Mega Bank Annual Report 2017

42 Mega Bank -42- Explanation: 1. In accordance with IFRS 9, the Bank and subsidiaries expect to reclassify other financial assets-equity investment carried at cost in the amounts of $4,833,186 thousand and make an irrevocable election at initial recognition on equity instruments not held for dealing or trading purpose, by increasing financial assets at fair value through other comprehensive income, increasing retained earnings and other equity interest in the amounts of $10,999,949 thousand, $299,195 thousand, and $5,867,568 thousand, respectively. 2. In accordance with IFRS 9, the Bank and subsidiaries expect to reclassify available-for-sale financial assets and other financial assets- equity investments carried at cost in the amounts of $5,781,732 thousand and $4,497,106 thousand, respectively, by increasing financial assets at fair value through profit or loss, increasing retained earnings and other equity interest in the amounts of $11,153,376 thousand $445,678 thousand and $428,860 thousand, respectively. 3. In accordance with IFRS 9, the Bank and subsidiaries expect to reclassify available-for-sale financial assets, held-to-maturity financial assets of $40,859,030 thousand, and $282,443,736 thousand, respectively, by increasing financial assets at amortised cost, decreasing Retained earnings and increasing other equity interest in the amounts of $323,295,318 thousand, $12,557 thousand and $5,109 thousand, respectively. 4. In accordance with IFRS 9, the Bank and subsidiaries expect to reclassify available-for-sale financial assets of $231,449,238 thousand, by increasing financial assets at fair value through other comprehensive income, decreasing deferred income tax liabilities and increasing other equity interest in the amounts of $231,449,238 thousand, $13,962 thousand, and $13,962 thousand, respectively. 5. In accordance with IFRS 9, the Bank and subsidiaries expect to reclassify Accrued interest of $16,084 thousand, by increasing financial assets at fair value through profit or loss, increasing retained earnings, decreasing other liabilities in the amounts of $16,046 thousand, $26 thousand and $64 thousand, respectively. 6. In accordance with IFRS 9, the Bank and subsidiaries expect to reclassify financial assets at fair value through other comprehensive income, In line with the regulation under IFRS 9 on provision for impairment, by increasing other equity interest, decreasing retained earnings in the amounts of $128,712 thousand, and $128,712 thousand, respectively. 7. In line with the regulation under IFRS 9 on provision for impairment, accounts receivable will have to be decreased by $28,185 thousand, bills discounted and loans decreased by $47 thousand, cash and cash equivalents decreased by $ 516 thousand, due from the Central Bank and call loans to banks decreased by $2,121 thousand, provisions increased by $39,719 thousand and retained earnings decreased by $70,588 thousand. (3) IFRSs issued by IASB but not yet endorsed by the FSC New standards, interpretations and amendments issued by IASB but not yet included in the IFRSs as endorsed by the FSC are as follows: New Standards, Interpretations and Amendments Effective Date by International Accounting Standards Board Amendments to IFRS 9, ‘Prepayment features with negative compensation’ January 1, 2019 Amendments to IFRS 10 and IAS 28, ‘Sale or contribution of assets between an investor and its associate or joint venture’ To be determined by International Accounting Standards Board IFRS 16, ‘Leases’ January 1, 2019 IFRS 17, ‘Insurance contracts’ January 1, 2021 Amendments to IAS 19, ‘Plan amendment, curtailment or settlement’ January 1, 2019 Amendments to IAS 28, ‘Long - term interests in associates and joint ventures’ January 1, 2019 IFRIC 23, ‘Uncertainty over income tax treatments’ January 1, 2019 Annual improvements to IFRSs 2015-2017 cycle January 1, 2019 Except for the following, the application of the above-mentioned new standards, interpretations and amendments is not likely to result in a material change in the accounting policy of the Bank and subsidiaries. The quantitative impact will be disclosed when the assessment is complete: IFRS 16, ‘Leases’ : IFRS 16, ‘Leases’, replaces IAS 17, ‘Leases’ and related interpretations and SICs. The standard requires lessees to recognise a 'right-of-use asset' and a lease liability (except for those leases with terms of 12 months or less and leases of low-value assets). The accounting stays the same for lessors, which is to classify their leases as either finance leases or operating leases and account for those two types of leases differently. IFRS 16 only requires enhanced disclosures to be provided by lessors. 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated. (1) Compliance statement The consolidated financial st atements of the Bank and subsidiaries have been prepared in accordance with the “Regulations Governing the Preparation of Financial Reports by Public Banks”, International Financial Reporting Standards, International Accounting stan dards, IFRIC Interpretat ions, and SIC Interpretations as endorsed by the FSC ( collectively referred herein as the “IFRSs”). (2) Basis for preparation Except for financial assets and financial liabilities (including derivative instruments) at fair value, defined benefit liabilities recognized based on the net amount of pension fund assets less present value of defined benefit obligation, and available-for-sale financial assets measured at fair value, these consolidated financial statements have been prepared under the historical cost convention. The analysis of expense is classified based on the nature of expenses.