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Commission Regulation (EC) No
1725/2003 of 29 September 2003 adopting certain international
accounting standards in accordance with Regulation (EC) No 1606/2002
of the European Parliament and of the Council
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Assets pledged as
security
53. A bank should disclose the
aggregate amount of secured liabilities and the nature and
carrying amount of the assets pledged as security.
54. In some countries, banks are
required, either by law or national custom, to pledge assets
as security to support certain deposits and other liabilities.
The amounts involved are often substantial and so may have a
significant impact on the assessment of the financial position
of a bank.
Trust acitivities
55. Banks commonly act as
trustees and in other fiduciary capacities that result in the
holding or placing of assets on behalf of individuals, trusts,
retirement benefit plans and other institutions. Provided the
trustee or similar relationship is legally supported, these
assets are not assets of the bank and, therefore, are not
included in its balance sheet. If the bank is engaged in
significant trust activities, disclosure of that fact and an
indication of the extent of those activities is made in its
financial statements because of the potential liability if it
fails in its fiduciary duties. For this purpose, trust
activities do not encompass safe custody functions.
Related party
transactions
56. IAS 24, related party
disclosures, deals generally with the disclosures of related
party relationships and transactions between a reporting
enterprise and its related parties. In some countries, the law
or regulatory authorities prevent or restrict banks entering
into transactions with related parties whereas in others such
transactions are permitted. IAS 24, is of particular relevance
in the presentation of the financial statements of a bank in a
country that permits such transactions.
57. Certain transactions between
related parties may be effected on different terms from those
with unrelated parties. For example, a bank may advance a
larger sum or charge lower interest rates to a related party
than it would in otherwise identical circumstances to an
unrelated party; advances or deposits may be moved between
related parties more quickly and with less formality than is
possible when unrelated parties are involved. Even when
related party transactions arise in the ordinary course of a
bank's business, information about such transactions is
relevant to the needs of users and its disclosure is required
by IAS 24.
58. When a bank has
entered into transactions with related parties, it is
appropriate to disclose the nature of the related party
relationship as well as information about the transactions and
outstanding balances necessary for an understanding of the
potential effects of the relationship on the financial
statements of the bank. The disclosures are made in accordance
with IAS 24 and include disclosures relating to a bank’s
policy for lending to related parties and, in respect of
related party transactions, the amount included in:
(a) Keach of loans and advances,
deposits and acceptances and promissory notes; disclosures
may include the aggregate amounts outstanding at the
beginning and end of the period, as well as advances,
deposits, repayments and other changes during the period;
(b) each of the principal types
of income, interest expense and commissions paid;
(c) the
amount of the expense recognised in the period for
impairment losses on loans and advances and the
amount of any allowance account at the balance sheet
date; and
(d) irrevocable commitments and
contingencies and commitments arising from off balance sheet
items.
Effective date
59. This International
Accounting Standard becomes operative for the financial
statements of banks covering periods beginning on or after 1
January 1991.
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