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ANNUAL REPORT 2021 121

Notes to the fiNaNcial statemeNts

2. significant accOUnting POlicies (cOnt’D.)

2.4 Summary of significant accounting policies (cont’d.)
(j) Provisions
Provisions are recognised when the Group and the Bank have a present obligation (legal or constructive) 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 of the amount can be made.

When the Group and the Bank expect some or all of a provision to be reimbursed, for example, under an insurance
contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain.
The expense relating to a provision is presented in the statement of profit and loss net of any reimbursement.

Where the effect of the time value of money is material, the amount of the provision is the present value of the
expenditure expected to be required to settle the obligation. Any increase in the provision which due to the passage
of time is recognised in the statement of profit and loss.
Provisions are reviewed at each reporting date and adjusted to reflect the current best estimates.
Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated
reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits
is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurence of
one or more future events are also disclosed as contingent liabilities unless the probability of outflow of economic
benefits is remote.
(k) Financial guarantee contracts

Financial guarantees are contracts that require the Group and the Bank to make specified payment to reimburse
the holder for a loss it incurs because a specified party fails to meet its obligation when it is due in accordance
with the contractual terms. In the ordinary course of business, the Group and the Bank give financial guarantees,
consisting of letters of credit, guarantees and acceptances. Where the Group and the Bank enter into such contracts,
the guarantee contract is treated as a contingent liability until such time as it becomes probable that the Group and
the Bank will be required to make a payment under the guarantee.
Financial guarantees premium are initially recognised at fair value on the date the guarantee was issued,
and presented as ‘deferred income’ in the statements of financial position. Subsequent to initial recognition,
the received premium is amortised over the life of the financial guarantee on a straight line basis.
(l) Employee benefits

Short-term employee benefits obligation in respect of salaries, annual bonuses, paid annual leave and sick leave
are measured on an undiscounted basis and expensed as the related service is provided.

A provision is recognised for the amount expected to be paid under short-term cash bonus if the Group and the
Bank have a present legal or constructive obligation to pay this amount as a result of past service provided by the
employees and the obligation can be estimated reliably.

The Group’s and the Bank’s contribution to statutory pension funds is charged to the statement of profit and loss
in the year to which they relate. Once the contributions have been paid, the Group and the Bank have no further
payment obligations.