Notes%20to%20the%20Financial%20Statements.pdf

Notes to the Financial Statements

1- Accounting Convention

Financial statements of the Bank have been prepared under historical cost conven-

tion and current values have also been applied when necessary.

2- Basis for determining Depositors’ Proit Share from Joint Income

By virtue of the usury-free banking Act and its executive directives, and with due

regard to the directives number 1799 dated 08.01.2004 of the Central Bank of the

Islamic Republic of Iran, the proits derived from granting facilities, investment in stock,

participation bonds and inter-bank proit that is recognized according to the prevailing

accounting convention, is considered as joint income and the depositors’ proit share

will be determined in proportion to investing their net resources in granted facilities.

3- Summary of Signiicant Accounting Policies

3-1- Investments

3-1-1 Evaluation Method

Long-lived assets are evaluated based on cost price less the provisioning for impair-

ment loss of each.

Liquid current assets are evaluated at the least cost price and net market of all

assets, and other current assets are evaluated at their least cost price and net market

of each asset.

3-1-2 Income Recognition Method

Proit from investment in the subsidiaries and afiliated companies are recognized at

the date of approval of their inancial statements by the general meeting of sharehold-

ers (till the date of approval of the inancial statements of the bank)

Proit from investment in the other companies, current or long term, are

Recognized at the date of approval of their inancial statements by the general meeting

of shareholders (till the balance sheet date)

3-2- Tangible Fixed Assets

3-2-1 Tangible Fixed Assets, except the one indicated in 4-2-2 below, are posted based

oncostprice.Therepairsandimprovementsleadingtoconsiderableincreaseinthecapacity

or estimated useful life of the ixed assets or essentially improve their utility are charged as

capital expenses and depreciated during the remaining useful life of the underlying asset.

Maintenance expenses incurred in partial repairing and retaining economic interests of the

business unit as per initially evaluated performance standards, are considered as current

expenses and carried to the proit (loss) of the period under report.

3-2-2 By virtue of article 62 of the third ive-year development plan, the premises

of the bank were revaluated and registered in the books for the amount of 11,543

billion Rial and the resulted surplus, i.e. 10,637 billion Rial, has been added to the

capital increase account of the government in the bank.

Notes to the Financial Statements

3-2-3- According to the resolution adopted in 1077 th session of the Money & Credit

Council on 17.02.2007, depreciation of ixed assets are recorded as per depreciation

chart of article 151 of direct taxes law based on the following rates and depreciation

methods:

Assets

Depreciation rate

Depreciation Method

Premises

Declining

Automobiles

25%

Declining

Equipment & computer

hardware systems

10 years

Direct line

PC hardware

10 years

Direct line

According to the note 10 of the code of conduct for depreciation, based on article

151 of direct taxes law, depreciation rate for the buildings revaluated at the end of

1383(2004/05)has been charged at 3.5% using declining method.

3-3- Good Will

By virtue of article 62 of the third ive-year development plan, good will of the

business units of the bank were registered in the books based on the revaluated prices

in 1383(2004/05). According to the resolution adopted in 1077 th session of the Money

& Credit Council depreciation of ixed assets are recorded as per depreciation chart of

article 151 of direct taxes law. So, no depreciation has been calculated for the good will

since beginning of 1385(2006/07).

3-4- Income Recognition

All incomes of the Bank are recognized based on accrual assumption basis and

relected in the inancial statements.

3-5- Foreign Currency Translation

3-5-1- domestic Accounts

Foreign currency monetary items are translated in the market rate (in accordance

with the daily inter-bank reference rate announced by the Central Bank) and foreign

currency non-monetary items are translated in the market rate on translation date.

3-5-2- Foreign branches and subsidiaries

All foreign currency monetary and non-monetary items (except shareholders’

equity) of the foreign branches and subsidiaries are translated in the market rate at

the balance sheet date and shareholders’ equity is translated in the market rate at the

creation date (historical rates). Proit and loss items are translated in the market at

the transaction date. The difference arisen from translation of the balance sheets of

foreign branches and subsidiaries is posted in the shareholders’ equity.

3-6- Provisions for Doubtful Debts

According to the resolution adopted in 1074th on 30.12.2006 and 1077 th dated

17.02.2007 session of the Money & Credit Council, provisions for doubtful debts are

calculated and posted in the books as follows:

3-6-1- General provisions are calculated equal to 1.5% of the balance of total loans,

except those for which speciic provisions have been made.

3-6-2- Speciic provisions: are calculated and charged to the accountspro-

portionate to the category of the over due loans and thereafter that they lose

collateral coverage as follows:

Category

Provisions

Overdue loans

10 %

Non performing loans

20 %

Doubtful loans, given assessing customer’s solvency

50-100 %

Loans that 5 years or more has passed from their maturity

100 %

3-7- Severance Pay Reserve

The reserve for the staffs’ severance pay is calculated as one- month of their last

salary and beneits for each year of service and considered in the accounts.

3-8- Assets classiication

According to the resolution adopted in 1074 th and 1077 th session of the Money &

Credit Council, loans granted by the bank are classiied based on the delay period,

customer’s solvency, and the situation of the customer’s industry as follows:

1- Outstanding

2- Overdue

3- Non performing

4- Doubtful

3-9- Severance Pay Liabilities

The present value of the staffs’ severance pay liabilities with respect to their years

of service (including, working, retired and pensioner staff) are calculated based on

actuary assumptions.

3-10- Dues from the Government

The mandatory facilities granted under former Management & Planning Organization

of the state, are regarded as dues from the government under following conditions:

a- Non performing loans due to customer’s insolvency, inadequate collaterals, or

failure of the bank in collecting the debt;

b- The overdue loans relating to performing acquiring capital assets;

c- Loans granted to ministries and government organizations.

Notes to the Financial Statements

7) Dues from the Central Bank

1387 (2008/09)

1386 (2007/08)

Deposit with the Central Bank

Prepayment for purchasing foreign currency

Total

41,499,478

2,205

41,501,683

37,747,491

2,205

37,749,696

8) Dues from Banks & Credit Institutes

1387 (2008/09)

1386 (2007/08)

Up to 6 months

Up to one year

One to 5 years

Over 5 years

Total

Deduction:

Provisions for doubtful debts

Proit of the following years

Total

17,593,867

12,610,716

14,095,473

4,221,363

48,521,419

10,671,561

7,649,031

8,549,610

2,560,468

29,430,670

(44,345)

(13,267)

48,463,807

(19,086)

(18,548)

29,393,036

10) Loans & Advances to the Public Sector

1387 (2008/09)

1386 (2007/08)

Governmental Sector

1 to 3 years

3 to 5 years

5 to 10 years

Over 10 years

Total

Deduction:

Provisions for over due & doubtful debts

General provisions

Proit for the following years

Differed proit

Total

4,646,043

1,334,012

3,340,393

1,403,125

10,723,573

6,539,082

1,875,632

4,696,620

1,966,097

15,077,431

(18,431)

(144,918)

(16,961)

10,447,263

(162,298)

(319,258)

(15,043)

14,580,832

11&12) Loans & Advances to other parties

1387 (2008/09)

1386 (2007/08)

1 to 3 years

3 to 5 years

5 to 10 years

Over 10 years

Total

Deduction:

Reserve for doubtful & differed loans

general reserve

Contingent proit for the following years

Differed proit

Total

166,657,096

67,833,796

20,505,359

16,129,144

271,125,395

150,934,852

61,434,431

18,570,906

14,607,539

245,547,728

(3,087,310)

(17,440,169)

(21,149,316)

(2,452,775)

226,995,825

(3,566,900)

(11,863,918)

(21,085,028)

(452,230)

208,579,652

14) Participation Bonds & the Like

1387 (2008/09)

1386 (2007/08)

Participation Bonds(1 year)

Foreign currency Bonds

Total

1,917,673

476,831

2,394,504

1,857,019

526,985

2,384,004

15) Investments & Partnerships

1387 (2008/09)

1386 (2007/08)

Domestic investments

foreign Investments

Total

Deduction:

provisions for impairment of stock

2% general provisions

Total

2,231,966

2,143,165

4,375,131

1,933,790

1,466,734

3,400,524

(79,721)

(34,721)

-----------

4,295,410

-----------

3,365,803

17) Other Assets

1387 (2008/09)

1386 (2007/08)

Accounts & receivable shares proit

Banks internal accounts

Tax prepayment

Prepayments to companies & institutions

Total

57,294

2,334,142

316,130

1,208,087

3,915,653

32,118

1,913,146

209,225

549,853

2,704,342

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