 27 107 54,900 49,167 risk category D - - 82,349 16,734 - - - - - - - - 68 43 - - 82,417 16,777 risk category E - - 166,342 272,216 - - - - - - - - 2,250 403 - - 168,592 272,619
- - 2,535,931 1,788,254 - - - - - - 631 1,560 5,320 2,221 81,722 66,589 2,623,604 1,858,624 (Allowance for impairment and special reserve, on individual basis) - - (243,213) (281,697) - - - - - - (34) (1,216) (3,250) (409) (1,006) (837) (247,503) (284,159) Carrying value of individually significant exposures, less the allowance for impairment and the special reserve, on individual basis - - 2,292,718 1,506,557 - - - - - - 597 344 2,070 1,812 80,716 65,752 2,376,101 1,574,465
Eurostandard Banka AD, Skopje 31
Notes to the financial statements (continued) Risk management (continued)
Credit risk (continued) Analysis of total credit risk exposure (continued)
In Denar thousand
Loans and advances to banks
Loans and advances to
customers
Investment in financial assets available – for –
sale
Investment in financial assets
held – to – maturity
Cash and cash equivalent
Fee and commission receivables Other receivables
Off-balance sheet exposure Total
2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 Carrying value of exposures that are assessed on group basis, before allowance for impairment and the special reserve on group basis Individually insignificant exposures (portfolio of small loans) - - - - - - - - - - - - - - - - - - Individually significant exposures that are not impaired on individual basis - - - - - - - - - - - - - - - - - - (Allowance for impairment and special reserve, group basis) - - - - - - - - - - - - - - - - - - Carrying value of exposures that are assessed on group basis, less the allowance for impairment and the special reserve, group basis - - - - - - - - - - - - - - - - - -
Carrying value of exposure for which no allowance for impairment/special reserve is allocated
Matured receivables Aging structure of matured receivables for which no allowance for impairment is allocated
up to 30 days - - - - - - - - - - - - - - - - - - Carrying value of matured receivables for which there is no allowance for impairment - - - - - - - - - - - - - - - - - -
Eurostandard Banka AD, Skopje 32
Notes to the financial statements (continued) Risk management (continued)
Credit risk (continued) Analysis of total credit risk exposure (continued)
In Denar thousand
Loans and advances to banks
Loans and advances to customers
Investment in financial assets available – for –
sale
Investment in financial assets
held – to – maturity
Cash and cash equivalent
Fee and commission receivables
Other receivables
Off-balance sheet exposure Total
2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 Non – matured receivables
Restructured receivables - - - - - - - - - - - - - - - - - -
Other receivables 209,662 70,004 - - 19,990 4,338 - - 892,308 461,725 - - - 47 239,230 138,460 1,361,190 674,574 Carrying value of non-matured receivables for which there no allowance for impairment /special reserve is allocated - - - - - - - - - - - - - - - - Total carrying value of the credit risk receivables before the allowance for impairment and special reserve 209,662 70,004 2,535,931 1,788,254 19,990 4,338 - - 892,308 461,725 631 1,560 5,320 2,268 320,952 205,049 3,984,794 2,533,198 (Total allowance for impairment and special reserve) - - (243,213) (281,697) - - - - - - (34) (1,216) (3,250) (409) (1,006) (837) (247,503) (284,159) Total carrying value of the credit risk receivables less the allowance for impairment and special reserve 209,662 70,004 2,292,718 1,506,557 19,990 4,338 - - 892,308 461,725 597 344 2,070 1,859 319,946 204,212 3,737,291 2,249,039
Eurostandard Banka AD, Skopje 33
Notes to the financial statements (continued) Risk management (continued)
Credit risk (continued) B. Value of collateral (fair value) for mitigating of credit risk
In Denar thousand
Loans and advances to banks
Loans and advances to customers
Investment in financial assets available – for –
sale
Investment in financial assets held
– to – maturity Cash and cash
equivalent Fee and commission
receivables Other receivables Off-balance sheet
exposure
2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 Value of collateral of the credit exposure which is assessed for impairment on individual basis First class collateral instruments: cash deposits (in depot and/or limited on bank accounts) - -
93,395
81,389
-
-
-
-
-
-
-
-
16,580
10,868
109,975
92,257
Government securities - -
-
982
-
-
-
-
-
-
-
-
-
-
-
982 Government unconditional guarantees - -
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Bank guarantees - -
- -
- -
-
- -
-
- -
-
-
-
- Guarantees from insurance companies and insurance policies - -
-
57,660
-
-
-
-
-
-
-
-
-
-
-
57,660
Corporative guarantees (except for banks and insurance companies) - -
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Guarantees from individuals - -
-
-
-
-
-
-
-
-
-
-
-
-
-
- Property pledge Property for own use (flats, houses) - -
1,068,958
790,191
-
-
-
-
-
-
-
-
29,576
51,686
1,098,534
841,877
Business property - - 2,434,220 1,317,663
-
-
-
-
- -
-
-
142,086
8,072 2,576,306 1,325,735
Moveable property pledge - - 1,599,373 1,053,881
-
-
-
-
-
-
-
-
46,406
24,529 1,645,779 1,078,410
Other types of guarantees - - 22,908 361,102
- -
-
109,575 22,908 470,677 Total value of collateral of credit exposure which is assessed for allowance for impairment on individual basis
-
-
5,218,854
3,662,868
-
-
-
-
-
-
-
-
234,648
204,730
5,453,502
3,867,598
Eurostandard Banka AD, Skopje 34
Notes to the financial statements (continued) Risk management (continued)
Credit risk (continued) Value of collateral (fair value) for mitigating of credit risk (continued)
In Denar thousand
Loans and advances to banks
Loans and advances to customers
Investment in financial assets
available – for – sale
Investment in financial assets held
– to – maturity Cash and cash
equivalent Fee and commission
receivables Other receivables Off-balance sheet
exposure 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010
Value of collateral of the credit exposure which is assessed for impairment on group basis First class collateral instruments: cash deposits (in depot and/or limited on bank accounts) - - - - - - - - - - - - - - - - Government securities - - - - - - - - - - - - - - - - Government unconditional guarantees - - - - - - - - - - - - - - - - Bank guarantees - - - - - - - - - - - - - - - - Guarantees from insurance companies and insurance policies - - - - - - - - - - - - - - - - Corporative guarantees (except for banks and insurance companies) - - - - - - - - - - - - - - - - Guarantees from individuals - - - - - - - - - - - - - - - - Property pledge Property for own use (flats, houses) - - - - - - - - - - - - - - - - Business property - - - - - - - - - - - - - - - - Moveable property pledge - - - - - - - - - - - - - - - - Other types of guarantees - - - - - - - - - - - - - - - - Total value of collateral of credit exposure which is assessed for allowance for impairment on individual basis - - - - - - - - - - - - - - - -
Eurostandard Banka AD, Skopje
Notes to the financial statements (continued) Risk management (continued)
35
Credit risk (continued) C. Concentration of credit risk by geographical loc ation and industrial sectors
The following table present a review of the Bank’s exposure to credit risk according to the carrying amounts, categorized according to the industrial sectors as of 31 December 2011 and 2010:
In Denar thousand Loans and
advances to banks
Loans and advances to
customers
Investment in financial assets available – for –
sale
Investment in financial assets
held – to – maturity
Cash and cash equivalent
Fee and commission receivables Other receivables
Off-balance sheet exposure Total
2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 Non residents - - - 64 - - - - 253,582 114,965 - - - - - - 253,582 115,029 Agriculture, forestry and fishery - - 13,761 15,564 - - - - - - - - 3 - - - 13,764 15,564 Mining - - - - - - - - - - - - - - - - - - Food industry - - 306,866 - - - - - - - - - 2 - 10,246 - 317,114 - Textile industry and production of clothing and footwear - - 97,383 - - - - - - - - - 97 - 12,109 - 109,589 - Chemical industry, production of construction materials production and processing of fuels, pharmaceutical industry - - 135,335 - - - - - - - - - 57 - - - 135,392 - Production of metals, machinery, tools and equipment - - 126,038 - - - - - - - - - 15 - 14,426 - 140,479 - Other manufacturing - - 55,404 438,023 - - - - - - - 138 6 66 1,238 25,123 56,648 463,350 Electricity, gas, steam and air conditioning - - 5,055 18,808 - - - - - - - - 8 - 23,230 - 28,293 18,808 Water, removing waste water, waste management and remediation activities on the environment - - 591 - - - - - - - - - - - 206 - 797 - Construction - - 135,342 103,540 - - - - - - - - 45 11 3,551 1,367 138,938 104,918
Eurostandard Banka AD, Skopje 36
Notes to the financial statements (continued) Risk management (continued)
Credit risk (continued) Concentration of credit risk by geographical locati on and industrial sectors (continued)
In Denar thousand
Loans and advances to banks
Loans and advances to
customers
Investment in financial assets available – for –
sale
Investment in financial assets
held – to – maturity
Cash and cash equivalent
Fee and commission receivables Other receivables
Off-balance sheet exposure Total
2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010
Wholesale and retail trade, repair of motor vehicles and motorcycles; - - 676,486 480,127 - - - - - - 297 156 864 1,162 129,619 108,352 807,266 589,797 Transport and storage - - 176,601 - - - - - - - - - 40 - 16,757 38 193,398 38 Accommodation and food service activities - - 41,484 - - - - - - - - - 19 - 5,670 5,781 47,173 5,781 Information and Communications - - 26,082 116,390 - - - - - - - - - 2 13,950 40,032 116,392 Financial activities and insurance activities 209,662 70,004 2,423 - 19,990 4,338 - - 638,726 346,760 - - 914 618 1,710 190 873,425 421,910 Activities related to real estate - - 31,918 297 - - - - - - - - - - 1,973 - 33,891 297 Activities related to real estate - - 128,821 - - - - - - - - - - - 11,748 - 140,569 - Administrative and support service activities - - 49,114 - - - - - - - - - - - 3,108 - 52,222 - Public administration and defence, compulsory social security - - - - - - - - - - - - - - - - - - Education - - 1,920 202 - - - - - - - - - - 5,172 - 7,092 202 Activities of health and social care - - 26,534 6,271 - - - - - - - - - - 283 - 26,817 6,271 Arts, entertainment and recreation - - 4,100 - - - - - - - - - - - 16,923 - 21,023 - Other service activities - - 2,001 - - - - - - - - - - - 367 - 2,368 - Activities of households as employers of household activities that produce diverse goods and perform various services for own needs - - - 138,042 - - - - - - - - - - 4,519 35,094 4,519 173,136
Eurostandard Banka AD, Skopje 37
Notes to the financial statements (continued) Risk management (continued)
Credit risk (continued) Concentration of credit risk by geographical locati on and industrial sectors (continued)
In Denar thousand
Loans and advances to banks
Loans and advances to customers
Investment in financial assets available – for –
sale
Investment in financial
assets held – to – maturity
Cash and cash equivalent
Fee and commission receivables
Other receivables
Off-balance sheet exposure Total
2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010
Activities of territorial organizations and bodies - - - - - - - - - - - - - - - - - - Individuals - - 246,510 188,757 - - - - - - 300 50 - - 43,141 28,267 289,951 217,074 Sole proprietors and individuals who are not considered as traders - - 2,949 472 - - - - - - - - - - - - 2,949 472
Total 209,662 70,004 2,292,718 1,506,557 19,990 4,338 - - 892,308 461,725 597 344 2,070 1,859 319,946 204,212 3,737,291 2,249,039
Eurostandard Banka AD, Skopje Notes to teh financial statements (continued) Risk management (continued)
38
Credit risk (continued) D. Credit risk concentration by geographic location The following table gives review on the Bank’s exposure to credit risk according the carrying values categorized under geographic regions as of 31 December 2011 and 2010:
In Denar thousand
Loans and advances to
banks Loans and advances
to customers
Investment in financial assets available – for –
sale
Investment in financial
assets held – to – maturity
Cash and cash equivalent
Fee and commission receivables Other receivables
Off-balance sheet exposure Total
2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 Geographical location Republic of Macedonia 209,662 70,004 2,292,718 1,506,493 19,990 4,338 - - 638,726 346,760 597 344 2,070 1,859 319,946 204,122 3,483,709 2,133,920 EU member countries - - - - - - - - 253,582 114,965 - - - - - 90 253,582 115,055 Europe (other) - - - 64 - - - - - - - - - - - - - 64 OECD member countries (without the European member-countries of OECD) - - - - - - - - - - - - - - - - - - Other - - - - - - - - - - - - - - - - - -
Total 209,662 70,004 2,292,718 1,506,557 19,990 4,338 - - 892,308 461,725 597 344 2,070 1,859 319,946 204,212 3,737,291 2,249,039
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) Risk management (continued)
39
2.2 Liquidity risk Liquidity risk represents the risk for the Bank of becoming incapable to provide sufficient funds
for settlement of its short-term liabilities when such liabilities fall due, or to provide such funds at
much higher costs.
Liquidity risk management The management of liquidity risk includes assets and liabilities management that ensures timely and
regular settlement of liabilities of the bank in regular operations or emergency.
The Bank has established Policy for managing liquidity risk, which was adopted by the Supervisory
Board and is regularly revised. The policy defines the manner of the Bank’s liquidity management
through the establishment of basic goals, the basic components of a system for managing liquidity
risk (organizational structure, steps and procedures for internal control and audit, information
systems, stress testing and liquidity contingencies plan), the basic elements of maintaining an
adequate level of liquidity.
The Bank has established procedures for identifying, measuring and monitoring liquidity risk,
which were adopted by the Board of Directors of the Bank and are regularly reviewed. Within the
procedures detailed are developed procedures for managing liquidity risk, including: identifying and
measuring liquidity risk, liquidity stress testing, monitoring and control of the liquidity risk.
Planning and monitoring of cash inflows and outflows, establish and maintain adequate maturity
structure, monitoring the sources of funds and their concentration ratios of liquidity, internal
liquidity indicators, fulfilling the legal obligation for required reserve in Denars and foreign
currency, analysis of Denar and foreign currency operational liquidity, stress testing and other
methods used to measure the liquidity risk. Reports of liquidity on a regular basis are submitted to
the Board for monitor and control of liquidity risk, the Risk Management Board and NBRM on a
monthly basis.
As of 31 December 2011, the maturity analysis of financial assets and liabilities of the Bank shows
maturity gap in the periods from one to twelve months and from one to two years. Cash flows that
the Bank expected to occur differ from the agreed. The maturity gap in the blocks of 3 months to
12 months cumulated in positive, taking into account the positive amount of the first maturity
block. The maturity gap in 1 to 2 years is due to time deposits of individuals. The total remaining
maturity of Bank’s assets and liabilities is positive.
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) Risk management (continued)
40
Liquidity risk (continued) Maturity analysis of financial assets and liabiliti es (remaining maturity)
The following tables analyse Bank’s assets and liabilities, grouped according their maturity based on
the remaining period from the reporting date to the agreed maturity date 31 December 2011 and
2010. Further, the amounts as of 31 December 2011 are presented on a gross basis, i.e. not taking
into account the amounts of accumulated amortisation, impairment provision and allocated special
reserve, and the amounts as of 31 December 2010 are presented on a net basis, according to the
applicable regulation at the date of preparation of those statements.
in Denar thousand
31 December 2011 Up to 1 month
From 1 to 3 months
From 3 to 12 month
From 1 to 2 years
From 2 to 5 years
Over 5 years Total
Financial assets
Cash and cash equivalents 1,207,631
-
- 76,098
-
- 1,283,729
Trading assets
-
-
-
-
-
- - Financial assets at fair value through profit and loss at its/ their initial recognition
-
-
-
-
-
- -
Derivative assets held for risk management
-
-
-
-
-
- -
Loans and advances to banks 209,662 -
-
-
-
- 209,662 Loans and advances to customers 429,315 325,721 956,018 260,652 434,815 140,782 2,547,303
Investment in securities
-
-
- 19,990
-
- 19,990
Investment in associates
-
-
-
-
-
- -
Current income tax receivables - 150 455 1,153
-
- 1,758
Other receivables 7,868
-
-
-
2,422
- 10,290
Assets pledged as collateral
-
-
-
-
-
-
-
Deferred tax assets
-
-
-
-
-
-
- Total financial assets 1,854,476 325,871 956,473 357,893 437,237 140,782 4,072,732 Financial liabilities Liabilities for trading - - - - - - - Financial liabilities designated at fair value through profit and loss at initial recognition - - - - - - - Derivative liabilities held for risk management - - - - - - -
Deposits to banks 15,125 5,010 -
-
-
- 20,135 Deposits to customers 751,138 343,848 885,148 1,320,483 88,553 3,813 3,392,983 Issued debt securities - - - - - - - Borrowings 62 191 614 10,554 39,382 34,352 85,155 Subordinated liabilities 1 - - - 24,000 92,258 116,259 Current income tax liabilities - - - - - - - Deferred tax liabilities - - - - - - - Other liabilities 6,648 - - - - - 6,648 Total financial liabilities 772,974 349,049 885,762 1,331,037 151,935 130,423 3,621,180 Off-balance items
Off-balance assets 22,353 - - - - - 22,353
Off-balance liabilities 212,752 50,259 90,691 49,936 - - 403,638
Net gap position 891,103 (73,437) (19,980) (1,023,080) 285,302 10,359 70,267
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) Risk management (continued)
41
Liquidity risk (continued) Analysis according maturity of financial assets and liabilities (remaining maturity) (continued)
in Denar thousand
31 December 2010 Up to 1 month
From 1 to 3 months
From 3 to 12 month
From 1 to 2 years
From 2 to 5 years
Over 5 years Total
Financial assets
Cash and cash equivalents 610,675
-
- 53,166 -
- 663,841
Trading assets
-
-
-
- -
-
- Financial assets at fair value through profit and loss at its/ their initial recognition
-
-
-
- -
-
-
Derivative assets held for risk management
-
-
-
- -
-
-
Loans and advances to banks 70,004
-
- - -
- 70,004 Loans and advances to customers 154,975 164,554 684,691 176,243 276,574 49,520 1,506,557
Investment in securities
-
-
- 4,338 -
- 4,338
Investment in associates
-
-
-
- -
-
-
Current income tax receivables 278 228 2,473
- -
- 2,979
Other receivables 6,017 266
- 155 -
- 6,438
Assets pledged as collateral
-
-
-
- -
-
-
Deferred tax assets
-
-
-
- -
-
- Total financial assets 841,949 165,048 687,164 233,902 276,574 49,520 2,254,157 Financial liabilities Liabilities for trading - - - - - - - Financial liabilities designated at fair value through profit and loss at initial recognition - - - - - - - Derivative liabilities held for risk management - - - - - - -
Deposits to banks 6,872 5,000
-
- -
- 11,872 Deposits to customers 609,310 390,690 558,041 121,398 40,546 21,798 1,741,783
Issued debt securities
-
-
-
- -
-
-
Borrowings 109 221 825
- -
- 1,155
Subordinated liabilities
-
-
-
- - 116,259 116,259
Current income tax liabilities
-
-
-
- -
-
-
Deferred tax liabilities
-
-
-
- -
-
-
Other liabilities 6,337
-
-
- -
- 6,337 Total financial liabilities 622,628 395,911 558,866 121,398 40,546 138,057 1,877,406
Off-balance items
Off-balance assets - - - - - -
Off-balance liabilities 118,491 26,801 147,388 29,634 344 - 322,658
Net gap position 100,830 (257,664) (19,090) 82,870 235,684 (88,537) 54,093
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) Risk management (continued)
42
2.3 Market risk Market risk is the risk that changes in market prices, such as changes in interest rates, changes in
equity prices, exchange rates and / or market prices of securities will affect the Bank’s profit or the
value of own financial instruments. The objective of market risk management is to manage and
control market risk exposures within acceptable limits by optimizing the yield.
Risk of changes in interest rates in the banking book Risk of changes in interest rates in the banking book presents a risk of loss arising from adverse
changes in interest rates, affecting the positions in the banking book of the Bank.
The Bank has established Policy for managing risk from changes in interest rates in the banking
book, which was adopted by the Supervisory Board and is regularly revised. The policy for
managing the risk of changes in interest rates defines how the position and / or implementation of
the following components: assessment, monitoring and controlling the risk of changes in interest
rates in the banking book, limits on risk exposure, organizational structure risk management of
change in interest rates, procedures for internal control and audit, information system and stress
testing.
The Bank has established procedures for managing risk from changes in interest rates in the
banking book, which was adopted by the Board of Directors and is regularly revised. The
procedures for managing the risk of changes in interest rates defines: assessment, monitoring and
controlling the risk of changes in interest rates in the banking book, limits on risk exposure,
organizational structure risk management of change in interest rates, procedures for internal
control and audit, information system and stress testing.
When assessing exposure to risk from changes in interest rates in the banking book, the Bank takes
into account all positions of the banking book that are sensitive to changes in interest rates, which
may affect the profits and own assets of the Bank . The Bank determines the change in the
economic value of the banking book as a result of the exposure to the interest rate risk, by applying
the standardised interest rate shock.
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) Risk management (continued)
43
Market risk (continued)
2.3.1 Analysis of sensitivity to changes in market risk of assets and liabilities
A. Analysis of sensitivity to changes in market ris k on assets and liabilities
Gains/(losses) Assets Risk-weighted assets Capital adequacy rate In Denar thousand In Denar thousand In Denar thousand in %
2011 Balance before analysis of sensitivity/stress tests (31.12.2011) 2,894 570,658 3,000,967 19.02% Effects of different scenarios Risk of changes in exchange rates - Scenario 1: Denar depreciates by 30% compared to all other currencies 34,464 605,122 3,347,939 18.07% - Scenario 2: Denar appreciates by 30% compared to all other currencies
(34,464) 536,194 2,633,523 20.36%
Risk of changes in interest rates - Scenario 1: Change in interest rates for 600 basic points (20,885) 549,773 3,000,967 18.32% - Scenario 2: Change in interest rate gap arising from non-performing loans for 40% (15,757) 554,901 3,000,967 18.49% 2010 Balance before analysis of sensitivity/stress tests (31.12.2010) 1,571 572,640 1,835,573 31.20% Effects of different scenarios Risk of changes in exchange rates - Scenario 1: Denar depreciates by 30% compared to all other currencies 21,674 594,314 2,055,539 28.91% - Scenario 2: Denar appreciates by 30% compared to all other currencies (21,674) 550,966 1,552,315 35.49% Risk of changes in interest rates - Scenario 1: Change in interest rates for 600 basic points (91,175) 481,465 1,835,573 26.23% - Scenario 2: Change in interest rate gap arising from non-performing loans for 40% (29,830) 542,810 1,835,573 29.57%
Eurostandard Banka AD, Skopje
Notes to the financial statements (continued) Risk management (continued)
44
Market risk (continued) Analysis of sensitivity to changes in market risk o n assets and liabilities (continued) C. Analysis of value exposed to market risk for tra ding portfolio
2011 2010
In Denar thousand Balance at 31
December Average value Highest value (maximum)
Lowest value (minimum)
Balance at 31 December Average value
Highest value (maximum)
Lowest value (minimum)
Value exposed to risk at interest bearing instruments - - - - - - - - Value exposed to risk at instruments in foreign currency - - - - - - - - Value exposed to risk at equity instruments - - - - - - - - Variance (offsetting effect) - - - - - - - - Total - - - - - - - -
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) Risk management (continued)
45
Market risks (continued) 2.3.2. Analysis of risk from changes in interest rates of financial assets and liabilities (without assets for trading) A. Analysis of sensitivity from changes in interest rates Changes of economic values of the portfolio from ba nk activities at 31 December 2011
Position Currency Amount 1.1 Net position of currencies EUR (FIR + VIR + AIR) EUR (21,706) 1.2 Net position of currencies MKD (FIR + VIR + AIR) MKD 8,031 1.3 Net weighted position for MKD cl. EUR currency (FIR + VIR + AIR) MKD cl. EUR 9,478 1.4 Net weighted position for other currencies (FIR + VIR + AIR) other (3,595)
2 Total weighted value – changes in the economic value of the portfolio of banking activities 7,792
3 Assets 570,658 4 Total weighted value/assets (2/3*100) 1.37% Changes of economic values of the portfolio from ba nk activities at 31 December 2010
Position Currency Amount 1.1 Net position of currencies EUR (FIR + VIR + AIR) EUR (18,386) 1.2 Net position of currencies MKD (FIR + VIR + AIR) MKD (11,655) 1.3 Net weighted position for MKD cl. EUR currency (FIR + VIR + AIR) MKD cl. EUR (1,394) 1.4 Net weighted position for other currencies (FIR + VIR + AIR) other 506
2 Total weighted value – changes in the economic value of the portfolio of banking activities 30,929
3 Assets 572,640 4 Total weighted value/assets (2/3*100) 5.40%
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) Risk management (continued)
46
Market risks (continued) Analysis of the risk of change in interest rates on financial assets and liabilities (excluding tradin g assets) (continued) B. Analysis of compliance of interest rates
In Denar thousand Up to 1 month
From 1 to 3 months
From 3 to 12 month From 1 to 2 years From 2 to 5 years Over 5 years
Total interest bearing assets/ liabilities
31 December 2011 Financial assets Cash and cash equivalents 1,204,307 - - - - - 1,204,307 Financial assets at fair value through profits and losses at initial recognition - - - - - -
-
Loans to and advances to banks 209,039 - - - - - 209,039 Loans to and advances to customers 636,883 1,139 1,126,752 232,216 203,427 - 2,200,417
Investments in securities - - - - - -
-
Other not mentioned interest sensitive assets - - - - - -
- Total interest sensitive financial assets 2,050,229 1,139 1,126,752 232,216 203,427 - 3,613,763 Financial liabilities Financial liabilities at fair value through profits and losses at initial recognition - - - - - -
-
Deposits to banks 855 18,405 - - - - 19,260 Deposits to customers 2,609,749 44,372 170,585 92,691 336,013 6 3,253,416
Issued debt securities - - - - - -
- Borrowings - - 45,876 - 38,748 - 84,624 Subordinated liabilities and hybrid instruments - - - - 24,000 92,258 116,258
Other not mentioned interest sensitive liabilities - - - - - -
- Total interest sensitive financial liabilities 2,610,604 62,777 216,461 92,691 398,761 92,264 3,473,558 Net-balance position (560,375) (61,638) 910,291 139,525 (195,334) (92,264) 140,205
Off-balance interest sensitive assets positions - - - - - -
-
Off-balance interest sensitive liabilities positions - - - - - -
- Net off -balance position Total net position (560,375) (61,638) 910,291 139,525 (195,334) (92,264) 140,205
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) Risk management (continued)
47
Market risks (continued) Analysis of the risk of change in interest rates on financial assets and liabilities (excluding tradin g assets) (continued) B. Analysis of compliance of interest rates
In Denar thousand Up to 1 month
From 1 to 3 months
From 3 to 12 month From 1 to 2 years From 2 to 5 years Over 5 years
Total interest bearing assets/ liabilities
31 December 2010 Financial assets Cash and cash equivalents 578,806 12,301 - - - - 591,107 Financial assets at fair value through profits and losses at initial recognition - - - - - -
- Loans to and advances to banks 70,000 - - - - - 70,000 Loans to and advances to customers 1,405,540 693 16,938 5,792 2,072 - 1,431,035
Investments in securities - - - - - -
-
Other not mentioned interest sensitive assets - - - - - -
- Total 2,054,346 12,994 16,938 5,792 2,072 - 2,092,142
Financial liabilities Financial liabilities at fair value through profits and losses at initial recognition - - - - - -
-
Deposits to banks 6,000 5,000 - - - - 11,000
Deposits to customers 724,331 153,295 347,104 174,594 232,951 5 1,632,280
Issued debt securities - - - - - -
- Borrowings - - 1,155 - - - 1,155
Subordinated liabilities and hybrid instruments - - - - - 116,258 116,258
Other not mentioned interest sensitive liabilities - - - - - - -
Total interest sensitive financial liabilities 730,331 158,295 348,259 174,594 232,951 116,263 1,760,693 Net-balance position 1,324,015 (145,301) (331,321) (168,802) (230,879) (116,263) 331,449
Off-balance interest sensitive assets positions - - - - - -
-
Off-balance interest sensitive liabilities positions - - - - - -
-
Net off-balance position - - - - - -
- Total net position 1,324,015 (145,301) (331,321) (168,802) (230,879) (116,263) 331,449
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) Risk management (continued)
48
Market risk (continued) 2.3.3 Currency risk The currency risk is the risk of loss due to change in inter-currency courses and / or change of
value of Denar against the value of other foreign currencies.
The Bank’s estimation is that the net exposure is maintained to satisfactory level. Denar is bound
to Euro and monetary projection is that the exchange rate against the Euro will be stable.
The Bank has established Policy for managing currency risk, which was adopted by the Supervisory
Board and is regularly revised. The policy defines the elements of an effective process of managing
currency risk (organizational structure, information system etc.) and the identification and
measurement of currency risk, sources of currency risk, indicators of exposure, exposure limits,
mechanisms of control and monitoring currency risk.
The Bank has established procedures for managing currency risk, which are adopted by the Board
of Directors of the Bank and are regularly reviewed. The procedures define the managing currency
risk, including: organizational structure for managing currency risk, procedures for managing
currency risk, procedures for internal control and audit, information system and stress testing.
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) Risk management (continued)
49
Market risks (continued) Foreign exchange risk (continued)
in Denar thousand MKD EUR USD Other
currencies Total 31 December 2011 Monetary assets Cash and cash equivalents 963,692 245,578 44,719 29,740 1,283,729
Trading assets
-
-
-
- - Financial assets at fair value through profit and loss at its/ their initial recognition
-
-
-
- -
Derivative assets held for risk management
-
-
-
- -
Loans and advances to banks 100,012 62,050 47,600
- 209,662
Loans and advances to customers 1,652,578 607,190 32,950
- 2,292,718
Investments in securities 19,990
-
-
- 19,990
Investments in associates
-
-
-
- -
Current income tax receivables 1,758
-
-
- 1,758 Other receivables 5,584 1,295 127 7,006
Assets pledged as collateral
-
-
-
- -
Deferred tax assets
-
-
-
- - Total monetary assets 2,743,614 916,113 125,396 29,740 3,814,863 Monetary liabilities
Trading liabilities
-
-
-
- - Financial liabilities at fair value through profit and loss at its/ their initial recognition
-
-
-
- -
Derivative liabilities held for risk management
-
-
-
- -
Due from banks 5,010 855 14,270 - 20,135 Due from customers 2,633,031 629,424 104,992 25,536 3,392,983
Debt instruments issued
-
-
-
- -
Borrowings - 85,155
-
- 85,155
Subordinated liabilities 24,001 92,258
-
- 116,259
Current income tax liabilities
-
-
-
- -
Deferred tax liabilities
-
-
-
- - Other liabilities 1,386 5,084 84 94 6,648 Total monetary liabilities 2,663,428 812,776 119,346 25,630 3,621,180
Net foreign currency position 80,186 103,337 6,050 4,110 193,683
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) Risk management (continued)
50
Market risks (continued) Foreign exchange risk (continued)
in Denar thousand MKD EUR USD
Other currencies Total 31 December 2010
Monetary assets
Cash and cash equivalents
462,852
147,209
45,705
8,075 663,841
Assets for trading
-
-
-
- - Financial assets designated at fair value through profit and loss at initial recognition
-
-
-
- -
Derivative assets held for risk management
-
-
-
- -
Loans and advances to banks
51,607
9,088
9,309
- 70,004
Loans and advances to customers
960,319
546,238
-
- 1,506,557
Investments in securities
4,338
-
-
- 4,338
Investments in associates
-
-
-
- -
Current income tax receivables
2,979
-
-
- 2,979
Other receivables
5,604
763
70
1 6,438
Assets pledged as collateral
-
-
-
- -
Deferred tax assets
-
-
-
- -
Total monetary assets
1,487,699
703,298
55,084
8,076 2,254,157 Monetary liabilities
Liabilities for trading
-
-
-
- - Financial liabilities designated at fair value through profit and loss at initial recognition
-
-
-
- -
Derivative liabilities held for risk management
-
-
-
- -
Deposits to banks
11,013
859
-
- 11,872
Deposits to customers
1,142,818
508,826
83,007
7,132 1,741,783
Issued debt securities
-
-
-
- -
Borrowings
-
1,155
-
- 1,155
Subordinated liabilities
24,002
92,257
- 116,259
Current income tax liabilities
-
-
-
- -
Deferred tax liabilities
-
-
-
- -
Other liabilities
5,361
477
499
- 6,337
Total monetary liabilities
1,183,194
603,574
83,506
7,132 1,877,406
Net position
304,505
99,724
(28,422)
944 376,751
Eurostandard Banka AD, Skopje
Notes to the financial statements (continued)
51
3 Capital management
The Bank’s objectives regarding capital management are:
� To comply with the capital requirements by the National Bank of the Republic of Macedonia; � To safeguard the Bank’s ability to provide dividends to shareholders; � To maintain a strong capital base to support the development of its business. Capital adequacy and the use of regulatory capital are regularly monitored by the Bank’s
management, using techniques prescribed by national regulatory authority (National Bank of
Republic of Macedonia) and it is submitted to regulatory authority on a quarterly basis.
The National Bank of the Republic of Macedonia requires that each bank has to maintain capital
adequacy ratio at least 8%.
The Bank’s regulatory capital is divided in two groups:
� Tier 1 capital that includes: ordinary and non-cumulative priority shares and share premium, statutory reserves and retained earnings or loss, items are result of consolidation, less: intangible assets.
� Tier 2 capital that includes: cumulative preferred shares and share premium, hybrid capital instruments and subordinated instruments.
Investment in other banks or financial institution over 10% and investments in insurance and re-
insurance companies and pension fund management companies are deducted from Tier 1 and Tier
2 capital to arrive at the regulatory capital.
According to national regulations, the risk weighted assets (on-balance and off-balance) are
measured by means of a hierarchy of five risk weights classified according to nature of assets,
taking into consideration the collateral or guarantees.
Calculation of capital adequacy ratio includes regulatory capital and total of credit risk-weighted
assets and foreign exchange risk-weighted assets.
The table below summarizes the compositions of regulatory capital and the capital adequacy ratio
of the Bank for the years ended 31 December 2011 and 2010 regarding the regulatory requirements
of the National Bank of the Republic of Macedonia.
Eurostandard Banka AD, Skopje 52
Notes to the financial statements (continued)
Capital management (continued)
Ref. No. Description 31 December
2011 31 December
2010 I CREDIT RISK WEIGHTED ASSETS
1 On-balance sheet credit risk weighted assets 2,611,377 1,579,654 2 Off-balance sheet credit risk weighted assets 264,475 152,026 3 Credit risk weighted assets (1+2) 2,875,852 1,731,680 4 Capital necessary to cover credit risk 230,068 138,534 II FOREX RISK WEIGHTED ASSETS - 5 Aggregate foreign currency position 125,115 103,892 6 Net-position of gold - - 7 Capital necessary to cover currency risk 10,009 8,331 8 Foreign exchange risk weighted assets 125,115 103,892
III OTHER RISK WEIGHTED ASSETS - - 9 Capital necessary to cover the risk from price changes of goods - -
10 Capital necessary to cover market risks (10.1+10.2+10.3+10.4+10.5+10.6+10.7+10.8) - -
10.1 Capital necessary to cover the specific risk from investment in debt instruments - -
10.2 Capital necessary to cover the general risk from investment in debt instruments - -
10.3 Capital necessary to cover the specific risk from investment in equity securities - -
10.4 Capital necessary to cover the general risk from investment in equity securities - -
10.5 Capital necessary to cover the settlement risk - - 10.6 Capital necessary to cover counterpart risk - - 10.7 Capital necessary to cover overdraft of exposure limits - - 10.8 Capital necessary to cover market risks from options - -
11 Capital necessary to cover the other risks (9+10) - - 12 Other risk weighted assets - - IV RISK WEIGHTED ASSETS (3+8+12) 3,000,967 1,835,572 13 Capital necessary to cover the risks 240,077 146,846 V REGULATORY CAPITAL 570,658 572,640
VI ADEQUACY OF CAPITAL (V/IV) 0.1902 0.3120
Eurostandard Banka AD, Skopje 53
Notes to the financial statements (continued)
Capital management (continued) Adequacy capital (continued) Report on own funds (continued) Ref. No. Description 31 December
2011 31 December
2010
1 Paid-in and subscribed ordinary and non - cumulative preference shares 1,100,668 1,100,668
1.1 Nominal value 1,100,668 1,100,668 1.1.1 Nominal value of ordinary shares 1,100,668 1,100,668 1.1.2 Nominal value of non-cumulative preference shares - -
1.2 Premium - - 1.2.1 Premium of ordinary shares - - 1.2.2 Premium of non- cumulative preference shares - -
2 Reserves and retained earnings and loss (386,433 ) (388,004) 2.1 Reserve fund 25,073 24,837 2.2 Retained earnings - - 2.3 Accumulated loss from previous years (411,506) (412,841) 2.4 Current profit - - 2.5 Unrealized loss of securities available – for – sale - -
3 Positions arising from consolidation - - 3.1 Minority interest - - 3.2 Reserves from exchange rate differences - - 3.3 Other differences - -
4 Deduction 3,429 4,676 4.1 Loss at the year-end or current loss - - 4.2 Treasury shares - -
4.3 Intangible assets, including the revalorization surplus realized for these assets 3,429 4,676
4.4 Net-negative revaluation reserves - -
4.5 Differences between amounts of the required and recognized impairment/special reserve - -
4.6 Amount of unallocated impairment and special reserve as a result of accounting time lag - -
5 Ordinary shares, reserves and retained earnings and accumulated loss and deductions 710,806 707,988
6 Amount of other positions that may be included in t he core capital - -
I CORE CAPITAL 710,806 707,988
Eurostandard Banka AD, Skopje 54
Notes to the financial statements (continued)
Capital management (continued) Adequacy capital (continued) Report on own funds (continued)
Additional capital I
7 Paid-in and subscribed cumulative preference shares and premium on such share - -
7.1 Nominal value - - 7.2 Premium - -
8 Revaluation reserves - - 9 Hybrid capital instruments - -
10 Subordinated instruments 111,458 116,258
11 Amount of subordinated instruments that may be incl uded in the additional capital I 111,458 116,258
II ADDITIONAL CAPITAL I 111,458 116,258 Deduction from core capital and additional capital I - -
12
Capital investments in other banks and financial institutions with more than 10% share participation in such institutions (exc. institutions under No.15) 251,606 251,606
13 Investments in subordinated and hybrid capital investments and other instruments of institutions referred to in 12 - -
14 Aggregate amount of investments in capital, subordinated and hybrid instruments and other instruments exceeding 10% of (I+II) - -
15 Direct capital investments in insurance and reinsurance companies and pension fund management undertakings - -
16
Investments in financial instruments issued by the insurance and reinsurance companies and pension fund management undertakings - -
17 Amounts representing excess of limits of investments in non – financial institutions - -
18 Positions arising from consolidations (negative amounts) - - III DEDUCTIONS 251,606 251,606 IV Core capital after deductions 570,658 572,640 V Additional capital I after deduction - -
Additional capital II 19 Subordinated instruments of additional capital II - - 20 Additional capital I and II - - 21 Allowed amount of additional capital I and II - -
21.1 Additional capital I - - 21.2 Additional capital II - -
22 Excess core capital 330,581 425,794 22.1 Excess core capital (150%) 495,871 638,692 22.2 Excess core capital (250%) 826,452 1,064,486
VI Allowed amount of additional capital II - - Own funds
VII Core capital 570,658 572,640 VIII Additional capital I - - IX Additional capital II - - X OWN FUNDS 570,658 572,640
Eurostandard Banka AD, Skopje
Bele[ki kon finansiskite izve[tai (prodol`uva)
55
4 Segment reporting
Segment reporting is performed under Bank’s operating segments, as prescribed by the regulations
of the National Bank of the Republic of Macedonia.
Operating segment is a component of the Bank’s activities for which the following conditions are
met:
� perform activities as a result of which income is derived income and expenses incurred;
� Bank’s Supervisory Board reviews the operating results in the separate operating segment on a regular basis (at least semi-annually) in order to assess performance and to make decision on future business activities in this segment;
� Certain financial information related to segment is available.
Bank discloses information separately for each major operating segment. An operating segment is
considered significant if any of the following quantitative criteria are met:
� Segment income (includes income from transfers between segments) participate with 10% or more in total income of the bank;
� absolute amount of profit or loss of the segment represents 10% or more of the higher absolute amount between: a) the total profit of all operating segments of the Bank which showed profits, or b) the total loss of all operating segments of the Bank that showed loss;
� Funds segment participate with 10% or more in total assets of the Bank.
The Bank should show information about the concentration of its business activities towards
certain significant customers. Significant client is the one from which the bank achieves 10% or
more of total income or total expenditure of the Bank. As of 31 December 2011 and 2010 the
Bank has no significant customers.
The Bank should present an analysis of its business activities according to geographical areas where
they are executed, for the following geographic areas:
� Member States of the European Union;
� other European countries outside the European Union;
� countries outside Europe, members of the Organization for Economic Cooperation and Development (OECD);
� other countries.
Eurostandard Banka AD, Skopje Notes to the financial statememts (continued)
56
Segment reporting (continued)
A. Operating segments
Retail customer
s
Corporate
banking
Investment
banking
Other Unallocat
ed Total Banks Governme
nt Non-
residents 2011
Net interest income /(expense) (65,944) 165,929 - 18,729 (2,165) (1,891) - 114,658 Net income /(expenses) from fees and commission 4,293 39,880 - (3,156) 168 (5,911) - 35,274 Net income from trading - - - - - - - - Net income from other financial instruments carried at their fair value - - - - - - - - Other operating income - - - - - - 13,769 13,769 Income realized between segments - - - - - - - -
Total income per segment (61,651) 205,809
- 15,573 (1,997) (7,802) 13,769 163,701
Allowance for impairment of financial assets, net (6,062) 34,454 - - - - (2,393) 25,999 Impairment loss of non-financial assets, net - - - - - - (706) (706) Amortisation - - - - - - (16,977) (16,977)
Restructuring costs - - - - - - -
- Costs for investment in property and equipment - - - - - - -
-
Other expenses - - - - - - (167,902) (167,902)
Total expenses per segment (6,062) 34,454 - - - - (187,978) (159,586)
Financial performance per segment (67,713) 240,263
- 15,573 (1,997) (7,802) (174,209) 4,115
Income tax (1,221) Profit/(loss) for the financial year 2,894
Total assets per segment 262,689 2,027,606 - 1,417,976 - 2,423 - 3,710,694 Unallocated assets per segment - - - - - - 628,621 628,621
Total assets 262,689 2,027,606
- 1,417,976
- 2,423 628,621 4,339,315
Total liabilities per segment 2,187,656 1,165,305 - 102,997 30,057 129,523 - 3,615,538 Unallocated liabilities per segment - - - - - - 6,648 6,648
Total liabilities 2,187,656 1,165,305
- 102,997 30,057 129,523 6,648 3,622,186
Eurostandard Banka AD, Skopje Notes to the financial statements (continued)
57
Segment reporting (continued) A. Operating segments (continued)
Retail customer
s
Corporate
banking
Investment
banking
Other Unalloca
ted Total Banks Governme
nt Non-
residents 2010
Net interest income /(expense) (5,897) 101,444 - 17,743 (1,578) (2,004) - 109,708 Net income /(expenses) from fees and commission 2,607 28,805 - (2,098) 1 (4,239) - 25,076 Net income from trading - - - - - - - - Net income from other financial instruments carried at their fair value - - - - - - - - Other operating income - - - - - - 12,016 12,016 Income realized between segments - - - - - - - -
Total income per segment (3,290) 130,249 - 15,645 (1,577) (6,243) 12,016 146,800
Allowance for impairment of financial assets, net (7,394) 24,796 - - - - 7 17,409 Impairment loss of non-financial assets, net - - - - - - (504) (504) Amortisation - - - - - - (17,938) (17,938) Restructuring costs - - - - - - - - Costs for investment in property and equipment - - - - - - - - Other expenses - - - - - - (143,613) (143,613)
Total expenses per segment (7,394) 24,796 - - - - (162,048) (144,646)
Financial performance per segment (10,684) 155,045 - 15,645 (1,577) (6,243) (150,032) 2,154 Income tax (583) Profit/(loss) for the financial year 1,571
Total assets per segment 197,522 1,306,674 - 662,553 - 2,361 - 2,169,110 Unallocated assets per segment - - - - - - 423,368 423,368
Total assets 197,522 1,306,674 - 662,553 - 2,361 423,368 2,592,478
Total liabilities per segment 780,056 862,412 - 11,872 90,413 127,154 - 1,871,907 Unallocated liabilities per segment - - - - - - 6,336 6,336
Total liabilities 780,056 862,412 - 11,872 90,413 127,154 6,336 1,878,243
Eurostandard Banka AD, Skopje Notes to the financial statements (continued)
58
Segment reporting (continued) B. Concentration of total revenues and expenses by significant customers
in Denar thousand Operating segments All
other insignificant operating segments
Non-allocated
Total significant customers 2011
(The Bank separately to show the total revenues and expenses derived from a significant customer) - - - - - - - - - - - Customer 1 - - - - - - - - - - - Revenues - - - - - - - - - - - (expenses) - - - - - - - - - - - Customer 2 - - - - - - - - - - - Revenues - - - - - - - - - - - (expenses) - - - - - - - - - - - Customer 3 - - - - - - - - - - - Revenues - - - - - - - - - - - (expenses) - - - - - - - - - - - Total per segment - - - - - - - - - - - 2010 (The Bank separately to show the total revenues and expenses derived from a significant customer) - - - - - - - - - - - Customer 1 - - - - - - - - - - - Revenues - - - - - - - - - - - (expenses) - - - - - - - - - - - Customer 2 - - - - - - - - - - - Revenues - - - - - - - - - - - (expenses) - - - - - - - - - - - Customer 3 - - - - - - - - - - - Revenues - - - - - - - - - - - (expenses) - - - - - - - - - - - Total per segment - - - - - - - - - - -
Eurostandard Banka AD, Skopje Notes to the financial statements (continued)
59
Segment reporting (continued) C. Geographic segments
In Denar thousand
The Republic of Macedonia
EU member
s countrie
s Europe (other)
OECD members countries
Other Other
insignificant geographic
segments Non-
allocated Total
2011 Total revenues 163,383 318 - - - - - - 163,701 Total assets 4,085,857 203,438 50,020 - - - - - 4,339,315 2010 Total revenues 146,608 192 - - - - - - 146,800 Total assets 2,492,176 74,545 25,757 - - - - - 2,592,478
Eurostandard Banka AD, Skopje Notes to the financial statements (continued)
60
5 Fair value of financial assets and financial liabilities
Fair value represents the amount at which an asset could be replaced or a liability settled on an
arm’s length basis. Fair values have been based on management assumptions according to the
profile of the asset and liability base.
Cash and cash equivalents The carrying value of cash and cash equivalents approximates their fair value, considering that they
include cash, bank accounts and bank deposits with short - terms maturity.
Loans and advances to banks and customers Loans and advances are carried at amortized cost less the provisions for impairment. Loans and
advances to customers mostly are with variable interest rate and their estimated fair value is
determined by discounting the estimated future cash flows using the effective interest rate.
Other receivables The fair value of other receivables approximates their carrying value, considering their short
maturity period.
Deposits and borrowings The estimated fair value of deposits with no stated maturity is the amount repayable on demand.
The fair value of the term deposits at variable interest rates approximates their carrying values as of
the Balance sheet. The fair value approximates their carrying value.
Other liabilities The fair value of other liabilities approximates their carrying value, considering their short maturity
period.
Eurostandard Banka AD, Skopje Notes to the financial statements (continued)
61
Fair value of financial assets and liabilities (con tinued) A. Fair value of financial assets and liabilities 2011 2010
In Denar thousand Carrying value Fair value Carrying value Fair value Financial assets
Cash and cash equivalents 1,283,729
1,283,729 663,841
663,841
Trading assets -
- - - Financial assets at fair value through profit and loss at its/ their initial recognition -
- -
-
Derivative assets held for risk management -
- -
-
Loans and advances to banks 209,662
209,662 70,004
70,004 Loans and advances to other customers 2,292,718
2,292,718 1,506,557
1,506,557
Investment in securities 19,990
19,990 4,338
4,338 Investment in associates - - - -
Current income tax receivables 1,758
1,758 2,979
2,979
Other receivables 7,006
7,006 6,438
6,438 Assets pledged as collateral - - - - Deferred tax assets - - - -
Financial liabilities Trading liabilities - - - - Financial liabilities at fair value through profit and loss at its/ their initial recognition - - - - Derivative liabilities held for risk management - - - - Due from banks 20,135 20,135 11,872 11,872 Due from other customers 3,392,983 3,392,983 1,741,783 1,741,783 Issued debt securities - - - - Borrowings 85,155 85,155 1,155 1,155 Subordinated liabilities 116,259 116,259 116,259 116,259 Current income tax liabilities - - - - Deferred tax liabilities - - - - Other liabilities 6,648 6,648 6,337 6,337
Eurostandard Banka AD, Skopje Notes to the financial statements (continued)
62
Fair value of financial assets and liabilities (con tinued) B. Levels of fair value of financial assets and lia bilities at fair value B1. Level of fair value of financial assets and lia bilities at fair value
In Denar thousand Note Level 1 Level 2 Level 3 Total 2011
Financial assets at fair value Trading assets 19 - - - - Financial assets at fair value through profit and loss at its/ their initial recognition 20 - - - - Derivative assets held for risk management 21 - - - - Investment in securities available-for-sale 23.1 - 19,990 - 19,990 Total - 19,990 - 19,990 Financial liabilities at fair value Trading assets 32 - - - - Financial liabilities at fair value through profit and loss at its/ their initial recognition 33 - - - - Derivative liabilities held for risk management 21 - - - - Total - - - -
Eurostandard Banka AD, Skopje
Notes to the financial statements (continued)
63
Fair value of financial assets and liabilities (con tinued) B. Levels of fair value of financial assets and lia bilities at fair value (continued) B1. Level of fair value of financial assets and lia bilities at fair value (continued)
In Denar thousand Note Level 1 Level 2 Level 3 Total 2010 Financial assets at fair value Trading assets 19 - - - - Financial assets at fair value through profit and loss at its/ their initial recognition
20 - - - -
Derivative assets held for risk management 21 - - - - Investment in securities available-for-sale
23.1 - 4,338 - 4,338
Total - 4,338 - 4,338 Financial liabilities at fair value Trading assets 32 - - - - Financial liabilities at fair value through profit and loss at its/ their initial recognition
33 - - - -
Derivative liabilities held for risk management
21 - - - -
Total - - - -
Eurostandard Banka AD, Skopje
Notes to the financial statements (continued)
64
Fair value of financial assets and liabilities (con tinued) B. Levels of fair value of financial assets and lia bilities at fair value (continued) B2. Transfers between Level 1 and 2 of fair value
in Denar thousand
2011 2010 Transfers from
Level 1 to Level 2 Transfers from
Level 2 to Level 1 Transfers from
Level 1 to Level 2 Transfers from
Level 2 to Level 1
Financial assets at fair value Trading assets - - - -
Financial assets at fair value through profit and loss at its/ their initial recognition - - - - Derivative assets held for risk management - - - - Investment in securities available-for-sale - - - - Total - - - - Financial liabilities at fair value Trading assets - - - - Financial liabilities at fair value through profit and loss at its/ their initial recognition - - - - Derivative liabilities held for risk management - - - - Total - - - -
Eurostandard Banka AD, Skopje
Notes to the financial statements (continued)
65
Fair value of financial assets and liabilities (con tinued) B. Levels of fair value of financial assets and lia bilities at fair value (continued) B3.Reconciliation of movements during the year at f air values measured in Level 3
In Denar thousand
Trading
assets
Financial assets at fair
value through profit and loss
at its/ their initial
recognition.
Investment in securities
available-for-sale
Total assets
Trading assets
Financial assets at fair
value through profit and loss
at its/ their initial
recognition. Total
liabilities At 1 January 2010
- - - - - - - Profit/(loss) recognized in: - Income statement - - - - - - - - Other profit/(loss) in the period not presented in the Income Statement - - - - - - - Purchase of financial instruments in the period - - - - - - - Sold financial instruments in the period - - - - - - - Issued financial instruments in the period - - - - - - - Paid financial instruments in the period - - - - - - - Reclassified financial instruments in the period /(from) Level 3 - - - - - - - Reclassified in loans and advances - - - - - - - At 31 December 2010
- - - - - - - Total as of 31 December 2010 - - - - - - -
Eurostandard Banka AD, Skopje
Notes to the financial statements (continued)
66
Fair value of financial assets and liabilities (con tinued) B. Levels of fair value of financial assets and lia bilities at fair value (continued) B3.Reconciliation of movements during the year at f air values measured in Level 3 (continued)
In Denar thousand Trading assets
Financial assets at fair value
through profit and loss at its/ their initial
recognition.
Investment in securities
available-for-sale
Total assets
Trading assets
Financial assets at fair value
through profit and loss at its/ their initial
recognition. Total
liabilities At 1 January 2011
- - - - - - - Profit/(loss) recognized in: - Income statement - - - - - - - - Other profit/(loss) in the period not presented in the Income Statement - - - - - - - Purchase of financial instruments in the period - - - - - - - Sold financial instruments in the period - - - - - - - Issued financial instruments in the period - - - - - - - Paid financial instruments in the period - - - - - - - Reclassified financial instruments in the period /(from) Level 3 - - - - - - - Reclassified in loans and advances - - - - - - - At 31 December 2011 - - - - - - - Total as of 31 December 2011 - - - - - - -
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand unless otherwise stated)
67
6 Interest income and expense A. Structure of interest income and expense accordi ng to the type of financial instruments in Denar thousand 2011 2010 Interest income Cash and cash equivalents 18,118 17,879 Financial assets at fair value through profit and loss at its/ their initial recognition - - Derivative assets held for risk management - - Loans and advances to banks 2,285 498 Loans and advances to other customers 191,845 121,222 Investment in securities - - Other receivables - - (Allowance for impairment of interest income, net) 39,974 36,677 Collected interest previously written off - - Total interest income 252,222 176,276 Interest expense Financial liabilities at fair value through profit and loss at its/ their initial recognition - - Derivative liabilities held for risk management - - Due to banks (371) (583) Due to customers (135,051) (65,514) Issued debt securities - - Loan liabilities (1,560) (250) Subordinated liabilities (582) (221) Other liabilities - - Total interest expenses (137,564) (66,568) Net interest income/ (expense) 114,658 109,708
B. Sector analysis of interest income and expenses according to sector in Denar thousand 2011 2010
Interest income Non-financial companies 166,354 100,801 Government - - Non-profit institutions that serve households 289 - Banks 20,403 18,377 Other financial institutions (non-banking) 885 2,021 Households 24,317 18,400 Non-residents - - (Allowance for impairment of interest income, net) 39,974 36,677 Collected interest previously written off - -
Total interest income 252,222 176,276
Interest expense Non-financial companies (12,766) (10,497) Government (2,165) (1,578) Non-profit institutions that serve households (4,664) (4,053) Banks (1,673) (634) Other financial companies (non-banking) (22,662) (19,168) Households (91,743) (28,634) Non-residents (1,891) (2,004) Total income expense (137,564) (66,568) Net interest income/(expense) 114,658 109,708
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand unless otherwise stated)
68
7 Fee and commission income and expense A. Structure of fee and commission income and expen se according to the type of financial instruments
in Denar thousand 2011 2010 Fee and commission income Loans 19,106 10,595 Payment’s operations - in the country 11,800 8,214 - abroad 9,466 9,206 Letter of credit and guarantees 7,743 6,987 Brokerage operations - Asset management - Fiduciary activities 205 - Issuing securities - Other 389 507 Total fee and commission income 48,709 35,509 Fee and commission expense Loans - - Payment operations - - in the country (6,758) (5,162) - abroad (6,677) (5,271) Letter of credit and guarantees - - Brokerage operations - Asset management - - Fiduciary activities - - Issuing securities - - Other - Total fee and commission expense (13,435) (10,433) Net fee and commission income/(expense) 35,274 25,076
B. Sector analysis of fees and commission income an d revenue per sector in Denar thousand 2011 2010 Fee and commission income Non-financial companies 40,685 29,210 Government 168 1 Non-profit institutions that serve households 392 373 Banks 372 296 Other financial companies (non-banking) 2,033 1,990 Households 4,293 2,607 Non-residents 766 1,032 Total fee and commission income 48,709 35,509 Fee and commission expense - Non-financial companies - - Government - - Non-profit institutions that serve households - - Banks (3,528) (2,394) Other financial institutions (non-banking) (3,230) (2,768) Households - - Non-residents (6,677) (5,271) Total fee and commission expense (13,435) (10,433) Net fee and commission income/(expense) 35,274 25,076
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand unless otherwise stated)
69
8 Net income from trading
in Denar thousand 2011 2010 Assets for trading
Profit/(loss) from fair value changes of debt securities, net - realised - - - unrealised - -
Profit/(loss) from fair value changes of equity instruments, net - realised - - - unrealised - - Income from dividends from trading assets - - Income from interest of trading assets - - Liabilities for trading
Profit/(loss) from fair value changes of debt securities, net - realised - - - unrealised - -
Profit/(loss) from fair value changes of trading deposits, net - realised - - - unrealised - -
Profit/(loss) from fair value changes of remaining financial liabilities for trading, net - realised - - - unrealised - - Interest expense of financial liabilities held for trade - -
Profit/(loss) from fair value change of derivatives held for trading, net - realised - - - unrealised - - Net income from trading - -
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand unless otherwise stated)
70
9 Net income from other financial instruments carried at fair value in Denar thousand 2011 2010 Financial assets carried at fair value through prof it and loss at their initial recognition Profit/(loss) from fair value changes of debt securities, net - realised - - - unrealised - -
Profit/(loss) from fair value changes of equity instruments, net - realised - - - unrealised - - Income from dividends from financial assets at fair value through profit and loss - - Profit/(loss) from the changes in fair value of loans and receivables at fair value through profit and loss, net - realised - - - unrealised - -
Financial liabilities carried at fair value through profit and loss at their initial recognition
Profit/(loss) from fair value changes of debt securities, net - realised - - - unrealised - -
Profit/(loss) from the changes in fair value of deposits at fair value through profit and loss, net - realised - - - unrealised - - Profit/(loss) from the changes in fair value of borrowings at fair value through profit and loss, net - realised - - - unrealised - - Profit/(loss) from the changes in fair value of other financial liabilities at fair value through profit and loss, net - realised - - - unrealised - - Profit /(loss) from fair value changes of derivatives held for risk management at fair value through profit and loss, net - realised - - - unrealised - -
Net income from other financial instruments carried at fair value - -
10 Net foreign exchange gains/ (losses) in Denar thousand 2011 2010 Realized foreign exchange gains / (losses), net 8,495 5,820 Unrealized foreign exchange gains / (losses), net - foreign exchange differences of allowance for impairment of financial assets, net 40 -
- foreign exchange differences of special reserves of off-balance exposure, net 10 -
- other foreign exchange differences, net 510 1,614 Net foreign exchange gains/(losses) 9,055 7,434
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand unless otherwise stated)
71
11 Other operating income in Denar thousand 2011 2010 Profit from the sale of assets available – for – sale - - Dividends from equity instruments available – for – sale 717 494 Net income from investment in subsidiaries and associates - - Capital gain from the sale of: - - property and equipment - - - intangible assets - - - foreclosed assets - - - non – current assets held for sale and group for disposal - - Income from rent 2,289 813 Income from litigations - - Collected receivables previously written off - - Release of special reserve and provisions for: - - off – balance sheet credit exposure - 2,187 - contingent commitments based on litigations - - - pensions and other employee benefits - - - restructuring - - - adverse contracts - - - other provisions - - Income from over accrued expenses from previous years 1,355 328 Income based on court litigations, taxes and other administrative taxes 130 477 Other 223 283 Total other operating income 4,714 4,582
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand unless otherwise stated)
72
12 Impairment loss of financial assets, net
in Denar thousand
Loans and advances to
banks
Loans and advances to
other customers
Investment in financial assets
available-for-sale
Investment in financial assets held to maturity
Cash and cash equivalents
Fees and commission receivables
Other receivables Total
2011 Allowance for impairment, on individual basis
Additional allowance for impairment -
190,156 1,228 4,182 195,566
(Release of allowance for impairment) -
(219,016) (1,208) (1,341) (221,565)
-
(28,860)
-
-
- 20 2,841 (25,999) Allowance for impairment, on group basis - - - - Additional allowance for impairment - - - - - - - - (Release of allowance for impairment) - - - - - - - - - - - - - - - - Total allowance for impairment of financial assets, net -
(28,860)
-
-
- 20 2,841 (25,999)
2010 Allowance for impairment, on individual basis Additional allowance for impairment - 191,335 - - - 1,476 718 193,529 (Release of allowance for impairment) - (210,184) - - - (266) (488) (210,938) - (18,849) - - - 1,210 230 (17,409) Allowance for impairment, on group basis Additional allowance for impairment - - - - - - - - (Release of allowance for impairment) - - - - - - - - - - - - - - - - Total allowance for impairment of financial assets, net - (18,849) - - - 1,210 230 (17,409)
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand unless otherwise stated)
73
13 Impairment loss of non-financial assets, net
in Denar thousand Property and
equipment Intangible
assets Foreclosed assets
Non - current assets held for sale and group
for disposal Other non-
financial assets Non controlled
interest Total 2011
Additional impairment loss - - 706 - - - 706 (Release of impairment loss) - - - - - - - Total impairment loss of non -financial assets, net - - 706 - - - 706 2010 Additional impairment loss - - 504 - - - 504 (Release of impairment loss) - - - - - - - Total impairment loss of non -financial assets, net - - 504 - - - 504
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand unless otherwise stated)
74
14 Employee benefits in Denar thousand 2011 2010 Short - term employee benefits - Salaries 43,931 42,403 - Mandatory contribution for social and health insurance 15,155 14,527 - Short - term paid leave of absence 158 142 - Expenses for temporary employment 1,407 819 - Interest in profit and rewards - - - Non-monetary benefits - - 60,651 57,891 Benefits after termination of employment - Contribution to pension plans for defined contributions - - - Benefits at retirement - - - Increasing the obligation for pension plans and defined benefits - - - Increasing the obligation for other long-term benefits - - - Other benefits after the termination of employment - - - - Benefits due to termination of employment Employee payments based on shares, settled with equity instruments - - Employee share-based payments, settled in cash - - Other - 140 - 140 Total employee expenses 60,651 58,031
15 Amortisation and depreciation in Denar thousand 2011 2010 Amortisation of intangible assets Internally developed software - - Software purchased from external suppliers 3,794 4,094 Other internally developed intangible assets - - Other non-material assets 1,247 1,246 Investment in intangible assets under lease - - 5,041 5,340 Depreciation of property and equipment Construction objects - - Transport vehicles 2,757 2,218 Furniture and office equipment 1,877 1,655 Other equipment 7,302 8,725 Other items of property and equipment - - Investment in property and equipment under lease - - 11,936 12,598 Total amortisation and depreciation 16,977 17,938
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand unless otherwise stated)
75
16 Other operating expenses in Denar thousand 2011 2010
Loss due to the sale of assets available – for – sale - -
Expenses for software licensing - -
Insurance premiums on deposits 9,045 3,850 Insurance premiums on property and employees 1,340 1,538 Materials and services 47,709 44,124 Administrative and marketing expenses 15,048 7,987 Other taxes and contributions 237 32 Expenses for rent 28,989 27,633 Expenses for litigation 4,380 - Special reserve for off-balance exposure, net 159 -
Provisions for pensions and other employee benefits, net - -
Provisions for contingent commitments based on litigations, net - -
Other provisions, net - -
Loss from the sale of: - -
- property and equipment - -
- non-material assets - -
- foreclosed assets - -
- non - current assets held for sale and group for disposal - -
Other 344 418 Total other operating expenses 107,251 85,582
17 Income tax A. Expenses/income for current and deferred income tax in Denar thousand 2011 2010 Current income tax Expenses / (income) for current income tax for the year 1,221 583 Adjustments for previous years - - Benefits for previously unrecognized tax losses, tax balance or temporary differences from previous years - - Changes in accounting policies and errors - - Other - - 1,221 583 Deferred income tax Deferred income tax that arises from temporary differences for the year - - Recognition of previously unrecognized tax losses - - Changes in the tax rate - - Introducing new taxes - - Benefits from previously unrecognized tax losses, balance or temporary differences from previous years - - Other - - - - Total income tax expenses / (return) 1,221 583 Current income tax
Recognized in the Income statement 1,221 583 Recognized in equity and reserves - -
1,221 583 Deferred income tax
Recognized in the Income statement - - Recognized in equity and reserves - -
- - Total income tax expenses / (return) 1,221 583
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand unless otherwise stated)
76
Income tax (continued) B. Reconciliation of the effective average tax rate with the variable tax rate
in % in Denar
thousand in % in Denar
thousand 2011 2010 Profit/(loss) before taxation - 4,115 - 2,154 Income tax in accordance with the applicable tax rate - - - - Effect from various tax rates in other countries - - - - Adjustment for previous years and changes in the tax rate - - - - Taxed income abroad - - - - Expenses unrecognized for tax purposes - 1,221 - 583 Tax exempted income - - - - Tax exemptions unrecognized in the Income statement - - - - Recognition of previously unrecognized tax losses - - - - Benefits from previously unrecognized tax losses, tax balance or temporary differences from previous years - - - - Changes of deferred tax - - - - Other - - - - Total expenses/(return) of income tax - 1,221 583 Average effective tax rate 29.7% 27.07%
C. Income tax from other profit/ (loss) in the peri od not presented in the Income Statement
2011 2010
in Denar thousand Before
taxation (expenses)/income tax return
Less income tax
Before taxation
Revaluation reserve for assets available-for-sale - - - - Reserve for instruments for risk protection of cash flows - - - -
Reserve for instruments for risk protection from net- investments in foreign operations - - - - Reserve of foreign exchange differences from investment in foreign operations - - - - Participation in other gains/ (losses) in associates not presented in the Income Statement - - - - Other gains.(losses) not presented in the Income Statement - - - -
Total other gains/ (losses) in the period not presented in the Income Statement - - - -
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand unless otherwise stated)
77
18 Cash and cash equivalents in Denar thousand 2011 2010
Cash in hand 75,415 71,291 Current account and deposits with the NBRM, except for obligatory foreign currency reserves 239,693 77,477 Current accounts and deposits with foreign banks 144,844 100,303 Current accounts and deposits with domestic banks 9,552 2,718 Treasury bills traded on the secondary market 677,891 338,963 Government bills traded on the secondary market - - Term deposits with a maturity period less than, or equal to three months - 6,947 Other short - term highly liquid assets 215 182 Interest receivables 1,306 493 (allowance for impairment loss) - - Included in cash and cash equivalents for the purpo se of the Statement of cash flows 1,148,916 598,374 Obligatory foreign currency reserves 76,098 53,166 Restricted deposits 58,715 12,301 (allowance for impairment loss) - - Total 1,283,729 663,841
in Denar thousand 2011 2010 Movement of allowance for impairment As of 01 January - - Allowance for impairment for the year - additional allowance for impairment - - - (release from allowance for impairment) - - Effect of exchange rate difference - - (Written-off receivables) - - As of 31 December - -
Based on the Decision on obligatory reserve brought by the National Bank of the Republic of
Macedonia, Bank’s reserve requirement ratio equals to 10.0% for liabilities in domestic currency,
20.0% for liabilities in domestic currency with foreign exchange clause and 13.0% for liabilities in
foreign currency. The basis for the reserve requirement is determined as an average of the Bank’s
liabilities for each calendar day of the preceding month. The period for obligatory reserve is from
11th in the current month until 10th in the following month.
The Bank fulfils the obligatory reserve in Denar on average basis. The Bank is required to keep an
obligatory reserve in foreign currency in separate accounts with the National Bank of the Republic
of Macedonia denominated in Euro at a fixed level.
The interest rate for the obligatory reserve in Denar, as of 2011 and 2010 is 2% p.a. During 2011
and 2010, the interest rate for the obligatory reserve in foreign currency is 0.1% p.a.
Treasury bills issued by NBRM, as of 31 December 2011 and 2010 are with a maturity of 28 days
and interest rates of 4.00% p.a.
Restricted deposits in amount of Denar 58,715 thousand (2010: Denar 12,301 thousand) represent
deposits as collateral for issued letters of guarantees.
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand unless otherwise stated)
78
19 Trading assets A. Structure of trading assets by type of financial instrument in Denar thousand 2011 2010
Trading Securities Debt securities for trading - Treasury bills for trading - -
- Government bills for trading - - - Other instruments on the money market - -
- Bonds issued by the Government - -
- Corporative bonds - -
- Other debt instruments - - - - Quoted - -
Unquoted - -
Owned instruments for trading - Owned instruments issued by banks - - - Other owned instruments - - - - Quoted - - Unquoted - - Derivatives for trading - Contracts dependent on the change of interest rate - - - Contracts dependent on the change of exchange rate - - - Contracts dependent on the change of price of securities - -
- Other contracts that meet the criteria of IAS 39 - - - -
Total assets for trading - -
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand unless otherwise stated)
79
Trading assets (continued) B. Reclassified trading assets B1. Balance of reclassified trading assets
in Denar thousand
2011 2010
Reclassified amount (at date of reclassification)
Accounting value at 31.12.2011
Fair value at 31.12.2011
Accounting value at 31.12.2010
Fair value at 31.12.2010
Trading assets reclassified in 2011 in:
- financial assets available-for-sale - - - - -
- loans and advances to banks - - - - -
- loans and advances to customers - - - - -
Trading assets reclassified in 2010 in:
- financial assets available-for-sale - - - - -
- loans and advances to banks - - - - -
- loans and advances to customers - - - - -
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand unless otherwise stated)
80
Trading assets (continued) B. Reclassified trading assets (continued) B2. Income and losses from reclassification of trad ing assets Reclassified during 2011 Reclassified during 2010
in Denar thousand Income statement
2011 Other income/ (losses) 2011
Income statement 2011
Other income/ (losses) 2011
Income statement 2010
Other income/ (losses) 2010
Period before reclassification - - - - - -
Trading assets reclassified in financial assets available-for-sale - - - - - - - net - income from trading - - - - - - Trading assets reclassified in loans and advances to banks - - - - - - - net - income from trading - - - - - - Trading assets reclassified in loans and advances to customers - - - - - - Period after reclassification - - - - - - Trading assets reclassified in financial assets available-for-sale - - - - - - - interest income - - - - - - - impairment provision of financial assets, net - - - - - - - changes in fair value, net - - - - - - Trading assets reclassified in loans and advances to banks - - - - - - - interest income - - - - - - - impairment provision of financial assets, net - - - - - - Trading assets reclassified in loans and advances to customers - - - - - - - interest income - - - - - - - impairment provision of financial assets, net - - - - - -
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand unless otherwise stated)
81
Trading assets (continued) B. Reclassified trading assets (continued) B3. Income or losses recognised in income statement if the assets we not reclassified Reclassified during 2011 Reclassified during 2010
in Denar thousand Income statement 2011 Income statement 2011 Income statement 2010
Trading assets reclassified in financial assets available-for-sale - - - - net - income from trading - - -
Trading assets reclassified in loans and advances to banks - - - - net - income from trading - - -
Trading assets reclassified in loans and advances to customers - - - - net - income from trading - - -
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand unless otherwise stated)
82
20 Financial assets at fair value through profit and loss at initial recognition in Denar thousand 2011 2010
Debt securities - Treasury bills - -
- Government bills - -
- Other instruments on the money market - -
- Bonds issued by the government - -
- Corporative bonds - -
- Other debt instruments - -
- -
Quoted - -
Unquoted - -
Equity instruments
- Equity instruments issued by banks - -
- Other equity instruments - -
- -
Quoted - -
Unquoted - -
Loans and advances to banks - -
Loans and advances to other customers - - Total financial assets at fair value through profit and loss, at initial recognition - -
Eurostandard Banka AD, Skopje
Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand, unles s otherwise stated)
83
21 Derivative assets and liabilities held for risk management in Denar thousand
2011 2010
Derivative assets
(Derivative liabilities)
Derivative assets
(Derivative liabilities)
A. Derivatives for risk protection /Derivatives hel d for risk management A.1 According to type of variability Derivatives held for risk management Contracts dependent on the change of interest rate - - - - Contracts dependent on the change of exchange rate - - - - Contracts dependent on the change of price of securities - - - - Other contracts that meet the criteria of IAS 39 - - - - Total derivatives held for risk management - - - - A.2 According to risk protection Fair value risk protection - - - - Cash flow risk protection - - - - Risk protection of net investment in foreign operations - - - - Total derivatives held for risk management - - - - B. Embedded derivatives Contracts dependent on the change of interest rate - - - - Contracts dependent on the change of exchange rate - - - - Contracts dependent on the change of price of securities - - - - Other contracts that meet the criteria of IAS 39 - - - - Total embedded derivatives - - - - Total derivatives held for risk management - - - -
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand unless otherwise stated)
84
22 Loans and advances
22.1 Loans and advances to banks in Denar thousand 2011 2010 Short – term Long – term Short – term Long – term Loans to banks - domestic banks 100,000 - 70,000 - - foreign banks - - - Term deposits, maturity over three months - - domestic banks 61,505 - - - - foreign banks 47,534 - - - Repo - domestic banks - - - - foreign banks - - - Other receivables - domestic banks - - - - foreign banks - - - Interest receivables 623 - 4 -
Current maturity
- - - - Total loans and advances to banks before allowance for impairment 209,662 - 70,004 -
(Allowance for impairment)
- - - - Total loans and receivable to banks less allowance for impairment
209,662 - 70,004 -
in Denar thousand 2011 2010 Movements of allowance for impairment As of 01 January - - Allowance for impairment for the year - - - additional allowance for impairment - - - (release of allowance for impairment) - - Effect of exchange rate differences - - (Written – off receivables) - - As of 31 December - -
Eurostandard Banka AD, Skopje
Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand, unles s otherwise stated)
85
Loans and advances (continued) 22.2 Loans and advances to customers A. Structure of loans and advances to customers by type of debtor
in Denar thousand 2011 2010 Short – term Long – term Short – term Long – term Non-financial companies
- receivables per principal
1,374,345
837,707 982,243 542,233
- interest receivables
16,182 - 9,609 - Government - receivables per principal - - - - - interest receivables - - - - Non-profit institutions that serve households
- receivables per principal -
1,492 - - - interest receivables - - - - Financial companies, apart from banks - receivables per principal - - 18,500 - - interest receivables - - 500 - Households - receivables per principal
housing loans
110
24,531 84 16,417
consumer loans
35,574
161,116 36,132 124,004
car loans
-
- - -
mortgages
-
- - -
credit cards
7,014
48,691 7,812 33,312
other loans
18,581
6,656 12,862 1,061
interest receivables
1,509 - 1,124 - Non – residents, apart from banks receivables per principal - 2,423 - 2,361 interest receivables - - - -
Current maturity
257,698
(257,698) 209,747 (209,747) Total loans and advances to other customers before allowance for impairment
1,711,013
824,918 1,278,613 509,641
(Allowance for impairment)
(228,346)
(14,867) (274,393) (7,304) Total loans and advances to other customers less allowance for impairment
1,482,667
810,051 1,004,220 502,337
As of 31 December 2011 the non-performing loans included in loans and advances to customers
are in the amount of Denar 303,486 thousand (2010: Denar 337,963 thousand). Unrecognised
interest related to these loans is in the amount of Denar 125,306 thousand (2010: Denar 111,730
thousand).
Eurostandard Banka AD, Skopje
Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand, unles s otherwise stated)
86
Loans and advances (continued)
Loans and advances to customers (continued) A. Structure of loans and advances to customers by type of debtor in Denar thousand 2011 2010 Movements of allowance for impairment, individual b asis As of 01 January 281,697 418,558 Allowance for impairment for the year
- additional allowance for impairment
190,156 191,335
- (release of allowance for impairment)
(219,016) (210,184) Effect of exchange rate differences 40 -
(Written off receivables) (9,664) (118,012) As of 31 December 243,213 281,697
Movements of allowance for impairment, group basis
As of 01 January - -
allowance for impairment for the year
- additional allowance for impairment - -
- (release of allowance for impairment) - -
Effect of exchange rate differences - -
(Written off receivables) - -
As of 31 December - -
Total allowance for impairment of loans and advance s to customers
243,213 281,697
B. Structure of loans and advances to customers per type of collateral in Denar thousand 2011 2010 (net carrying amount of loans and advances)
First class instruments for guarantee
- Cash deposits (in depot and/or limited bank accounts) 76,215 147,573 - Government securities - -
- Government unconditional guarantees - -
- Bank guarantees - -
Guarantees from insurance companies and insurance policies - -
Corporate guarantees (apart from banking and insurance companies) - -
Guarantees from individuals - -
Property pledge
- Property for own use 670,631 446,130 - Property for operating activities 477,004 309,329 Property pledge 423,623 242,423 Other types of guarantees 645,245 361,102 Unsecured - - Total loans and advances to customers less allowanc e for impairment 2,292,718 1,506,557
Eurostandard Banka AD, Skopje 87
Notes to the financial statements (continued) As of and for year ended 31 December 2011 (All amounts are expressed in Denar thousand unless otherwise stated)
23 Investments in securities
23.1 Investments in financial assets available-for- sale A. Structure of investments in financial assets ava ilable – for – sale according to the type of financ ial instrument
in Denar thousand 2011 2010 Debt securities
Treasury bills - - Government bills - - Other instruments on the money market - - Government issued bonds - - Corporative bonds - - Other debt instruments - -
- -
Quoted - - Unquoted - -
Owned instruments Owned instruments issued by banks - - Other owned instruments 19,990 4,338
19,990 4,338
Quoted - - Unquoted 19,990 4,338
Total investment in financial instruments available – for – sale before allowance for impairment 19,990 4,338 (Allowance for impairment) - - Total investment in financial instruments available – for – sale less allowance for impairment 19,990 4,338
in Denar thousand 2011 2010 Movements of allowance for impairment As of 01 January - - Allowance for impairment for the year - additional allowance for impairment - - - (release of allowance for impairment) - - Foreign exchange differences - - (Written – off receivables) - - As of 31 December - -
As of 31 December 2011 and 2010, the investments in other unquoted equity instruments in
amount of Denar 19,990 thousand (2010: Denar 4,338 thousand) are investment in local financial
companies.
Eurostandard Banka AD, Skopje
Notes to the financial statements (continued) As of and for year ended 31 December 2011 (All amounts are expressed in Denar thousand unless otherwise stated)
88
Investment in financial assets available – for – sa le (continued) B. Reclassified financial assets available - for - sale B1. Balance of reclassified assets available-for-sa le 2011 2010
In Denar thousand Reclassified amount (at the date
of reclassification) Accounting value at 31.12.2011 Fair value at 31.12.2011 Accounting value at 31.12.2010
Fair value at 31.12.2010
Assets available - for - sale reclassified in 2011in: - Loans and advances to banks - - - - - - Loans and advances to customers - - - - - - - - - - Assets available - for - sale reclassified in 2010 in: - Loans and advances to banks - - - - - - Loans and advances to customers - - - - - - - - - -
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for year ended 31 December 2011 (All amounts are expressed in Denar thousand unless otherwise stated)
89
Investment in financial assets available-for-sale ( continued) B. Reclassified financial assets available - for - sale B2. Profit and loss from reclassified assets availa ble-for-sale
In Denar thousand Income statement (current) Other profit /(loss) (current) Income statement (previous) Other profit /(loss) (previous) Period before reclassification
Assets available - for - sale reclassified in loans and advances to banks
- - - - - interest - - - - - net based impairment provision of financial assets - - - - - net based changes in fair value
- - - - Assets available - for - sale reclassified in loans and advances to customers - - - - - interest - - - - - net based impairment provision of financial assets - - - - - net based changes in fair value
- - - - - - - - Period after reclassification
Assets available - for - sale reclassified in loans and advances to banks
- - - - - interest - - - - - net based impairment provision of financial assets - - - - - amount of revaluation reserves
- - - - Assets available - for - sale reclassified in loans and advances to customers - - - - - interest - - - - - net based impairment provision of financial assets - - - - - amount of revaluation reserves
- - - -
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for year ended 31 December 2011 (All amounts are expressed in Denar thousand unless otherwise stated)
90
Investment in financial assets available-for-sale ( continued) B3.Income or losses recognised if the assets are no t reclassified
In Denar thousand Income statement
(current) Other profit /(loss)
(current) Income statement
(previous) Other profit /(loss)
(previous)
Assets available - for - sale reclassified in loans and advances to banks - - - -
- interest - - - - - net based impairment provision of financial assets
- - - - Assets available - for - sale reclassified in loans and advances to customers
- - - - - interest - - - - - net based impairment provision of financial assets - - - - - net based changes in fair value - - - -
Eurostandard Banka AD, Skopje
Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand, unles s otherwise stated)
91
Investments in securities (continued) 23.2 Investments in financial assets held to maturi ty
In Denar thousand 2011 2010 Debt securities
Treasury bills - - Government bills - - Other instruments on the money market - - Government issued bonds - - Corporative bonds - - Other debt instruments - - - - Quoted - - Unquoted - -
Total investments in financial instruments held-to- maturity before allowance for impairment - - (Allowance for impairment) - - Total investment in financial instruments held-to-m aturity less allowance for impairment - -
In Denar thousand 2011 2010 Movements of allowance for impairment As of 01 January - - Allowance for impairment for the year - additional allowance for impairment - - - (release of allowance for impairment) - - Foreign exchange differences - - (Written-off receivables) - - As of 31 December - -
24 Investments in subsidiaries and associates A. Percentage of the Bank’s interest in subsidiarie s and associates
in %
Name of subsidiaries and associates Country
Percentage of interest in ownership Percentage of right to vote
2011 2010 2011 2010
B. Financial information of associates – 100% In Denar thousand
Name of associates Total assets Total liabilities Total equity and
reserves Income
Profit/ (loss) for
the financial year
2011 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
2010
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand, unles s otherwise stated)
92
25 Other liabilities In Denar thousand 2011 2010 Trade receivables 2,417 224 Prepaid expenses 1,916 1,612 Calculated deferred income - - Fees and commission receivables 631 1,560 Receivables from the employees - 3 Advances for intangible assets - - Advances for property and equipment - - Small inventory 2,242 2,622 Receivables in calculation of business combinations in foreign currency - Western Union 1,106 647 Other 1,978 1,395 Total other receivables before allowance for impair ment 10,290 8,063 (allowance for impairment) (3,284) (1,625) Total other receivables less allowance for impairme nt 7,006 6,438
In Denar thousand 2011 2010 Movement of allowance for impairment As of 1 January 1,625 185 Allowance for impairment for the year
- additional allowance for impairment 5,410 2,194 - (release of allowance for impairment) (2,549) (754) Effect of exchange rate differences - -
(Written-off receivables) (1,202) - As of 31 December 3,284 1,625
26 Pledged assets 2011 2010
Debt securities - - Owned instruments - - Total pledged assets - -
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand, unles s otherwise stated)
93
27 Foreclosed assets
Land Buildings Equipment
Residential facilities
and apartments Other Total
Cost At 1 January 2010 - - 17,400 18,080 3,377 38,857 Foreclosed during the year 2,771 - 2,120 22,203 - 27,094 (Sold during the year) - - - - - - (Transfer to own assets) - - - - - - At 31 December 2010 2,771 - 19,520 40,283 3,377 65, 951
At 1 January 2011
2,771
-
19,520
40,283
3,377
65,951
Foreclosed during the year
7,527
99,364
93,603 -
200,494
(Sold during the year) - - -
(3,375) -
(3,375)
(Transfer to own assets) - - - - -
-
At 31 December 2011
10,298
99,364
19,520
130,511
3,377 263,070 Impairment At 1 January 2010 - - 16,035 - 3,377 19,412 Impairment loss during the year - - 68 436 - 504 (sold during the year) - - - - - - (Transfer to own assets) - - - - - - At 31 December 2010 - - 16,103 436 3,377 19,916
At 1 January 2011
-
-
16,103
436
3,377
19,916
Impairment loss during the year -
35
230
441
706
(Transfer to own assets) - - - - -
-
At 31 December 2011
-
35
16,333
877
3,377
20,622 Current carrying value At 01 January 2010 - - 1,365 18,080 - 19,445 At 31 December 2010 2,771 - 3,417 39,847 - 46,035
At 31 December 2011
10,298
99,329
3,187
129,634
- 242,448
During 2011, the Bank performed internal property transfer from the accounts for residential
buildings and apartments, to accounts for construction buildings in the amount of Denar 15,151
thousand. The transfer is shown in the table above within "foreclosed during the year".
As of 31 December 2011 and 2010, the fair value of foreclosed assets is Denar 244,229 thousand
(2010: Denar 46,035 thousand).
Eurostandard Banka AD, Skopje
Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand, unles s otherwise stated)
94
28 Intangible assets
As of 31 December 2011, intangible assets consist of acquired software from external suppliers and other internally developed intangible assets. Movements of carrying values for the reviewed periods are as follows:
A. Reconciliation of net carrying value
Internally developed
software
Acquired software from
external suppliers
Other internally developed intangible
assets Other intangible
assets
Investments in intangible
assets under lease
Non controlled interest Total
Cost
At 1 January 2010 - 29,504 6,234 - - - - 35,738
Increase through new acquisitions - 5,383 - - - - - 5,383
Increase through internal development - - - - - - - -
Increase through business combinations - - - - - - - -
(Disposal and write off) - - - - - - - -
(Disposal through business combinations) - - - - - - - - (Transfer to non – current assets held for sale) - - - -
-
- - - transfer from non – current assets held for sale - - - -
-
- - -
At 31 December 2010 - 34,887 6,234 - - - - 41,121
At 1 January 2011 - 34,887 6,234 - - - - 41,121
Increase through new acquisitions - 260 - - - - - 260
Increase through internal development - - - - - - - -
Increase through business combinations - - - - - - - -
(Disposal and write off) - - - - - - - -
(Disposal through business combinations) - - - - - - - - (Transfer to non – current assets held for sale) - - - -
- - - -
transfer from non – current assets held for sale - - - -
-
- - -
At 31 December 2011 - 35,147 6,234 - - - - 41,381
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand, unles s otherwise stated)
95
Intangible assets (continued) A. Reconciliation of net carrying value (continued)
Internally developed
software
Acquired software from
external suppliers
Other internally developed intangible
assets Other intangible
assets
Intangible assets in
preparation
Investments in intangible assets
under lease Total Amortization and impairment At 1 January 2010 - 22,261 312 - - - - 22,573 Amortization for the year - 4,094 1,246 - - - - 5,340 Impairment loss during the year - - - - - - - - (Release of impairment loss during the year) - - - - - - - - (Disposal and write off) - - - - - - - - At 31 December 2010 - 26,355 1,558 - - - - 27,913 -
At 1 January 2011 -
26,355
1,558
-
-
-
- 27,913
Amortization for the year -
3,794
1,247 - - - - 5,041 Impairment loss during the year - - - - - - - - (Release of impairment loss during the year) - - - - - - - - (Disposal and write off) - - - - - - - -
At 31 December 2011 -
30,149
2,805 -
-
-
- 32,954 Current carrying amount At 1 January 2010 - 7,243 5,922 - - - - 13,165 At 31 December 2010 - 8,532 4,676 - - - - 13,208
At 31 December 2011 - 4,998 3,429 -
-
-
- 8,427
B. Carrying value of intangible assets where there is limitation of ownership and/ or are pledge as co llateral for Bank’s liabilities
Internally developed
software
Acquired software from
external suppliers
Other internally developed intangible
assets Other intangible
assets Intangible assets
in preparation
Investments in intangible assets
under lease Total Current carrying amount At 31 December 2010 - - - - - - - At 31 December 2011 - - - - - - -
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand, unles s otherwise stated)
96
29 Property and equipment A. Reconciliation of the net carrying amount
Land Buildings Transport
Furniture and office
equipment Other
equipment
Other items of property and
equipment
Property and equipment in
preparation
Investments in intangible
assets under lease Total
Cost
At 1 January 2010 - - 12,441 14,136 52,452 - 1,183 - 80,212
Increase - - - 158 3,498 - 3,134 - 6,790 Increase through business combinations - - - - - - - - -
(Disposal and write off) - - - (412) (1,144) - - - (1,556) (Disposal through business combinations) - - - - - - - - - (transfer to non – current assets held for sale) - - - - - - - - - Transfer from non – current assets held for sale - - - - - - - - -
Other transfers - - - - 3,134 - (3,134) - -
At 31 December 2010 - - 12,441 13,882 57,940 - 1,183 - 85,446
At 1 January 2011 - - 12,441 13,882 57,940 - 1,183 - 85,446
Increase - - 3,574 292 1,686 - 883 - 6,435 Increase through business combinations - - - - - - - - -
(Disposal and write off) - - - - - - - - - (Disposal through business combinations) - - - - - - - - - (transfer to non – current assets held for sale) - - - - - - - - - Transfer from non – current assets held for sale - - - - - - - - -
Other transfers-adjustments - - 883 191 - - (883) 191
At 31 December 2011 - - 16,898 14,365 59,626 - 1,183 - 92,072
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand, unles s otherwise stated)
97
Property and equipment (continued) A. Reconciliation of the net carrying amount (conti nued)
Land Buildings Transport
Furniture and office
equipment Other
equipment
Other items of property and
equipment
Property and equipment in
preparation
Investments in intangible
assets under lease Total
Depreciation and impairment At 1 January 2010 - - 7,232 7,828 31,872 - - - 46,932 Depreciation for the year - - 2,218 1,655 8,725 - - - 12,598 Impairment loss during the year - - - - - - - - - (Release of impairment loss during the year) - - - - - - - - - (Disposal and write off) - - - (412) (1,144) - - - (1,556) (Transfer to non – current assets held for sale) - - - - - - - - - Transfer from non – current assets held for sale - - - - - - - - - Other transfers - - - - - - - - - At 31 December 2010 - - 9,450 9,071 39,453 - - - 57,974
At 1January 2011 - -
9,450 9,071 39,453
- -
- 57,974
Depreciation for the year - -
2,757 1,877 7,302 - - - 11,936 Impairment loss during the year - - - - - - - - - (Release of impairment loss during the year) - - - - - - - - - (Disposal and write off) - - - - - - - - - (Transfer to non – current assets held for sale) - - - - - - - - - Transfer from non – current assets held for sale - - - - - - - - - Other transfers - - - 191 - - - - 191
At 31 December 2011 - - 12,207 11,139 46,755 - -
- 70,101 Net carrying amount At 1January 2010 - - 5,209 6,308 20,580 - 1,183 - 33,280 At 31 December 2010 - - 2,991 4,811 18,487 - 1,183 - 27,472
At 31 December 2011 - - 4,691 3,226 12,871 - 1,183
- 21,971
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand, unles s otherwise stated)
98
Property and equipment (continued) As of 31 December 2011 and 2010 the Bank has no mortgages or other encumbrances over its property and equipment.
B. Carrying amount of the items of property, plant and equipment where there are limitations of the ow nership and/or are pledged as collateral/pledge for bank liabilities
Land Buildings Transport
Furniture and office
equipment Other
equipment
Other items of property and
equipment
Property and equipment in
preparation
Investments in intangible
assets under lease Total
Current carrying amount : At 31 December 2010 - - - - - - - - -
At 31 December 2011 - - - - - - - - -
Eurostandard Banka AD, Skopje
Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand, unles s otherwise stated)
99
30 Current and deferred tax assets and liabilities
30.1 Current tax assets and current tax liabilities 2011 2010 income tax receivables (current) 1,758 2,979 income tax liabilities (current) - - 1,758 2,979
30.2 Deferred tax assets and deferred tax liabilitie s A. Recognized deferred tax assets and deferred tax liabilities
2011 2010
Deferred tax assets
(Deferred tax
liabilities) Net basis Deferred
tax assets
(Deferred tax
liabilities) Net basis
Derivative liabilities held for risk management - - - - - - Loans and advances to banks - - - - - - Loans and advances to customers - - - - - - Investments in securities - - - - - - Intangible assets - - - - - - Property, plant and equipment - - - - - - Other receivables - - - - - - Derivative liabilities held for risk management - - - - - - Other liabilities - - - - - - Unused tax losses and unused tax credits - - - - - - Other - - - - - - Deferred tax assets/liabilities recognized in the Statement of Income - - - - - - Investments in financial assets available – for – sale - - - - - - Cash flow risk protection - - - - - - Deferred tax assets/liabilities recognized in equity - - - - - - Total recognized deferred tax assets/liabilities - - - - - -
B. Unrecognized deferred tax assets
2011 2010 Tax losses - - Tax credits - - Total unrecognized deferred tax assets - -
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand, unles s otherwise stated)
100
Current and deferred tax assets and liabilities (co ntinued) Deferred tax assets and deferred tax liabilities (c ontinued) C. Reconciliation of the movement of deferred tax a ssets and tax liabilities during the year
Recognized during
the year in:
As of 1 January
Income statement Equity
As of 31 December
2010
Derivative liabilities held for risk management - - - -
Loans and advances to banks - - - -
Loans and advances to customers - - - -
Investments in securities - - - -
Intangible assets - - - -
Property, plant and equipment - - - -
Other receivables - - - -
Derivative liabilities held for risk management - - - -
Other liabilities - - - -
Unused tax losses and unused tax credits - - - -
Other - - - -
Investments in financial assets available – for – sale - - - -
Cash flow risk protection - - - -
Total recognized deferred tax assets/ liabilities - - - -
2011
Derivative liabilities held for risk management - - - -
Loans and advances to banks - - - -
Loans and advances to customers - - - -
Investments in securities - - - -
Intangible assets - - - -
Property, plant and equipment - - - -
Other receivables - - - -
Derivative liabilities held for risk management - - - -
Other liabilities - - - -
Unused tax losses and unused tax credits - - - -
Other - - - -
Investments in financial assets available – for – sale - - - -
Cash flow risk protection - - - -
Total recognized deferred tax assets/ liabilities - - - -
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand, unles s otherwise stated)
101
31 Non-current assets held for sale and disposal group A. Non – current assets held for sale
2011 2010 Intangible assets - - Property and equipment - - Total non – current assets held for sale - - B. Disposal group
Disposal group of assets 2011 2010
Financial assets - - Intangible assets - - Property and equipment - - Investment in associates 251,606 251,606 Income tax receivables - - Other assets - - Total disposal group of assets 251,606 251,606 Liabilities directly related to disposal group Financial liabilities - - Special reserve - - Income tax liabilities - - Other liabilities - - Total liabilities directly related to the disposal group - - C. Profit / (loss) recognized from the sale of asse ts held for sale and disposal group
2011 2010 Profit / (loss) recognized from the sale of assets held for sale and disposal group - - - -
Assets held for represent non - current investments acquired exclusively for sale. Namely, in 2005
the Bank acquired 66.66% of the shares of Postenska Banka A.D Skopje with voting right
(“Postenska Banka”), by realization of pledge.
The Bank has implemented procedures for sale of shares in Postenska Banka, for which has signed
and written contracts with potential buyers where has realized higher sale value than cost.
Transactions for the sale of shares were not realized due to reasons out of Bank’s control. Bank
leads active negotiations for the sale of shares and the sale price at which the contract package of
shares in Postenska Banka negotiated is higher than the purchase cost.
Considering that the Bank has a real offer, the price for the shares of Postenska Banka higher than
the purchase cost, is confirmed that as of 31 December 2011 there are no indications of
impairment of assets.
Transactions with subsidiary held for sale are presented in Note 44 – Related party transactions.
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand, unles s otherwise stated)
102
32 Trading liabilities 2011 2010 Due to banks - Current accounts, demand deposits and overnight deposits - - - Term deposits - - - Other deposits - - - - Due to customer - Current accounts, demand deposits and overnight deposits - - - Term deposits - - - Other deposits - - - - Issued debt securities - Money market instruments - - - Deposit certificates - - - Issued bonds - - - Other - - - - Other financial liabilities - - Trade derivatives Contracts dependent on the interest rate change - - Contracts dependent on the exchange rate change - - Contracts dependent on the price of securities - - Other contracts that meet the criteria of IAS 39 - - - - Total trading liabilities - -
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand, unles s otherwise stated)
103
33 Financial liabilities designated at fair value through profit and loss, at its/
their initial recognition
2011 2010
Current carrying amount
Contractual value, paid at
maturity Current carrying
amount
Contractual value, paid at
maturity Due to banks Current accounts, demand deposits and overnight deposits - - - - Term deposits - - - - Other deposits - - - - - - - - Due to customer Current accounts, demand deposits and overnight deposits - - - - Term deposits - - - - Other deposits - - - - - - - - Issued debt securities Money market instruments - - - - Deposit certificates - - - - Issued bonds - - - - Other - - - - - - - - Subordinary debts - - - - Other financial liabilities - - - - Total financial liabilities through profit and loss at its/ their initial recognition - - - -
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand, unles s otherwise stated)
104
34 Deposits 34.1 Due to banks 2011 2010 Short – term Long – term Short – term Long – term Current accounts - Domestic banks - - 4 - - Foreign banks 855 - 855 - Demand deposits - Domestic banks - - - - - Foreign banks - - - - Term deposits - Domestic banks 19,260 - 11,000 - - Foreign banks - - - - Limited deposits - Domestic banks - - - - - Foreign banks - - - - Other deposits - Domestic banks - - - - - Foreign banks - - - - Interest - Domestic banks 20 - 13 - - Foreign banks - - - - Current maturity - - - - Total due to banks 20,135 - 11,872 -
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand, unles s otherwise stated)
105
34.2 Due to customers 2011 2010 Short - term Long-term Short - term Long-term Non-financial companies - Current accounts 398,669 - 208,585 - - Demand deposits 9,275 - 78 - - Term deposits 199,644 11,533 132,225 - - Limited deposits 22,749 7,797 19,382 7,301 - Other deposits 3,168 - 5,942 - - Interest 829 - 664 -
634,334 19,330 366,876 7,301 Government - Current accounts - - - - - Demand deposits - - - - - Term deposits 30,000 - 90,000 - - Limited deposits - - - - - Other deposits - - - - - Interest 58 - 413 -
30,058 - 90,413 - Non-profit organizations that serve households - Current accounts 20,378 - 20,285 - - Demand deposits - - - - - Term deposits 71,898 31,758 90,750 9,226 - Limited deposits 79 - - - - Other deposits 75 - - - - Interest 928 - 994 -
93,358 31,758 112,029 9,226 Financial companies, apart from banks - Current accounts 6,006 - 6,831 - - Demand deposits - - - - Term deposits 242,483 105,090 309,095 20,000 - Limited deposits - 4,020 4,638 - - Other deposits 17 - 17 - - Interest 2,288 - 1,114 -
250,794 109,110 321,695 20,000 Households - Current accounts 57,563 - 38,510 - - Demand deposits 36,688 - 60,795 - - Term deposits 718,626 1,306,475 507,514 118,955 - Limited deposits 18,112 26,262 20,893 21,330 - Other deposits 1,856 - - - - Interest 21,394 - 11,350 -
854,239 1,332,737 639,062 140,285 Non-residents, apart from banks - Current accounts 11,523 - 9,732 - - Demand deposits - - - - - Term deposits 5,482 - 2,960 - - Limited deposits 1,653 18,390 73 21,796 - Other deposits - - - - - Interest 217 - 335 -
18,875 18,390 13,100 21,796 Current maturity 98,476 (98,476) 14,866 (14,866) Total due to other customers 1,980,134 1,412,849 1,558,041 183,742
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand, unles s otherwise stated)
106
35 Issued debt securities 2011 2010 Money market instruments - - Deposit certificates - - Issued bonds - - Other - - Interest on issued securities - - Total issued debt securities - -
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand, unles s otherwise stated)
107
36 Borrowings A. The structure of borrowings according to the typ e of liabilities and the donor’s sector
2011 2010
Short - term Long-term Short - term Long-term Banks - Residential Borrowings - 82,331 - - Repo-transactions - - - - Interest 531 - - - - Non-residential - - Borrowings - - - - Repo-transactions - - - - Interest - - - - 531 82,331 - - Non-financial companies Borrowings - - - - Repo-transactions - - - - Interest - - - - - - - - Non-financial companies Borrowings - - - - Repo-transactions - - - - Interest - - - - - - - - Non-profit institutions that serve to households Borrowings - - - - Interest - - - - - - - - Financial companies, apart from banks Borrowings - 2,293 - 1,155 Repo-transactions - - - - Interest - - - - - 2,293 - 1,155 Non-residents, apart from banks - Non-financial companies - - - - Borrowings - - - - Repo-transactions - - - - Interest - - - - -Government Borrowings - - - - Repo-transactions - - - - Interest - - - - - Non-profit institutions that serve to households - - - - Borrowings - - - - Repo-transactions - - - - Interest - - - - - Financial companies, apart from banks Borrowings - - - - Repo-transactions - - - - Interest - - - - - Households Borrowings - - - - Interest - - - - - - - - Current maturity 336 (336) 1,155 (1,155) Total borrowings 867 84,288 1,155 -
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand, unles s otherwise stated)
108
Borrowings (continued) B. Borrowings liabilities according to donor
2011 2010 Short - term Long-term Short - term Long-term
Domestic sources: MBDP 531 82,331 - 1,155 Lease company - 2,293 - - 531 84,624 - 1,155 Foreign sources: - - - - - - - - Current maturity 336 (336) 1,155 (1,155) Total borrowings 867 84,288 1,155 -
On 17 October 2008, the Bank signed Contract with domestic lease company for vehicle
purchase. Total amount of lease according the Contract is EUR 70,978, of which the principal is
in the amount of EUR 60,385 and interest – EUR 10,593. In accordance with the Contract
provision, the repayment will be made in 36 equal instalments, each in the amount of EUR 1,972,
starting from 17 November 2008 to 17 October 2011. The residual value of the transportation
asset with the repayment of the last instalment is equal to zero (Note 30). At 18 October 2011 the
lease liability is entirely settled.
On 16 June 2011 the Bank signed Contract with domestic lease company for vehicle purchase.
Total amount of lease according the Contract is EUR 52,009, of which the principal is in the
amount of EUR 42,710 and interest - EUR 9,300. In accordance with the Contract provision, the
repayment will be made in 36 equal instalments, each in the amount of EUR 1,445, starting from
16 July 2011 to 16 June 2014. The residual value of the transportation asset with the repayment of
the last instalment is equal to zero (Note 30).
During 2011, the Bank signed Contracts with the Macedonian Bank for Development Promotion
AD Skopje for placement of funds from the credit line for small and medium enterprises and the
Italian credit line with repayment period from 2013 to 2019 and with interest rates 3% to 5% p.a.
The Bank has given bond as collateral for these borrowings.
37 Subordinated liabilities
2011 2010 Subordinated deposit liabilities Liabilities based on interest - - - - Subordinated credit liabilities Publishing house Kultura AD Skopje 24,000 24,000 Gofi Group of finance and investment 92,258 92,258 Liabilities based on interest 1 1 116,259 116,259 Subordinated liabilities on issued debt securities Liabilities based on interest - - - - Preference shares - - Total subordinated liabilities - -
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand, unles s otherwise stated)
109
Subordinated liabilities (continued)
At 18 June 2010 the Bank signed a subordinated loan contract with Gofi Group of Finance and
Investment SA, Switzerland, with which the Bank has on disposal available financial assets as cash
yield in amount of Denar 400,000 thousand with an interest rate of 0.5% p.a. There is no collateral
for this loan. The repayment date is five years after the date of incurred yield of cash. At 25 August
2010 was concluded Annex no. 1 to the subordinated loan contract with which that the repayment
date is changed to six years from the date of incurred yield of cash.
At 23 June 2010 the Bank signed a subordinated loan contract with Gofi Group of Finance and
Investment SA, Switzerland, with which the Bank has on disposal available financial assets as cash
yield in amount of Denar 500,000 thousand with an interest rate of 0.5% p.a. There is no collateral
for this loan. The repayment date is five years after the date of incurred yield of cash. At 25 August
2010 was concluded Annex no. 1 to the subordinated loan contract with which that the repayment
date is changed to six years from the date of incurred yield of cash.
At 23 July 2010 the Bank signed a subordinated loan contract with the Publishing House Kultura
AD Skopje, with which the Bank has on disposal available financial assets as cash yield in amount
of Denar 24,000 thousand with an interest rate of 0.5% p.a. There is no collateral for this loan. The
repayment date is six years after the date of incurred yield of cash.
At 21 October 2010 the Bank signed a subordinated loan contract with Gofi Group of Finance
and Investment SA, Switzerland, with which the Bank has on disposal available financial assets as
cash yield in amount of Denar 600,000 thousand with an interest rate of 0.5% p.a. There is no
collateral for this loan. The repayment date is six years after the date of incurred yield of cash.
Eurostandard Banka AD, Skopje
Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand, unles s otherwise stated)
110
38 Special reserve and provisions
Special reserve and off-balance credit
exposure
Provisions for potential liabilities based on
litigations Pension provisions and
other employee benefits Restructuring
provision Provisions for
adverse contracts Other provisions Total
At 1 January 2010 3,024 - - - - - 3,024
Additional provisions during the year 5,291 - - - - - 5,291
(used provisions during the year) - - - - - - -
(release of provisions during the year) (7,478) - - - - - (7,478)
At 31 December 2010 837 - - - - - 837
At 1 January 2011 837 - - - - -
837
Additional provisions during the year 3,122 - - - - -
3,122
(used provisions during the year) - - - - - - -
(release of provisions during the year) (2,963) - - - - -
(2,963)
Effect of exchange rate differences 10 - - - - -
10
At 31 December 2011 1,006 - - - - -
1,006
Eurostandard Banka AD, Skopje
Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand, unles s otherwise stated)
111
39 Other liabilities 2011 2010
Trade payables 2,942 1,911 Received advances 224 224 Fee and commission liabilities 697 426 Accrued expenses - - Deferred income from the previous year - - Short – term liabilities to employees - - Short – term liabilities for employee benefits - - VAT liabilities 200 132 Prepayments 932 933 MIPS liabilities 545 363 Other 1,108 2,348
Total other liabilities 6,648 6,337
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand, unles s otherwise stated)
112
40 Share capital A. Share capital
In Denars Number of issued shares
Nominal value per share ordinary shares
preference shares not for sale Total subscribed capital
ordinary shares
preference shares not for
sale 2011 2010 2011 2010 2011 2010
At 1 January – fully paid 61,148.22 - 18,000 18,000 - - 1,100,668 1,100,668 Recorded shares during the year - - - - - - - - Realization of share option - - - - - - - - Division / increase of nominal value per share - - - - - - - -
Other changes during the year (list them in detail): - - - - - - - -
______________________________ - - - - - - - - ______________________________ - - - - - - - - ______________________________ - - - - - - - - At 31 December – fully paid 61,148.22 - 18,000 18,000 - - 1,100,668 1,100,668
Eurostandard Banka AD, Skopje
Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand, unles s otherwise stated)
113
Share capital (continued) B. Dividends B1. Issued dividends and paid dividends by the Bank
2011 2010
Issued dividends and paid dividends for the year - -
2011 2010
Ordinary share dividend - -
Preference share dividend - -
B.2 Issued dividends after the balance sheet date ( the dividends liabilities are not shown in the Bala nce sheet)
2011 2010 Issued dividends after 31 December - -
2011 2010 Ordinary share dividend - - Preference share dividend - - C. Shareholders with more than 5% voting share
Shareholder’s name
In MKD thousand in % 2011 2010 2011 2010
Subscribed capital (Nominal
value)
Subscribed capital (Nominal
value) Voting right Voting right Gofi Group of Finance and Investment SA-Switzerland 550,334 550,334 50.0 50.0 E.H.H. Eastern Hemisphere Holding SA-Switzerland 550,334 550,334 50.0 50.0 Total 1,100,668 1,100,668 100.0 100.0
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand, unles s otherwise stated)
114
41 Earnings per share A. Basic earnings per share
2011 2010
Net - profit attributable to holders of ordinary shares Net - profit for the year 2,894 1,571
Dividends for preference shares not for sale - -
Changes of Net - Profit attributable to holders of ordinary shares - -
Net profit / (loss) attributable to holders of ordi nary shares 2,894 1,571
Number of shares 2011 2010
Weighted average number of ordinary shares Issued ordinary shares as of 1 January 18,000 18,000
Effects of issuing potential ordinary shares - - Weighted average number of ordinary shares (diluted) as of 31 December 18,000 18,000
Basic earnings per share (in MKD) 161 87
B. Diluted earnings per share
2011 2010 Net - profit attributable to holders of ordinary shares (diluted) Net profit attributable to holders of ordinary shares - -
Changes of net profit attributable to holders of ordinary shares for the effects of all issued potential ordinary shares - - Net profit attributable to holders of ordinary shar es (diluted) - -
Number of shares 2011 2010 Weighted average number of ordinary shares (diluted) Issued ordinary shares as of 1 January - -
Effects of issuing potential ordinary shares - -
Weighted average number of ordinary shares (diluted) as of 31 December - - Diluted earnings per share (in MKD) - -
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand, unles s otherwise stated)
115
42 Commitments and contingencies
42.1 Commitments 2011 2010 Payment guarantees - in Denar 132,392 64,460
- in foreign currency 75,880 44,093
- in Denar with foreign clause 10,504 -
Performance guarantees
- in Denar 32,508 25,025
- in foreign currency 308 158
- in Denar with foreign clause - 19,097
Uncovered letter of credit - in Denar - - in foreign currency 2,695 417
- in Denar with foreign clause - -
Unused overdraft for current accounts - -
Unused credit card limits 58,149 47,642
Contingent liabilities for crediting and unused credit limits 78,342 101,572
Other commitments and contingencies - -
Issued covered collateral 12,860 18,817
Covered letter of credit - 2,214
Other commitments and contingencies - -
Total commitments before the special reserve 403,638 323,495
(Special reserve)
(1,006) (837) Total commitments less potential reserve 402,632 322,658
Part of contingent liabilities for crediting and unused credit limits in the amount of Denar 69,827
thousand (2010: Denar 97,415 thousand) relates to revocable approved framework agreements for
use of funds from loans, credit letters and guarantees which use is subject to re-approval according
the Bank’s procedures.
Litigations At 31 December 2011, proceedings against the Bank amount in total Denar 1,150 thousand. The
provision as of the balance sheet date has not been recorded because the professional legal advice
indicates that there is no possibility of significant losses. In addition, various legal actions and
claims may be asserted in the future against the Bank from litigations and claims incident to the
ordinary course of business. Related risks have been analysed as to likelihood of occurrence.
Although the outcome of these matters cannot always be ascertained with precision, the
management of the Bank believes that no material liabilities are likely to occur.
Taxation The tax authorities may at any time inspect the books and records up to 5 years subsequent to the
reported tax year, and may impose additional tax assessments and penalties. The Bank's
management is not aware of any circumstances, which may give rise to a potential material liability
in this respect.
Capital commitments As of the reporting date, there are no capital commitments that have been recognized in the
financial statements.
42.2 Contingencies 2011 2010 Total c ontingencies - -
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand, unles s otherwise stated)
116
43 Activities on behalf of third parties
2011 2010
Assets Liabilities Net-
position Assets Liabilities Net-position Asset administration on behalf and at the expense of third parties Deposits in Denar - - - - - - Deposits in foreign currencies - - - - - -
Loans in Denar
7,592
(7,592)
- 7,592 (7,592) - Loans in foreign currencies - - -
Other receivables in Denar
65,853
(65,853)
- 853 (853) - Other receivables in foreign currencies - - - - - - Asset management on behalf and at the expense of third parties Deposits in Denar - - - - - - Deposits in foreign currencies - - - - - - Loans in Denar - - - - - - Loans in foreign currencies - - - - - - Other receivables in Denar - - - - - - Other receivables in foreign currencies - - - - - - Bank accounts - - - - - - Other - - - - - - Total 73,445 (73,445) - 8,445 (8,445) -
The Bank manages the assets on behalf of third parties intended for purchasing government bills
and bonds or approving loans for customers. These assets are not owned by the Bank and are not
recognized in the Balance sheet. The Bank is not exposed to credit risk that arises from these
placements.
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand, unles s otherwise stated)
117
44 Related party transactions
According to the Law on Banks, related parties are considered: persons with special rights and
responsibilities in the Bank and persons related to them; shareholders with a qualified contribution
to the Bank (direct or indirect ownership of at least 5% of the total number of shares, or voting
right shares or that enable a significant influence on the Bank’s managing), affiliates and entities, as
well as the responsible persons of these shareholders - legal entities, Bank’s subsidiaries and other
persons related to the Bank.
The Bank grants loans, performs payment transfers and deposits funds of related enterprises and
financial institutions. It is the opinion of the Bank’s management that these transactions are carried
out on normal market terms and conditions and during the regular course of business activities. As
of 31 December 2011 and 2010 the balances and volume of transactions with companies related to
companies that have common control over the Bank, and key management personnel of the Bank
and its related parties, are as follows:
A. Balance sheet
Parent
Company Subsidiarie
s Associates
Management of the
Bank
Other related parties Total
At 31 December 2011 Assets Current accounts - 7,102 - - - 7,102
Trading assets - - - - - -
Loans and advances
- Mortgages 2,322 - - 3,846 - 6,168
- Consumer loans 10,531 - - 2,531 - 13,062
- Financial leasing receivables - - - - - -
- Factoring and forfeiting receivables - - - - - -
- Other loans and advances 22,094 5,171 4,880 - 32,145
Investments in securities - - - - - -
(Allowance for impairment) (500) (38) - (73) - (611)
Other assets 621 1 - 2 - 624
Total 35,068 12,236 - 11,186 - 58,490
Liabilities
Trading liabilities - - - - - -
Deposits 228,311 898 - 21,511 250,720
Issued securities - - - - - -
Borrowings 2,293 - - - - 2,293
Subordinated liabilities 116,259 - - - - 116,259
Other liabilities 13,438 593 - 8,136 - 22,167
Total 360,301 1,491 - 29,647 - 391,439
Commitments
Issued guarantees 2,811 - - - - 2,811
Issued letter of credit - - - - - -
Other commitments 2,820 183 - 2,457 - 5,460
(Special reserves) (40) - - (47) - (87)
Total 5,591 183 - 2,410 - 8,184
Potential assets Received guarantees - - - - - - Other potential assets - - - - - - Total - - - - - -
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand, unles s otherwise stated)
118
Related party transactions (continued) A. Balance sheet (continued)
Parent
Company Subsidiarie
s Associates
Management of the
Bank
Other related parties Total
At 31 December 2010 Assets Current accounts - - - - - -
Trading assets - - - - - -
Loans and advances
- Mortgages 7,930 - - 4,737 - 12,667
- Consumer loans - 299 - 6,360 - 6,659
- Financial leasing receivables - - - - - -
- Factoring and forfeiting receivables - - - - - -
- Other loans and advances 27,702 3,924 - - - 31,626
Investments in securities - - - - - -
(Allowance for impairment) (94) - - (56) - (150)
Other assets 266 36 - 50 - 352
Total 35,804 4,259 - 11,091 - 51,154
Liabilities
Trading liabilities - - - - - -
Deposits 138,722 21 - 26,258 - 165,001
Issued securities - - - - - -
Borrowings 1,155 - - - - 1,155
Subordinated liabilities 116,259 - - - - 116,259
Other liabilities 219 - - 21 - 240
Total 256,355 21 - 26,279 - 282,655
Commitments Issued guarantees 6,476 - - - - 6,476 Issued letter of credit - - - - - - Other commitments 25,612 - - 1,709 - 27,321 (Special reserves) (9) - - (8) - (17) Total 32,079 - - 1,701 - 33,780
Potential assets Received guarantees - - - - - - Other potential assets - - - - - - Total - - - - - -
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand, unles s otherwise stated)
119
Related party transactions (continued) B. Income and expenses from other related party tr ansactions
Parent
Company Subsidiarie
s Associates
Management of the
Bank
Other related parties Total
2011 Income Interest income 3,471 508 - 1,080 - 5,059 Fee and commission income 550 - - 83 - 633 Net income from trading - - - - - - Dividend income - - - - - - Capital gain from the sale of non - current assets - - - - - - Other income 273 133 - 666 - 1,072 Transfers between subjects - - - - - Total 4,294 641 - 1,829 - 6,764 Expenses Interest expense 8,574 17 - - - 8,591
Fee and commission expense - - - - - - Net losses from trading - - - - - - Expenses from purchase of non - current assets - - - - - - Allowance for impairment of financial assets, net - - - - - - Other expenses 24,439 894 837 26,170
Transfers between subjects - - - - - - Total 33,013 911 - 837 - 34,761
Parent
Company Subsidiarie
s Associates
Management of the
Bank
Other related parties Total
2010 Income Interest income 3,365 272 - 954 - 4,591 Fee and commission income 317 42 - 65 - 424 Net income from trading - - - - - - Dividend income - - - - - - Capital gain from the sale of non - current assets - - - - - - Other income 180 262 - 656 - 1,098 Transfers between subjects - - - - - - Total 3,862 576 - 1,675 - 6,113 Expenses Interest expense 7,180 31 - - - 7,211
Fee and commission expense - - - - - -
Net losses from trading - - - - - - Expenses from purchase of non - current assets - - - - - - Allowance for impairment of financial assets, net - - - - - -
Other expenses 167 7 - 54 - 228
Transfers between subjects - - - - - -
Total 7,347 38 - 54 - 7,439
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand, unles s otherwise stated)
120
Related party transaction (continued) B. Key management compensation
2011 2010
Short - term employee benefits 20,071 19,958 Benefits after employment - - Benefits due to termination of employment - - Employee payment based on shares, settled with owned instruments - - Employee payment based on shares, settled in cash - - Other - - Total 20,071 19,958
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand, unles s otherwise stated)
121
45 Leases A. Lessor A.1 Financial leases receivables
Total financial
lease receivables
Maturity period of financial lease receivables
up to 1 year
From 1 to 5 years
Over 5 years
At 31 December 2011 - - - - Current value of minimum lease payments - - - - Total - - - - - - - - At 31 December 2010 - - - - Current value of minimum lease payments - - - - Total - - - - A.2 Irreversible operative lease receivables
Total irrevocable
operative leases
liabilities
Maturity period of irrevocable operative leases liabilities
up to 1 year
From 1 to 5 years
Over 5 years
At 31 December 2011 - - - - Current value of minimum lease payments - - - - Total - - - - - - - - At 31 December 2010 - - - - Current value of minimum lease payments - - - - Total - - - -
Land Buildings Vehicles
Furniture and office
equipment Other
equipment
Other items of property
and equipment Total
Value of property under operational lease: - - - - - - - At 31 December 2011 - - - - - - - At 31 December 2010 - - - - - - -
Total - - - - - - -
B. Lessee B.1 Financial lease liabilities
Total financial leases receivables
Maturity period of financial lease liabilities
up to 1 year From 1 to 5
years Over 5
years At 31 December 2011 2,293 1,101 1,192 -
Current value of minimum lease payments - - - -
Total 2,293 1,101 1,192 -
At 31 December 2010 1,155 1,155 - -
Current value of minimum lease payments - - - -
Total 1,155 1,155 - -
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand, unles s otherwise stated)
122
Leases (continued) B. Lessee (continued) B1. Financial lease liabilities (continued)
Land Buildings Transportation
vehicles
Furniture and office
equipment Other
equipment
Other items of property and
equipment Total Value of property under financial lease: Cost At 1 January 2010 - - 3,708 - - - 3,708 - additions - - - - - - - - (disposal and write off) - - - - - - - - other - - - - - - - At 31 December 2010 - - 3,708 - - - 3,708 At 1 January 2011 - - 3,708 - - - 3,708 - additions - - 3,574 - - - 3,574 - (disposal and write offs) - - (3,708) - - - (3,708) - other - - - - - - - At 31 December 2011 - - 3,574 - - - 3,574 Accumulated depreciation and impairment At 1 January 2010 - - 1,082 - - - 1,082 - depreciation for the year - - 927 - - - 927 - impairment loss during the year - - - - - - - - (release of impairment loss during the year) - - - - - - - - (disposal and write offs) - - - - - - - - other - - - - - - - At 31 December 2010 - - 2,009 - - - 2,009 At 1 January 2011 - - 2,009 - - - 2,009 - depreciation for the year - - 447 - - - 447 - impairment loss during the year - - - - - - - - (release of impairment loss during the year) - - - - - - - - (disposal and write offs) - - (2,009) - - - (2,009) - other - - - - - - - At 31 December 2011 - - 447 - - - 447
Eurostandard Banka AD, Skopje Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar thousand, unles s otherwise stated)
123
Leases (continued) B. Lessee (continued) B1. Financial lease liabilities (continued)
Land Buildings Transportation
vehicles
Furniture and office
equipment Other
equipment
Other items of property and
equipment Total Current carrying value At 1 January 2010 - - 2,626 - - - 2,626 At 31 December 2010 - - 1,699 - - - 1,699 At 31 December 2011 - - 3,127 - - - 3,127
B.2 Irrevocable operative leases liabilities
Total irrevocable
operative leases
liabilities
Maturity period of irrevocable operative leases liabilities
up to 1 year
From 1 to 5 years
Over 5 years
At 31 December 2011 - - - - Current value of minimum lease payments - - - - Total - - - - At 31 December 2010 - - - - Current value of minimum lease payments - - - - Total - - - -
Eurostandard Banka AD, Skopje 124
Notes to the financial statements (continued) As of and for the year ended 31 December 2011 (All amounts are expressed in Denar unless otherwis e stated)
46 Share based payments 2011 2010 Date of giving option - - Date of option expiry - - Price of option realization - - Share price on the date the option is given - - Variance - - Expected dividend return - - Interest rate - - Fair value on the date the option is given - -
2011 2010
Number of share options
Weighted average price of
share options
Number of share options
Weighted average price of
share options At 1 January Changes during the year: - options given to Supervisory Board members - - - - - options given to Board of Directors members - - - - - Other given options - - - - - Forfeited options - - - - - Realized options - - - - - Options with expired deadline - - - - At 31 December - - - -
47 Pension plans
The Bank does not operate any defined contribution pension plans or share – based remuneration
options as of 31 December 2011 and 2010. The Management believes that the present value of the
future obligations to employees with respect to retirement and other benefits and awards are not
material to these financial statements as of 31 December 2011 and 2010.
48 Events after the reporting date
After 31 December 2011 - the reporting date until the approval of these financial reports, there are
no adjusting events reflected in the financial statements or events that are materially significant for
disclosure in these financial statements.
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