Krung Thai Bank Public Company Limited Vientiane Branch
Financial statements for the year ended
31 December 2019 and
Independent Auditors' Report
Krung Thai Bank Public Company Limited - Vientiane Branch
Contents
1
2
3
4
5
6
7
8
Branch infonnation
Management's responsibility
Independent auditors' report
Statement of financial position
Statement of profit or loss and other comprehensive income
Statement of changes in equity
Statement of cash flows
Notes to the financial statements
Page
1
2
3-5
6
7
8
9-10
11 - 60
Krung Thai Bank Public Company Limited - Vientiane Branch
Branch information
Bank
Banking Business License
Investment License
Board of Management
Mrs. Kanjanee Udomchaiporn Ms. Weeranuch Thannasakti Mr. Somphon Tasdorn Mr. Wanchalenn Jiraprapat
Registered office
Auditors
Krung Thai Bank Public Company Limited - Vientiane Branch
No. 165/BOL, dated 30 June 1993
No. 092/PI, 08 July 2008
Branch Manager Branch Manager Deputy Branch Manager Deputy Branch Manager
Effective from 1st March 2020 Effective till 29th February 2020 Effective from 23 rd June 2014 Effective from 1st December 2014
Krung Thai Bank Public Company Limited - Vientiane Branch 80 Lane Xang A venue, Chantabuly District, Vientiane, Lao PDR
KPMG Lao Co., Ltd. 10th Floor, Royal Square Office Building, Samsenthai Road, Nongduong Nua Village, Sikhotabong District, P.O.Box 6978, Vientiane, Lao PDR. Tel +856 (21) 454240-7
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MA.l'IAGEMENT'S RESPONSIBILITY IN RESPECT OF THE FINANCIAL STATEMENTS
The Management of Krung Thai Bank Public Company Limited - Vientiane Branch ("Branch") is responsible for the preparation of the financial statements and for ensuring that the financial statements present fairly, in all material respects, statement of financial position of the Bank as at 31 December 2019, and the statement of profit or loss and other comprehensive income, changes in equity and cash flows for the year then ended 31 December 2019 in accordance with the International financial Reporting Standards ("lFRS''). In preparing the financial statements, Management is required to:
(i) Adopt appropriate accounting policies which are supported by reasonable and prudent judgements and estimates and then apply them consistently;
(ii) Comply with lFRS or, if there have been any departures in the interest of true and fair presentation, ensure that these have been appropriately disclosed, explained and quanti tied in the financial statements;
(iii) Maintain adequate accounting records and an effective system of internal controls;
(iv) Take reasonable steps for safeguarding the assets of the Branch and for preventing and detecting fraud, error and other irregularities;
(v) Prepare the financial statements on the going concern basis unless it is inappropriate to assume that the Branch will continue operations in the foreseeable future; and
(vi) Effectively control and direct the Branch and be involved in all material decisions affecting the Branch's operations and performance and ascertain that such have been properly reflected in the financial statements.
Management confirms that they have complied with the above requirements in preparing the financial statements.
APPROVAL OF THE FINANCIAL STATEMENTS
I, Mrs . Kanjanee Udomchaipom on behalf of the Board of Management, do hereby state that the financial statements set out on pages 5 to 60 present fairly, in all material respects, the financial position of the Branch as at 31 December 2019 and its financial performance and cash flows for the year then ended and have been properly drawn up in accordance with IFRS.
Signed on behalf of the Board of Management
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Branch Manager
3 l March 2020
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KPMG Lao Co., Ltd.
10th Floor, Royal Square Office Building,
Samsenthai Road, Nongduong Nua Village,
Sikhotabong District, P.O. Box 6978,
Vientiane, Lao PDR Te\+856 (21)454240-7
INDEPENDENT AUDITORS' REPORT
To: The management of
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Krung Thai Bank Public Company Limited - Vientiane Branch
Opinion
We have audited the financial statements of Krung Thai Bank Public Company Limited -Vientiane Branch, (the "Branch"), which comprise the statement of financial position as at 31 December 2019, the statements of profit or loss and other comprehensive income, changes in equity and of cash flows for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information.
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Bank as at 31 December 2019 and its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards ("\FRS").
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (\SAs) . Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Branch in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants that is relevant to our audit of the financial statements, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS, 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.
In preparing the financial statements, management is responsible for assessing the Branch's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Branch or to cease operations, or has no realistic alternative but to do so.
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Auditors' Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the f inancial statements as a whole are free from materia l m isstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion . Reasonable assurance is a high leve l of assurance, but is not a guarantee that an audit conducted in accordance w ith ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are cons idered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements .
As part of an aud it in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obta in audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resu lting from fraud is higher than for one resulting from error, as fraud may involve col lusion, forgery, intentional omissions, misrepresentations, or the override of internal control .
• Obtain an understanding of internal control re levant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of express ing an opinion on the effectiveness of the Branch's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and re lated disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Branch's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the re lated disclosures in the financial statements or, if such disclosures are inadequate, to mod ify our opinion. Our conc lusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or cond itions may cause the Branch to cease to continue as a going concern.
• Evaluate the overa ll presentation, structure and content of the financial statements,
including the disclosures, and whether the f inancial statements represent the
underlying transactions and events in a manner that ach ieves fair presentation.
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KPMG Lao Co., Ltd.
Date: 31 March 2020
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5
Krung Thai Bank Public Company Limited - Vientiane Branch
Statement of financial position
Assets
Cash
Interbank and money market items
Statutory deposits
Loans and advances to customers
Investment in securities
Deferred tax assets
Property and equipment
Right of use assets
Intangible assets
Other assets
Total assets
Liabilities and equity
Liabilities
Interbank and money market items
Deposits from customers
Borrowing
Liabilities payable on demand
Current income tax payable
Other liabilities
Total liabilities
Equity
Paid-up capital
Legal reserve
Other reserve
Retained earnings
Other components of equity Total equity
Total liabilities and equity
Note
5 6 7
8 9
10 11 12 13 14
15 16 17
18
19 21 20
31 December
2019 2018
(in LAK)
2.811.109.436 3.077.204.208
223.953.955.181 492.469.286.128
66.643.563.885 66.886.633.180
2.590.283 .586.413 4.175.215.545.772
70.339.424.658 70.984.054. 795
33.103.073.122 12.177.965.731
5.141.823.197 5.443.909.706
3.984.316.653
- 794.973
104.565.253.145 334.079.086.111
3.100.826.105.690 5.160.334.480.604
3.567.084.294 4.154.233.761
216.625.297.493 477.318.267.229
2.720.088.800.000 4.073.501.500.000
97.472.713 217.226.698
7.961.077.105 760.857.288
29.600.813.364 32.738.630.754
2.977.940.544.969 4.588.690. 715. 730
140.000.000.000 100.000.000.000
57.347.487.955 50.000.000.000
45.017.574.074 39.819.576.817
(30.981.928.568) 341.211.160.854
(88.497.572.7402 40.613.027.203
122.885.560.721 571.643.764.874 3.100.826.105.690 5.160.334.480.604
The accompanying notes fonn an integral part of these financial statements
6
Krung Thai Bank Public Company Limited - Vientiane Branch
Statement of profit or loss and other comprehensive income
For year ended 31 December
Note 2019 2018
(in LAK)
Interest income 22 220.100.112.279 448.013.610.220 Interest expense 23 (138.969.713.363) (213.229.109.629)
Net interest income 81.130.398.916 234. 784.500.591
Net impainnent loss of financial assets (7.171.258.071) 50.376.535.331
Net interest income after provision for financial assets 73.959.140.845 285.161.035.922 --
Fees and service income 24 2.274.180.418 5.782.783.786 Fees and service expenses (8.352.336) (5.415.862) Gain on foreign exchange 16.066.264. 704 1.235.056.350
Other operating income 15.225.540 147.743.563
Administrative and other operating expenses 25 (3.380.271.230) (3.475.168.839)
Profit before income tax 88.926.187.941 288.846.034.920 Income tax 26 (9.445.186.842) (75.726.463.475)
Profit for the year 79.481.001.099 213.119.571.445
Other comprehensive income Remeasurement of post-employment benefit
260.899.348 (9.118.943) obligation
Income tax recorded directly in other (114.771.368) 2.188.546
comprehensive income Foreign currency translation differences (129.256.727.923) 24.985.587.815
Other comprehensive income for the year .J.129.110.599.943) 24.978.657.418
Total comprehensive income for the year, net of tax ( 49 .629 .598.844) 238.098.228.863
The accompanying notes fonn an integral part of these financial statements
7
Krung Thai Bank Public Company Limited - Vientiane Branch Statement of changes in equity
Paid-up capital Legal reserve Other reserve
(in LAK) (in LAK) (in LAK)
Balance as at January 2018 100.000.000.000 50.000.000.000 9.253.238.110 Change in accounting policy
Balance as at January 2018 100.000.000.000 50.000.000.000 9.253.238.110
Profit for the year
Profit remittance to Head Office
Exchange difference on translation to presentation currency
Remeasurement of post-employment
Total comprehensive income for the year -Appropriation for tax reserve 30.566.33 8. 707
Balance as at 31 December 2018 and 1 January 2019 100.000.000.000 50.000.000.000 39.819.576.817
Adjustment on initial application of IFRS 16Note(3)
Adjusted balance at 1 January 2019 100.000.000.000 50.000.000.000 39.819.576.817 Profit for the year
Transfer to legal reserve 7.347.487.955 Profit remittance to Head Office
Transfer to capital 40.000.000.000 Remeasurement of post-employment benefit
Exchange difference on translation to presentation currency
Total comprehensive income for the year
Appropriation for tax reserve 5.197.997.257
Balance as at 31 December 2019 140.000.000.000 57.347.487.955 45.017.574.074
Actuarial loss on defined employee
Retained earnings benefit plan
(in LAK) (in LAK)
665.628.407.432 (139.197.583) (80.741.719.854)
584.886.687.578 (139.197.583)
213.119.571.445 (426.228.759.462)
(6.930.397)
(213.109.188.017) (6.930.397) (30.566.338. 707)
341.211.160.854 (146.127.980)
(3.202.552.018)
338.008.608.836 (146.127.980) 79.481.001.099
(7.347.487.955) (395.926.053 .291)
( 40.000.000.000)
146.127.980
146.127.980 (5.197.997.257)
(30.981.928.568) -
The accompanying notes form an integral part of the;se firnmcial ;statcmcnti:l
8
Foreign currency translation differences
Total
(in LAK) (in LAK)
15.773.567.368 840.516.015.327 (80.741.719.854)
15.773.567.368 759.774.295.473
213.119.571.445
( 426.228. 759 .462)
24.985.587.815 24.985.587.815
(6.930.397)
24.985.587.815 (188.130.530.599)
40. 759.155.183 571.643.764.874
(3.202.552.018)
40. 759.155.183 568.441.212.856 79.481.001.099
(395 .926.053 .291)
146.127.980
(129.256.727.923) (129.256.727.923)
(129.256.727.923) (129.110.599.943)
(88.497.572.740) 122.885.560.721
Krung Thai Bank Public Company Limited - Vientiane Branch
Statement of cash flows
Cash flows ji-0111 operating activities Profit from operating before income
tax expense Items to reconcile profit ji-0111
operating before income tax expenses to cash received (paid) fiwn operating activities
Interest income
Interest expense
Depreciation and amortisation expenses
Net impairment loss on financial assets
Unrealised (loss) gain on foreign exchange
Profit from operating before changes in operating assets and liabilities
(Increase) decrease in operating assets
Interbank and money market items (assets)
Statutory deposits with Bank of Lao PDR
Loans to customers
Other assets
Increase ( decrease) in operating liabilities
Interbank and money market items (liabilities)
Deposit from customers
Bo1Towing
Other liabilities
Cash before interest and income tax provided by operating activities
Cash received from interest income
Cash paid for interest expenses
Income tax paid Net cash received from operating
activities
Note
22
23
11, 12, 13, 25
For the year ended 31 December
2019 2018
(InLAK)
88.926.187.941
(220.100.112.279)
138.969.713.363
544.213.849
7.171.258.071
15.511.260.945
(50.000.000.000)
622.180.271
1.430.910.229.333
194.196.917.204
(587.149.467)
(259.450.670.724)
(1.343.373.496.540)
7.187.360.014
( 4.983.368.964)
266.833.330.865
(148.355 .820.333)
(22.523.988.496)
90.970.153.072
(InLAK)
288.846.034.920
(448.013.610.220)
213.229.109.629
385.936.835
(50.376.535.331)
{2.116.749.604)
1.954.186.229
(18.602.836.426)
3.508.964.065.597
(334.125.867.512)
133.933.333
11.874.554.776
(2.945.809.239.557)
( 6.333. 744.610)
218.055.051.830
445.020.102.447
(216.884.274.096)
(70.566.627.505)
375.624.252.676
The accompanying notes fonn an integral part of these financial statements
9
Krung Thai Bank Public Company Limited - Vientiane Branch
Statement of cash flows
Note
Cash flows from investing activities Proceeds from redemption of
investment 9
Purchase of investment at amortised cost 9
Purchase of premises, equipment and leasehold 11
Net cash used in investing activities
Cash flows from financing activities Profit remittance to Head Office
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash ·equivalents at the beginning of the year
Exchange gain (loss) on cash and cash equivalents
Cash and cash equivalents at the end of the year
Cash and cash equivalents Cash 5 CmTent accounts with Bank of Lao
6 PDR
CmTent accounts with domestic 6 banks
CmTent accounts with branches of 6 foreign banks in Lao PDR
For the year ended 31 December 2019 2018
(In LAK) (In LAK)
68.200.000.000 50.000.000.000
( 68.200.000.000) (68.200.000.000)
(145.554.843) (58.079.661)
(145.554.843) (18.258.079.661)
(395.926.053.291) { 426.228.759.462)
(395.926.053.291) (426.228.759.462)
(305.101.455.062) (68.862.586.447)
500.593.372.314 539.747.336.319
(18.570.444.846) 29.708.622.442
176.921.472.406 500.593.372.314
2.811.109.436 3.077.204.208
171.173.991.892 450.105.303.509
2.936.371.078 47.196.271.461
- 214.593.136
176.921.472.406 500.593.372.314
The accompanying notes fonn an integral part of these financial statements
·10
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements For the year ended 31 December 2019
Note Contents
1 Reporting entity 2 Basis of preparation of the financial statements 3 Changes in accounting policies 4 Significant accounting policies 5 Cash 6 Interbank and money market items (assets) 7 Statutory deposits 8 Loans and advances to customers 9 Investment in securities 10 Defened tax assets 11 Prope1iy and equipment 12 Right of use assets 13 Intangible assets 14 Other assets 15 Interbank and money market items (liabilities) 16 Deposits from customers 17 Bo1Towings 18 Other liabilities 19 Paid - up capital 20 Profit remittance 21 Legal reserve 22 Interest income 23 Interest expense 24 Fee and service income 25 Administrative and other operating expenses 26 Income tax 27 Related party transactions 28 Contingent liabilities and commitments 29 Tax contingencies 30 Financial risk management 31 Fair value estimation 32 Events after the reporting period 33 International Financial Reporting Standards (IFRS) not yet adopted
11
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements (continued) For the year ended 31 December 2019
1. Reporting entity
Krung Thai Bank Public Company Limited ("the Bank") is incorporated in Thailand. The Vientiane Branch ("the Branch") is a branch office of the Bank that operates in the Lao People's Democratic Republic ("Lao PDR") under a banking license (License No. 165) granted by the Bank of Lao PDR ("BoL") on 30 June 1993.
BoL's regulation number 338/BOL dated 13 September 2012 requires the banks in Lao PDR to prepare a separated set of financial statements in accordance with International Financial Reporting Standards. Apart from this set, the Branch has prepared the financial statements in accordance with regulations of the Bank of Lao PDR and the Branch's principal accounting policies as the Branch's statutory financial statements. Therefore, the Branch has· 2 financial statements as the follows:
1) In accordance with regulations of the Bank of Lao PDR and the Branch's principal accounting policies ("Lao Practice'').
2) In accordance with International Financial Reporting Standards ("IFRS Practice").
As at 31 December 2019, the actual paid-up capital of the Branch is LAK 140.000 million (31 December 2018: LAK 100.000 million).
The principal activity of the Branch is the provision of comprehensive banking and related financial services in Lao PDR.
As at 31 December 2019, the Branch has 13 (2018: 13) employees.
2. Basis of preparation of the financial statements
(a) Statement of compliance
The Branch's financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") and interpretations issued by the IFRS Interpretations Committee (IFRS IC) applicable to companies reporting under IFRS. The financial statements comply with IFRS as issued by the International Accounting Standards Board (IASB). The financial statements have been prepared on a historical basis.
The Branch's financial statements are presented in LAK, which is the Branch's presentation cutTency.
In preparing these financial statements, the significant judgments made by management in applying the Branch's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the financial statements as of and for the year ended 31 December 2018, except for the change in accounting policy in relation to IFRS 16 effective from 1 January 2019. The nature and the effect of these changes are disclosed in Note 3.
12
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements ( continued) For the year ended 31 December 2019
(b) Basis of measurement
The financial statements have been prepared on the historical cost basis except as stated in the significant accounting policies (Note 4).
This is the first set of the Branch's annual financial statements in which IFRS 16 Leases has been applied. The related changes to significant accounting policies are described in Note 3.
(c) Functional and presentation currency
These accompanying financial statements are presented in Lao Kip "LAK", which is the Branch's functional currency. All financial information presented in LAK in the financial statements and the accompanying notes, unless otherwise stated.
(d) Use of judgments and estimates
In preparing this financial statement, management has made judgements, estimates and assumptions that affect the application of the Branch's accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively.
In preparing these financial statements, the significant judgments made by management in applying the Branch's accounting policies and the key sources of estimation unce1iainty were the same as those applied to the audited financial statements as at and for the year ended 31 December 2019.
Financial asset classification:
Assessment of the business model within which the assets are held and assessment of whether the contractual tenns of the financial asset are solely payments of principal and interest on the principal amount outstanding.
Impainnent of financial instruments
Assessment of whether credit risk on the financial asset has increased significantly since initial recognition and incorporation of forward-looking information in the measurement of ECL.
Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the year ended 31 December 2019 included in the following note:
Note 8 - Loans and advances to customers
(e) Fiscal year
The Branch's repmiing period starts on 1 January and ends on 31 December.
13
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements (continued) For the year ended 31 December 2019
3. Changes in accounting policies
IFRS 16 Leases
a) Leases
The Branch applied IFRS 16 using the modified retrospective approach, under which the cumulative effect of initial application is recognized in retained earnings at 1 January 2019. Accordingly, the comparative infonnation presented for 2018 is not restated i.e. it is presented, as previously reported under IFRS. The details of the changes in accounting policies are disclosed below. Additionally, the disclosure requirements in IFRS 16 have not generally been applied to comparative infonnation.
b) Definition of a lease
Previously, the Branch treated Lease contracts as operating leases and booked related lease expense as operating expense lease under IAS 17. The only lease contracts falling under the domain of IFRS 16 are building rental agreements. The Branch has now assessed whether the rental agreements fall under the definition of a lease, as explained in Note 12.
c) As a lease
As a lessee, the Branch has the Branch office premises. Under IFRS 16, the Branch recognizes right-of-use asset and lease liability i.e. this lease is recorded in the statement of financial position. Further, the Branch has not entered into any new lease during the year ended 31 December 2019.
On transition, for this lease, lease liability was measured at the present value of the remaining lease payments, discounted at the Branch's weighted average rate of deposits for the year 2019.
The right-of-use are measured at their carrying amount as if IFRS 16 was applied since the commencement date of the agreement, discounted using the lessee's weighted average deposits rate at the date of transition.
c) Impact on financial statements
On transition to IFRS 16, the Branch recognized additional right-of-use assets and additional lease liability, recognizing the difference in retained earnings. The impact on transition in summarised below:
Right-of-use assets
Accumulated depreciation
Lease liabilities
Prepaid rental
Retained earnings
14
01 Janua,y 2019
(in LAK)
8 .327 .282.423
( 4.176.462.290)
5.932.028.791
( 1.421.343.360)
(3.202.552.018)
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements (continued) For the year ended 31 December 2019
4. Significant accounting policies
Except for the changes explained in Note 3, the accounting policies set out below have been applied consistently to all periods presented in these financial statements.
(a) Foreign currency transactions
Transactions denominated in foreign cmTencies are translated into the functional currency at the rate of exchange prevailing at the transaction dates.
Monetary assets and liabilities are translated into the Branch's functional currency at the official exchange rate of BOL at the end of the respective reporting period. Foreign exchange gains and losses resulting from the settlement of transactions and from the translation of monetary assets and liabilities into the Branch's functional currency at year-end official exchange rates of BOL, are recognised in profit or loss for the year (as foreign exchange translation gains less losses). Translation at year-end rates does not apply to non-monetary items that are measured at historical cost.
Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.
Effects of. exchange rate changes on non-monetary items measured at fair value in foreign currency are recorded as part of the fair value gain or loss.
The results and financial position of the Branch are translated into the presentation currency as follows:
Assets and liabilities for each statement of financial position presented are translated at the closing mid-rate at the end of the respective reporting period;
Income and expenses are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions);
Components of equity are translated at the historic rate; and
All resulting exchange differences are recognised in other comprehensive income.
The applicable exchange rates for the LAK against foreign currencies were as follows:
United State Dollar ("USD") Thai Baht ("THB")
31 December 2019
8.866,00 298,54
15
31 December 2018
8.509,00 266,13
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements ( continued) For the year ended 31 December 2019
(b) Financial assets and.financial liabilities
In accordance with IFRS 9, all financial assets and liabilities have to be recognised in the Branch's statement of financial position and measured in accordance with their assigned category.
(i) Financial assets
Classification, recognition, derecognition and measurement
those to be measured subsequently at fair value ( either through OCI or through profit or loss); and
those to be measured at amortised cost.
The classification depends on the entity's business model for managing the financial assets and the contractual te1111s of the cash flow.
Financial assets are recognised on trade date, the date on which the Branch commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Branch has transferred substantially all the risks and rewards of ownership.
Loan to customers and accrued interest receivables are initially recognised at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial assets. Transaction costs of financial assets carried at FVPL are expensed in profit or loss.
The financial assets that are hold for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are subsequently measured at amortised cost. Interest income from these financial assets is included in interest income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains (losses) together with foreign exchange gains and losses. Impainnent losses are presented as separate line item in the statement of profit or loss.
Impairment
The Branch assesses on a forward looking basis the expected credit losses ('ECL') associated with its debt instrument assets carried at amortised cost. The impainnent methodology applied depends on whether there has been a significant increase in credit risk. The Branch recognizes a loss allowance for such losses at each repo1iing date. The measurement ofECL reflects:
An unbiased and probability-weighted amount that is detennined by evaluating a range of possible outcomes;
The time value of money; and
Reasonable and supportable infomrntion that is available without undue cost or effort at the reporting date about past events, cmTent conditions and forecasts of future economic conditions.
16
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements (continued) For the year ended 31 December 2019
(i) Financial assets (continued)
The Branch classified its financial assets in loans and receivables that the classification depended on the purpose for which the investments were acquired. Management determined the classification of its investments at initial recognition and, in the case of assets classified as heldto-maturity.
For impainnent on loans and receivable, the amount of the loss was measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that had not been incuned) discounted at the financial asset's original effective interest rate. The cmTying amount of the asset was reduced and the amount of the loss was recognised in profit or loss. If a loan had a variable interest rate, the discount rate for measuring any impairment loss was the current effective interest rate detennined under the contract.
If, in a subsequent period, the amount of the impairment loss decreased and the decrease could be related objectively to an event occmTing after the impai1111ent was recognised (such as an improvement in the debtor's credit rating), the reversal of the previously recognised impairment loss was recognised in profit or loss.
(ii) Financial liabilities
Financial liabilities that are not classified as fair value through profit or loss fall into this category and are measured at amortised cost. Financial liabilities measured at amortised cost are interbank and money market item (liabilities), deposit from customers, and liabilities payable on demand and borrowing.
(iii) Derecognition
The Branch derecognises financial assets when (a) the assets are redeemed or the rights to cash flows from the assets otherwise expired or (b) the Branch has transferred the rights to the cash flows from the financial assets or entered into a qualifying pass-through anangement while (i) also transferring substantially all risks and rewards of ownership of the assets or (ii) neither transferring nor retaining substantially all risks and rewards of ownership, but not retaining control. Control is retained if the counterparty does not have the practical ability to sell the asset in its entirely to an unrelated third party without needing to impose restrictions on the sale.
17
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements (continued) For the year ended 31 December 2019
(c) Assets carried at amortised cost
The Branch assesses on a forward looking basis the expected credit losses ('ECL') associated with its debt instrument assets carried at amortised cost. The impainnent methodology applied depends on whether there has been a significant increase in credit risk. The Branch recognizes a loss allowance for such losses at each reporting date. The measurement of ECL reflects:
An unbiased and probability-weighted amount that is detennined by evaluating a range of possible outcomes;
The time value of money; and
Reasonable and supportable infonnation that is available without undue cost or effort at the reporting date about past events, cmTent conditions and forecasts of future economic conditions.
(d) Cash and cash equivalents
Cash and cash equivalents comprise balances with less than three months' maturity from the date of acquisition, include cash in hand, deposits held at call with banks and other short-tenn highly liquid investments with original maturities of three months or less. Cash and cash equivalents are carried at am01iised cost.
(e) Statutmy deposits
Statutory deposits are maintained with BOL in compliance with BOL regulations. These deposits do not earn interest.
(f) Premises and equipment
Premises and equipment are stated at cost less accumulated depreciation and provision for impainnent, where required.
Costs of minor repairs and day-to-day maintenance are expensed when incurred. Costs of replacing major parts or components of premises and equipment items are capitalised, and the replaced part is retired.
At the end of each reporting period, management assesses whether there is any indication of impainnent of premises and equipment. If any such indication exists, management estimates the recoverable amount, which is detennined as the higher of an asset's fair value less costs to sell and its value in use. The carrying amount is reduced to the recoverable amount and the impainnent loss is recognised in profit or loss for the year. An impainnent loss recognised for an asset in prior years is reversed if there has been a change in the estimates used to detennine the asset's value in use or fair value less costs to sell.
Gains and losses on disposals detennined by comparing proceeds with CatTYing amount are recognised in profit or loss for the year (within other operating income or expenses).
18
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements (continued) For the year ended 31 December 2019
(j) Premises and equipment (continued)
Depreciation on other items of premises and equipment is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives:
Building and leasehold improvement
Furniture and equipment
Computer hardware
Motor vehicles
5 years and 46 years
5 years
5 years
5 years
The residual value of an asset is the estimated amount that the Branch would currently obtain from disposal of the asset less the estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its useful life. The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
(g) Leases
The Branch has applied IFRS 16 using the modified retrospective approach and therefore the comparative information has not been restated and continues to be rep01ied under IFRS.
Policy applicablefiwn 1 Janua,y 2019
At inception of a contract, the Branch assesses whether a contracts is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Branch assesses whether:
the contract involves the use of an identified asset;
the Branch has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use: and
the Branch has the right to direct the use of the asset. The Branch has this right when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used.
This policy is applied to contracts entered in to, or changed, on or after 1 January 2019.
At inception or on reassessment of a contract that contains a lease component, the Branch allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices.
Policy applicable before 1 Janua,y 2019
Operating leases
In the comparative period, payments made under operating leases were recognised in profit or loss on a straight-line basis over the tenn of the lease.
19
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements (continued) For the year ended 31 December 2019
(h) Intangible assets
The Branch's intangible assets other than goodwill have definite useful life and primarily include capitalised computer software. Acquired computer software licences are capitalised on the basis of the costs incmTed to acquire and bring to use the specific software. Development costs that are directly associated with identifiable and unique software controlled by the Branch are recorded as intangible assets if the inflow of incremental economic benefits exceeding costs is probable. Capitalised costs include staff costs of the software development team and an appropriate portion of relevant overheads. All other costs associated with computer software, e.g. its maintenance, are expensed when incurred. Capitalised computer software is amortised on a straight line basis over expected useful lives of 2 years and 5 years. Amortisation is included in the administrative and other operating expense.
(i) Current and deferred income tax
Income taxes have been provided for in the financial statements in accordance with legislation enacted or substantively enacted by the end of the reporting period. The income tax charge comprises current tax and deferred tax and is recognised in profit or loss for the year, except if it is recognised in other comprehensive income or directly in Head Office Account because it relates to transactions that are also recognised, in the same or a different period, in other comprehensive income or directly in Head Office Account.
CutTent tax is the amount expected to be paid to, or recovered from, the taxation authorities in respect of taxable profits or losses for the cunent and prior periods. Taxable profits or losses are based on estimates if the financial statements are authorised prior to filing relevant tax returns. Taxes other than on income are recorded within administrative and other operating expenses.
Defened income tax is provided using the liability method or temporary differences arising between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Defened tax assets are recognised only if it is probable amounts will be available to utilise those temporary differences and losses.
(j) Employee benefits
Legal severance payment plan
The liability recognised in the statement of financial position in respect of defined benefit plan is calculated annually using the projected unit credit method. The present value of the defined benefit obligation is detem1ined by discounting the estimated future cash outflows using market yield of govermnent bonds that are denominated in the cunency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension liability.
The obligation is equal to 15% of the basic monthly salary for every month of service for dismissed employees who have worked for the Branch for more than three years. ·
20
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements (continued) For the year ended 31 December 2019
Short-term obligations
Liabilities for wages and salaries expected to be settled within 12 months after the end of the period in which the employees render the related service are recognised in respect of employee's services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The short-tenn employee benefit obligations are presented as payables.
(k) Provisions
Provisions are recognised when it's probable that outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. The Branch recognises no provisions for future operating losses.
(I) Recognition of income and expenses
Interest income and expenses
Interest income and expenses for all interest-bearing financial instruments are recognised within 'Interest income' and 'Interest expenses' in profit of loss 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 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 Branch estimates cash flows considering all contractual tem1s of the financial instrument (for example, prepayment options) but does not consider future credit losses. The calculation includes all material fees and points paid or received between parties to the contract that are an integral paii of the effective interest rate, transaction costs and all other premiums or discounts.
Once a financial asset or a group of similar financial assets has been written down as a result of an impainnent loss, interest income is recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impainnent loss.
Fee and commission income and expenses
Fees and commissions are generally recognised on an accrual basis when the service has been provided. Commitment fees for loans that are likely to be drawn down are deferred (together with related direct costs) and recognised as an adjustment to the effective interest rate on the loan. Commission fees arising from negotiating, or participating in the negotiation of, a transaction for a third party are recognised on completion of the underlying transaction. Portfolio and other management advisory and service fees are recognised based on the applicable service contracts, usually on a time-proportionate basis.
21
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements (continued) For the year ended 31 December 2019
(111) Financial guarantee contracts
Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss when incun-ed because a specified debtor fails to make payments when due, in accordance with the terms of debt instruments. Such financial guarantees are given to banks, financial institutions and other bodies on behalf of customers to secure loans, overdrafts and other banking facilities.
Financial guarantees are initially recognised in the financial statements at fair value on the date the guarantee was given. The fair value of a financial guarantee at the time of signature is zero because all guarantees are agreed on ann's length tenns and the value of the premium agreed con-esponds to the value of the guarantee obligation. No receivable for the future premiums is recognised. Subsequent to initial recognition, the Branch's liabilities under such guarantees are measured at the higher of the initial amount, less amortisation of fees recognised in accordance with IFRS 15, and the best estimate of the amount required to settle the guarantee. These estimates are detennined based on experience of similar transactions and history of past losses, supplemented by the judgement of management. The fee income earned is recognised on a straight-line basis over the life of the guarantee.
Any increase in the liability relating to guarantees is reported in the statement of comprehensive income within other operating expenses.
(11) Critical accounting estimates and judgements in applying accounting policies
The preparation of financial statements in confonnity with IFRS requires management to make estimates and assumptions in certain circumstances, affecting reported amounts of revenue, expenses, assets and liabilities, the disclosure of contingent assets and liabilities. Actual results could differ from these estimates. The significant areas requiring management to make judgments and estimates that affect reported amounts and disclosures in the financial statements are as follows:
Impairment of amortised cost
Expected credit losses ('ECL') are recognised for loans and advances to banks and customers, other financial assets held at amortised cost, debt instruments measured at FVOCI, and certain loan commitments and financial guarantee contracts. At initial recognition, allowance ( or provision in the case of case of some loan commitments and financial guarantees) is required for ECL resulting from default events that are possible within the next 12 months, or less, where the remaining life is less than 12 months ('12 month ECL'). In the event of a significant increase in credit risk, allowance ( or provision) is required for ECL resulting from all possible default events over the expected life of the financial instrument ('lifetime ECL'). Financial assets where 12-month ECL is recognised are considered to be 'stage 1 ';financial assets that are considered to have experienced a significant increase in credit risk are in 'stage 2'; and financial assets for which there is objective evidence of impainnent so are considered to be in default or otherwise credit impaired are in 'stage 3'. Purchased or originated credit-impaired financial assets ('POCI') are treated differently.
22
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements (continued) For the year ended 31 December 2019
(n) Critical accounting estimates and judgements in applying accounting policies (continued)
Unimpaired and without significant increase in credit risk - (stage!)
ECL resulting from default events that are possible within the next 12 months (12-month ECL) are recognised for financial instruments that remain in stage 1.
Sign(ficant increased in credit risk (stage2)
An assessment of whether credit risk has increased significantly since initial recognition is perfom1ed at each reporting period by considering the change in the risk of default occu1Ting over the remaining life of the financial instrument. The assessment explicitly or implicitly compares the risk of default occurring at the reporting date compared with that at initial recognition, taking into account reasonable and supportable infonnation, including infonnation about past events, cu1Tent conditions and future economic conditions. The assessment is unbiased, probabilityweighted, and to the extent relevant, uses forward-looking infonnation consistent with the used in the measurement of ECL. The analysis of credit risk is multifactor. The determination of whether a specific is relevant and its weight compared with other factors depends on the type of product, the characteristics of the financial instrument and the bo1Tower, and the geographical region. Therefore, it is not possible to provide a single set of criteria that will detennine what is considered to be a significant increase in credit risk, and these criteria will differ for different types ofleding, particularly between retail and wholesale. However, unless identified at an earlier stage, all financial assets deemed to have suffered a significant increases in credit risk when 30 days past due. In addition, wholesale loans that are individually assessed, typically corporate and commercial, and included on a watch or worry list, are including in stage 2.
Credit impaired (stage3)
Branch dete1111ines that a financial instrument is credit impaired and in stage 3 by considering relevant objective evidence, primarily whether:
contractual payments of either principal or interest are past due for more than 90 days;
there are other indications that the bonower is unlikely to pay or considered to be in default.
If such unlikeliness to pay is not identified at an earlier stage, it is deemed to occur when an exposure is 90 days past due, even where regulatory rules permit default to be defined based on 180 days past due. Therefore, the definitions of credit impaired and default are aligned as far as possible so that stage 3 represents all loans that are considered defaulted or otherwise credit impaired.
Interest income is recognised by applying the effective interest rate to the amortised cost amount.
23
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements ( continued) For the year ended 31 December 2019
(o) Income tax
Income tax comprises current tax and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised in other comprehensive income or directly in equity, in which case the tax is recognised in the same statement as the related item appears.
Current tax is the tax expected to be payable on the taxable profit for the year and on any adjustment to tax payable in respect of previous years. Branch provides for potential current tax liabilities that may arise on the basis of the amounts expected to be paid to the tax authorities.
Deferred tax is recognised on temporary difference between the can-ying amounts of assets and liabilities in the balance sheet, and the amounts attributed to such assets and liabilities for tax purposes. Deferred tax is calculated using tax rates excepted to apply in the periods in which the assets will be realised or the liabilities settled.
Current and deferred tax are calculated based on tax rates and law enacted, or substantively enacted, by the balance sheet date.
(p) Initial recognition of related party transactions
In the nonnal course of business, the Branch enters into transactions with its related parties. IFRS 9 requires initial recognition of financial instruments based on their fair values. Judgement is applied in determining if transactions are priced at market or non-market interest rates, where there is no active market for such transactions. The basis for judgement is pricing for similar types of transactions with unrelated parties and effective interest rate analysis. Terms and conditions of related party balances are disclosed in Note 27.
24
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements ( continued) For the year ended 31 December 2019
5. Cash
Cash on hand Total
6. Interbank and money market items (assets)
Domestic items: CmTent accounts with Bank of Lao PDR Current accounts with domestic banks Current accounts with branches of foreign
banks in Lao PDR
Tenn placement with branches of foreign banks in Lao PDR
Gross interbank and money market items
Less: expected credit loss Total interbank and money market items
(asset)
7. Statutory deposits
Statutory deposits on:
Branch Capital
Customer Deposits
Gross statutory deposits
31 December 2019 2018
(in LAK)
2.811.109.436 3.077.204.208 2.811.109.436 3.077.204.208
31 December 2019 2018
(in LAK)
171.173.991.892 2.936.371.078
174.110.362.970
50.000.000.000
224.110.362.970
(156.407.789)
223.953.955.181
450.105.303.509 4 7 .196.271.461
214.593.136
497.516.168.106
497.516.168.106
(5.046.881.978)
492.469.286.128
31 December 2019
(in LAK)
40.035.212.500
26.608.351.385
66.643.563.885
2018
35.212.500
66.851.420.680
66.886.633.180
Statutory deposits on capital are maintained with the BOL in compliance with BOL regulations, the amounts of which should be at least LAK 5 million.
Statutory deposits on customer deposits with BOL is maintained in compliance with applicable BOL regulations, the amounts of which are detennined as a defined percentage of customers' deposits with the Branch, i.e. 5% on deposits of Lao Kip and 10% on deposits of USD and Thai Baht. These deposits do not earn interest.
25
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements ( continued) For the year ended 31 December 2019
8. Loans and advances to customers
Loans to corporate entities
Loans to government
Loans to individual
Loans to financial institution (BOL)
Loans to customers and accrued interest receivables
Less: expected credit loss Total loans to customers and accrued
interest receivables, net
31 December 2019 2018
(in LAK)
43.886.411.708 83.436.810.184
l .945.758.293.905 2.419.801.762.229
642.554.088 481.984.001
666.823.638.003 l.726.358.972.929
2.657 .110.897. 704 4.230.079.529.343
(66.827.311.291) (54.863.983.571)
2.590.283.586.413 4.175.215.545. 772
At 31 December 2019 and 2018, economic sector risk concentrations within the customer loan portfolio are as follows:
Agriculture Electricity Lumber industry and wood product Non-profit organisation Personal consumption Manufacturing
Loans to customers and accrued interest receivables
31 December 2019 2018
(in LAK)
6.579.015.607 l.060.752.461.797
642.554.088
l.551.829.470.111
37.307.396.101
2.657.110.897.704
16.656.642.205
l .384.882.269.613 693.721.731
2.761.278.465.545 10.980.869
66.557.449.380
4.230.079.529.343
Reconciliation of expected credit loss is as follows:
Balance at 1 January Provision made in the year Balance at 31 December
26
31 December 2019
(in LAK)
54.863.983.571 11.963.327.720 66.827.311.291
2018
2.275.033.893 52.588.949.678 54.863.983.571
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements ( continued) For the year ended 31 December 2019
At 31 December 2019 and 2018, loans are analysed by collateral is as follows:
31 December 2019 2018
Unsecured loans Loans guaranteed by other parties,
including other banks Loans collateralised by: Other real estate Total loans to customers (before
impairment)
(in LAK)
1.558.408.485. 718
l.060.752.461.797
37.949.950.189
2.657.110.897.704
1.743.015.615.133
2.419.812.743.098
67.251.171.112
4.230.079.529.343
At 31 December 2019 and 2018, loans are analysed by residency as follows:
Residents Loans to customers and accrued
interest receivables
31 December 2019
(in LAK) 2018
2.657.110.897.704
2.657.110.897.704
4.230.079.529.343
4.230.079.529.343
At 31 December 2019 and 2018, loans are analysed by credit quality is as follows:
31 December 2019 2018
Normal neither past due nor impaired -gross
Past due, but not impaired - gross Impaired - gross
Less: expected credit loss Total loans to customers and accrued
interest receivables, net
27
(in LAK)
2.619.803.501.603
37.307.396.101 (66.827.311.291)
2.590.283.586.413
4.164.601.841.381 65.477.687.962
(54.863.983.571)
4.17 5.215.545. 772
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements (continued) For the year ended 31 December 2019
10. Deferred tax assets
For the years ended 31 December 2019, the movements of deferred tax assets (liabilities) is as follows:
For the year ended 31 December 2019
At 1 January 2019
Deferred tax assets
Deferred revenue 3.265.413.064
Retirement benefit obligations 114. 771.368
Impairment on loans 9.191.632.399
Deferred tax assets 12.571.816.831
Deferred tax liabilities
Prepaid expenses (393.851.100)
Deferred tax liabilities (393.851.100)
Deferred tax assets, net 12.177.965.731
Credited/ ( charged) to profit
or loss
Credited to other
components of equity
(In LAK)
25.613.783.756
(114. 771.368)
( 4.966.316.098)
20.647.467.658 (114. 771.368)
392.411.100
392.411.100
21.039.878.758 (114.771.368)
29
At 31 December 2019
28.879.196.820
4.225 .316.302
33.104.513.122
( 1.440.000)
(1.440.000)
33.103.073.122
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements (continued) For the year ended 31 December 2019
10. Deferred tax assets (continued)
For the years ended 31 December 2018, the movements of deferred tax assets (liabilities) is as follows:
For the year ended 31 December 2018
At 1 January 2018 before Adjustment At 1 January 2018 Credited/ ( charged) adjustment IFRS9 after adjustment to profit or loss
(In LAK)
Deferred tax assets
Deferred revenue 7 .948.118.927 - 7.948.118.927 4.835.595.302)
Retirement benefit obligations 102.855.081 - 1 02.855.081 6.652.552
Impairment on loans (4.626.190.658) 25.497.385.198 20.871.194.540 (11.758.327.621)
Deferred tax assets 3.424.783.350 25.497.385.198 28.922.168.548 (16.587 .270.371)
Deferred tax liabilities
Prepaid expenses 380.600.136) - (380.600.136) (2.338.192)
Deferred tax liabilities (380.600.136) - (380.600.136) (2.338.192).
Deferred tax assets, net 3.044.183.214 25.497.385.198 28.541.568.412 (16.589 .608.563)
30
Credited to other
components of Foreign exchange At 31 December equity difference 2018
- 152.889 .439 3.265.413.064
2.222.154 3.041.581 114.771.368
- 78.765.480 9.191.632.399
2.222.154 234.696.500 12.571;816.831
(10.912.772) (393.851.100)
- (10.912.772) (393.851.100)
2.222.154 223.783.728 12.177.965.731
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements (continued) For the year ended 31 December 2019
11. Property and equipment
Movement of the balance of property and equipment for the year ended 31 December 2019 is as follows:
Building and leasehold Furniture and improvement equipment
(in LAK) Cost: Balance at I January 2019 9.587.061.565 3.493.249.627 Additions 145.554.843 Disposal (69.333.020) ( I 09.442.437) Balance at 31 December 2019 9.517. 728.545 3.529.362.033
Accumulated depreciation: Balance at I January 2019 (5.497.469.298) (2.405.530.067) Charges for the year (161.863.708) (129.959.620) Disposal 22.316.875 91.825.508 Balance at 31 December 2019 (5.637.016.131) (2.443.664.179)
Net book value: As at 1 January 2019 4.089.592.267 1.087.719.560
As at 31 December 2019 3.880.712.414 1.085.697.854
31
Others Total
1.142.386.151 14.222.697 .343 145.554.843
(47.137.328) (225.912.785) 1.095.248.823 14.142.339.401
(875.788.272) (8.778.787.637) (85.202.958) (377.026.286)
41.155.336 155.297.719 (919.835.894) (9.000.516.204)
266.597.879 5.443.909.706 175.412.929 5.141.823.197
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements (continued) For the year ended 31 December 2019
11. Property and equipment (continued)
Movement of the balance of property and equipment for the year ended 31 December 2018 is as follows:
Building and leasehold Furniture and improvement equipment
(in LAK) Cost: Balance at 1 January 2018 9.320.691.860 3.362.453.018 Additions 34.178.515 Foreign currency translation 266.369.705 96.618.094 Balance at 31 December 2018 9.587.061.565 3.493.249.627
Accumulated depreciation: Balance at 1 January 2018 (5.182.931.891) (2.210.694.356) Charges for the year (163.901.093) (129.666.647) Foreign currency translation (150.636.314) (65.169.064) Balance at 31 December 2018 (5.497.469.298) (2.405.530.067)
Net book value: As at 1 January 2018 4.137.759.969 1.151. 758.662
As at 31 December 2018 4.089.592.267 1.087.719.560
32
Others Total
1.087.051.869 13.770. 196.747 23.901.146 58.079.661 31.433.136 394.420.935
1.142.386.151 14.222.697 .343
(768.523.455) (8.162.149.702) (84.011.642) (377.579.382) (23.253.175) {239.058.553)
(875. 788.272) (8.778.787.637)
318.528.414 5.608.04 7 .045
266.597 .879 5.443.909.706
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements ( continued) For the year ended 31 December 2019
12. Right of use assets
Movement of intangible assets during 2019 are as follows:
Cost: Balance at 1 January 2019 Recognition of right-of-use asset on initial application ofIFRS 16 Adjusted balance at 1 January 2019 Addition Balance at 31 December 2019
Accumulated depreciation: Balance at 1 January 2019 Recognition of right-of-use asset on initial application of IFRS 16
Adjusted balance at 1 January 2019
Charges for the year
Balance at 31 December 2019
Net book value: As at 1 January 2019 - Adjusted As at 31 December 2019
(a) Right-of-use asset
Balance at 1 January 2019 - net Additions
Depreciation charge for the year
Balance at 31 December 2019
(b) Amount recognized in pro.fit or loss
Interest on lease liability
Depreciation expense
Total
33
2019
(in LAK)
8.327.282.423 8.327.282.423
8.327.282.423
(4.176.462.290)
(4.176.462.290)
{166.503.480)
( 4.342.965. 770)
4.150.820.133
3.984.316.653
(in LAK)
4.150.820.133
( 166.503 .480)
3.984.316.653
(in LAK)
172.878.932
166.503.480
339.382.412
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements ( continued) For the year ended 31 December 2019
13. Intangible assets
Movement of intangible assets during 2019 are as follows:
2019
Cost: Balance at 1 January Foreign cunency translation Balance at 31 December
Accumulated amortization: Balance at 1 January Amortisation charge Foreign cunency translation Balance at 31 December
Net book value: As at 1 January
As at 31 December
14. Other assets
(in LAK)
134.915.804
134.915.804
( 134.120.831) (684.083) (110.890)
(134.915.804)
794.973
31 December (in LAK)
2018
13 1.167 .265 3.748.539
134.915.804
(122.149.787) (8.357.453) (3.613.591)
(134.120.831)
9.017.478 794.973
Inter-office accounts with Head Office Interest receivables
2019
104.358.601.092 199.452.054
7.199.999
2018
334.079.086.111
Prepaid expenses Total other assets
15. Interbank and money market items (liabilities)
Conespondent accounts and overnight placements of other banks
Total interbank and money market items (liabilities)
34
104.565.253.145 334.079.086.111
2019
31 December (in LAK)
3.567.084.294
3.567 .084.294
2018
4.154.233.761
4.154.233.761
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements (continued) For the year ended 31 December 2019
16. Deposits from customers
Current accounts Saving accounts Fixed deposits Total deposit from customers
(a) Analysed by currencies
Lao Kip ("LAK") United States Dollar ("USD") Thai Baht ("THB") Total deposit from customers
(b) Analysed by relationship
Customers Staff Total deposit from customers
(c) Analysed by interest rates
Savings deposits Lao Kip ("LAK") United States Dollar ("USD") Thai Baht ("THB")
Term deposits Lao Kip ("LAK") United States Dollar ("USD") Thai Baht ("THB")
35
31 December (in LAK)
2019
84.233.601.995 59.250.138.011 73.141.557.487
216.625.297.493
2018
90.477.185.142 326.758.040.323
60.083.041.764 477.318,267.229
31 December (in LAK)
2019
21.917.476.327 49.929.186.827
144.778.634.339 216.625.297.493
2018
10.032.001.205 316.611.049.837 150.675.216.187 477.318.267.229
31 December (inLAK)
2019
216.520.902.389 104.395.104
216.625.297.493
2019 (%)
0,75 0,50 0,50
1,50 - 4,75 1,00 - 1,75 1,25 - 4,00
2018
477.195.465.504 122.801.725
477.318.267.229
2018 (%)
0,75 0,50 0,50
1,50 - 4,25 1,00 - 1,75 1,25 - 4,00
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements (continued) For the year ended 31 December 2019
17. Borrowing
18.
19.
Borrowing from Head Office Total borrowing
31 December (in LAK)
2019
2.720.088.800.000 2. 720.088.800.000
2018
4.073.501.500.000 4.073.501.500.000
As at 31 December 2019, the borrowing from Head Office amounts to USD 306,80 million or equivalent to LAK 2.720,08 billion (2018: USD 477,55 million or equivalent to LAK 4.073,50 billion) with interest rate ranging between 2,27% - 4,82% per annum (2018: 1,83% - 4,68% per annum).
Other liabilities
31 December (inLAK)
2019 2018
Interest payable 18.512.422.187 27.979.500.029 Lease liability 6.104.907.723 Accrued expense 481.952.100 564.317.078 Withholding tax payable 9.236.238 7.270.717 Others 4.492.295.116 4.187 .542.930 Total other liabilities 29.600.813.364 32. 738.630. 754
Paid up capital
The movement of the paid up capital during the year is presented below:
Balance as at 1 January Transfer to capital
Balance as at 31 December
Total contributed legal capital
31 December (in LAK)
2019 100.000.000.000 40.000.000.000
140.000.000.000
140.000.000.000
2018 100. 000. 000. 000
100.000.000.000
100.000.000.000
According to Article 12 of amended Law on Commercial Bank No. 56/NA dated 07 December 2018 and Decision No. 7 52/BoL on Minimum Registered Capital and Investment Capital, dated 27 August 2019, a Branch of foreign commercial bank is required to raise its capital to minimum ofLAK 300 billion within 5 years. All banks/branches are required to inject the additional capital not less than 20% each year commencing from September 2019.
36
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements (continued) For the year ended 31 December 2019
Accordingly, the Branch has transferred its retained earning for capital injection on 24 December 2019 and obtained the acknowledgement letter No. 129/CBS, dated 23 March 2020 on increasing the registered capital amounting to LAK 140.000.000.000 (2018: LAK 100.000.000.000) from the Commercial Bank Supervision Department, Bank of Lao PDR.
20. Profit Remittance
According to the notification of Commercial Bank Supervisor Department No. 19/CBS, dated 10 January 2018, other reserve shall be maintained, whenever profit remittance, comprising annual appropriation of 5% of net profit before income tax. However, other reserve would be approved by Bank of Lao PDR before appropriation.
For the year ended 31 December 2019, the Branch had obtained approval letters No. 31/CBS and 312/CBS for profit remittance of2017 and 2018 amounting to LAK 206.608.459.096,57 and LAK 189.317.594.194,04 on 10 January 2019 and 13 May 2019 respectively from the Commercial Bank Supervision Depaiiment, Bank of Lao PDR.
21. Legal reserve
In accordance with the amended Law on Enterprise No. 46/NA dated 26 December 2013, the Branch is required to provide legal reserve at the rate 10% of profit after deducting retained loss. The Branch can stop reserving when the legal reserve has reached up to 50% ofregistered capital. The legal reserve is subject to approval by Board of Management.
22. Interest income
Loans and advances to customers Investment securities at am01iised cost Te1111 deposit with other bank Total interest income
23. Interest expense
Saving accounts Fixed deposits Borrowing Total interest expense
37
31 December (in LAK)
2019
217.135.290.361 2.765.369.863
199.452.055 220.100.112.279
2018
444.860.170.794 3.153.439.426
448.013.610.220
31 December (in LAK)
2019
1.289.345.956 2.751.490.327
134.928.877.080 138.969. 713.363
2018
2.165.982.394 2.469.541.435
208.593 .585 .800 213.229.109.629
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements ( continued) For the year ended 31 December 2019
24. Fee and service income
Trade finance fee Others Total fee and service income
25. Administrative and other operating expenses
Staff costs Interest expense on lease liability Premise expenses Depreciation and amortisation expenses Professional fees Travelling expenses Communication expenses Deposit contribution Utilities expenses Sundries Others Total administrative and other operating
expenses
26. Income tax
(a) Components of income tax expense
31 December (in LAK)
2019
1.181.312.928 1.092.867.490 2.274.180.418
31 December (in LAK)
2019
1.187 .320.834 172.878.932 61.849.780
544.213.849 315.313.900 58.293.512 48.079.067
181.769.272 140.897.403 131.830.185 537.824.496
3.380.271.230
2018
2.921.211.982 4.032.044.805 5. 782. 783. 786
2018
1.038.975.534
300.080.888 385.936.835 389.179.000
59.428.271 8.798.254
230.400.682 141.509.766 236.517.167 684.342.442
3.475.168.839
For the years ended 31 December 2019 and 2018, income tax expenses comprise as follows:
31 December
CmTent tax expense Deferred tax income/ (expense)
Total income tax expense for the year
(in LAK) 2019
30.485.065.601 (21.039.878.759)
(9.445.186.842)
2018
58.804.814.034 16.921.649.441
75. 726.463.475
For the year ended 31 December 2019, in accordance with Lao Income Tax law, the Branch has an obligation to pay a corporate income tax at the rate of 24% (2018: 24%) of taxable income.
38
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements (continued) For the year ended 31 December 2019
26. Income tax (continued)
For the years ended 31 December 2019 and 2018, income tax expense was calculated in accordance with the Law on Tax (Amendment Version) No. 70/NA dated 15 December 2015. The announcement was effective for the accounting period 1 January 2016 onwards.
As announced thru the Notification from Ministry of Finance on Implementation of the Taxation Management Law, Income Tax Law and Excise Tax Law, No. 042/ MOF, dated on 11 February 2020 grants a reduction on Profit Tax rate for the accounting period of 2020; from 24% to 20% which begins from 1 January 2020. The tax profit of the Branch for 2016 to 2019 were not yet recalculated and approved by the tax authorities for the year ended 31 December 2019 according to requirement of the Notice No. 4475/MoF, dated 06 November 2019.
(b) Reconciliation of effective tax rate
Profit before tax
Income tax at the domestic tax rate (2019 and 2018: 24%)
Add Tax effect of non-deductible expense
Less: impact of income tax rate deduction Income tax as per statement of
comprehensive income
Effective income tax rate
39
31 December (in LAK)
2019
88.926.187.941
21.342.285.106
(18.517 .712.888)
6.620.614.624
9.445.186.842
10.62%
2018
288.846.034.920
69.323.048.381
6.403.415.094
75. 726.463.475
26.22%
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements ( continued) For the year ended 31 December 2019
27. Related party balances and transactions
Related party transactions include all transactions undertaken with other parties to which the Branch is related. A party is related to the Branch if:
(a) directly, or indirectly through one or more intermediaries, the party:
controls, is controlled by, or is under common control with the Branch (this includes parents, subsidiaries and fellow subsidiaries);
has an interest in the Branch that gives it significant influence over the Branch or;
has joint control over the Branch.
(b) the paiiy is a joint venture in which the Branch is a venture;
(c) the party is a member of the key management personnel of the Branch or its parent;
(d) the party is a close member of the family of any individual referred to in (a) or (c);
(e) the party is a Branch that is controlled,jointly controlled or significantly influenced by, or for which significant voting power in such Branch resides with, directly or indirectly, any individual referred to in ( c) or ( d) or
(f) the paiiy is a post-employment benefit plan for the benefit of employees of the Branch, or of any branch that is a related party of the Branch.
The significant related party transactions are transacted with the Krnng Thai Bank Public Company Limited ("the Bank") which is its head office incorporated in Thailand.
For the years ended 31 December 2019 and 2018, the Branch has significant business transactions with the Bank as follow:
Inter-office accounts with Head Office Borrowing from Head Office
31 December (in LAK)
2019
104.358.601.092 (2.720.088.800.000)
2018
334.079.086.111 ( 4.073.501.500.000)
For the years ended 31 December 2019 and 31 December 2018, significant transactions with related paiiies during the year are conducted on normal commercial tenns as follows:
Interest expenses
40
31 December (in LAK)
2019
134.928.877 .080
2018
208.593.585.800
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements (continued) For the year ended 31 December 2019
28. Contingent liabilities and commitments
(a) Loan guarantee and otherfinancialfacilities
At 31 December 2019 and 2018, the Branch had the contractual amounts of the Branch's off-financial position financial instruments that commit it to extend credit to customers, guarantee and other financial facilities as follows:
Off statements of financial position Unused overdrafts Standby Letter of Credit Letter of guarantee Total
(b) Commitment
(in LAK) 2019
8.448.558.325 3 .043.641.782
63.443.764.394 74.935.964.501
2018
8.424.943.875 94.465.562.137
2.520.298.793 105.410.804.805
The Branch entered into lease agreements in respect of office rental and other service contracts.
At 31 December 2019 and 31 December 2018, future minimum payments for such leases under non-cancellable contracts are summarised as follows:
Over one year and not later than five years Over five years Total commitments
29. Tax contingencies
2019 (in LAK)
2018
352.885 .248 7.410.590.208 7.763.475.456
The taxation system in Lao PDR is relatively new and is characterised by numerous taxes and frequently changing legislation, which is often unclear, contradictory, and subject to interpretation. Often, differing interpretations exist among numerous taxation authorities and jurisdictions. Taxes are subject to review and investigation by a number of authorities, who are enabled by law to impose severe fines, penalties and interest charges.
These facts may create tax risks in Lao PDR substantially more significant than in other countries. Management believes that it has adequately provided for tax liabilities based on its interpretation of tax legislation. However, the relevant authorities may have differing interpretations and the effects could be significant.
30. Financial risk management
The risk management function within the Branch is can-ied out in respect of financial risks, operational risks and legal risks. Financial risk comprises market risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk. The primary objectives of the financial risk management function are to establish risk limits, and then ensure that exposure to
41
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements (continued) For the year ended 31 December 2019
30. Financial risk management ( continued)
risks stays within these limits. The operational and legal risk management functions are intended to ensure proper functioning of internal policies and procedures, in order to minimise operational and legal risks.
The expected credit losses relating to financial assets under IFRS 9 is recorded in the income statement under 'change in expected credit losses and other credit impainnent charges' ('ECL').
( a) Credit risk
(]) Credit risk measurement
The estimation of credit exposure is complex and requires the use of models, as the exposure varies with changes in market condition, expected cash flows and the passage of time. The assessment of credit risk of assets entails fmiher estimations as to the likelihood of defaults occurring, of the associated loss ratios and of default con-elations between counterparties. The Branch measures credit risk using Probability of Default (PD), Exposure at Default (EAD) and Loss Given Default (LGD). This is similar to the approach used for the purposes of measuring Expected Credit Loss (ECL) under IFRS 9.
Probability of Default represents the likelihood of a bon-ower defaulting on its financial obligation.
Exposure at Default is based on the amounts the Branch expects to be owed at the time of default.
Loss Given Default represents the Branch's expectation of the extent of loss on a defaulted exposure. LGD varies by type of counterparty, type and seniority of claim and availability of collateral. LGD is expressed as a percentage loss per unit of exposure at the time of default (EAD).
(2) Maximum exposure to credit risk before collateral held or other credit enhancements
Credit risk exposures relating to on-statement of financial positions assets are disclosed in Note 6 and Note 8.
Interbank and money market items have low credit risk due to the fact that the Branch has transactions with the financial institutions.
Credit risk for off- statement of financial positions financial instruments is defined as the possibility of sustaining a loss as the result of another party to a financial instrument failing to perfonn in accordance with the tenns of the contract. The Branch uses the same credit policies in assuming conditional obligations as it does for on-balance sheet financial instruments, through established credit approvals, risk control limits and monitoring procedures. The credit risk exposures relating to off-statement of financial positions are disclosed in Note 28.
42
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements ( continued) For the year ended 31 December 2019
30. Financial risk management (continued)
(a) Credit risk (continued)
Concentration of risks of financial assets with credit risk exposure
Geographical sectors
Held or other credit support as categorised by geographical region as of 31 December 2019 and 31 December 2018 are disclosed in Note 8, the Branch has allocated exposures to regions based on the country of domicile of its counterpatiies.
JndustJy sectors
Any collateral held or other credit support as categorised by the industry sectors of the Branch's counterpaiiies as of31 December 2019 and 31 December 2018 are disclosed in Note 8.
43
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements (continued) For the year ended 31 December 2019
30. Financial risk management (continued)
Credit risk (continued)
(3) Loss allowance
The table below explained the changes in the loss allowance between the beginning and the end of the annual period due to these factors:
Loss allowance as at 1 January 2019
Changes due to financial instruments recognised as at 1 January 2019:
Transfer to lifetime Expected Credit Losses
Transfer to credit-impaired financial assets
Transfer to 12-month expected credit losses
Net remeasurement of loss allowance
New financial assets originated or purchased
Financial assets that have been derecognised during the period
Loss allowance as at 31 December 2019
12-month ECL
58.713.446.769
58.713.446.769
(11.912.947.086)
46.800.499.683
44
2019 Lifetime ECL - not
credit impaired Lifetime ECL-credit
impaired
(InLAK)
1.751.736.394
( 1. 751. 736.394) 20.835.941.551
20.835.941.551
20.835.941.551
Total
60.465.183.163
19.084.205.157
79.549.388.320
(11.912.947.086)
67.636.441.234
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements (continued) For the year ended 31 December 2019
30. Financial risk management (continued)
Credit risk (continued)
(3) Loss allowance (continued)
Loss allowance as at 1 January 2018
Changes due to financial instruments recognised as at 1 January 2018:
Transfer to lifetime Expected Credit Losses
Transfer to credit-impaired financial assets
Transfer to 12-month expected credit losses
Net remeasurement of loss allowance
New financial assets originated or purchased
Financial assets that have been derecognised during the period
Changes in model assumptions and methodology
Foreign exchange and other movements
Loss allowance as at 31 December 2018
12-month ECL
102.465.152.930
102.465.152.930
-(28.875.166.572)
4.675.777.681
(19.552.317.270)
58.713.446.769
45
2018 Lifetime ECL - not
credit impaired Lifetime ECL-credit
impaired
(In LAK)
6.048.986.015
6.048.986.015
(3.927.193.662)
(69.081.485)
(300.974.474) -1.751.736.394 -
Total
108.514.138.945
108.514.138.945
(32.802.360.234)
4.606.696.196
(19.853.291.744)
60.465.183.163
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements (continued) For the year ended 31 December 2019
30. Financial risk management (continued)
(b) Market risk
Market risk is the risk ofloss arising from adverse movement in the level of market prices or rates, the two key components being foreign cunency exchange risk and interest rate risk.
Foreign cmTency exchange risk refers to the adverse exchange rate movements on foreign currency exchange positions taken from time to time. The Branch maintains a policy of not exposing itself to large foreign exchange positions. Any foreign exchange open positions are monitored against the operating requirements, predetennined position limits and cut-loss limits.
Interest rate risk refers to the volatility in net interest income as a result of changes in the levels of interest rate and shifts in the composition of the assets and liabilities. Interest rate risk is managed through close monitoring of returns on investment, market pricing, cost of funds and through interest rate sensitivity gap analysis. The potential reduction in net interest income from an unfavorable interest rate movement is monitored against the risk tolerance limits set.
46
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements ( continued) For the year ended 31 December 2019
(I) Foreign exchange risk
The table below summarises the Branch's exposure to foreign cmTency exchange rate risk at 31 December 2019 and 2018. Included in the table are the Branch's financial instruments at carrying amounts, categorised by cmTency.
I<'inancial assets
Cash
Interbank and money market items
Inter-office accounts with Head Office
Statutory deposits
Loans to customers and accrued interest receivable
Investment securities at amortised cost and accrued interest receivable
Total financial assets
Financial liabilities
Interbank and money market items
Deposit from customers
Liabilities payable on demand
B01Towing
Total financial liabilities
LAK
1.232.708.601
164.110.759.356
40.158.282.500
6.911.158.864
70.339.424.658
282.752.333.979
21.917.476.327
21.917.476.327
47
2019 USD
(InLAK)
834.272.868
44.636.291.220
10.829.730.340
2.650.199.738.840
2. 706.500.033.268
2.785.589.389
49 .929 .186.828
2.720.088.800.000
2. 772.803.576.217
THB
744.127.967
15.363.312.394
I 04.358.601.092
15.655.551.045
136.121.592.498
781.494.905
144. 778.634.338
97.472.713
145.657.601.956
Total
2.811.109.436
224.110.362.970
104.358.601.092
66.643.563.885
2.657.110.897.704
70.339.424.658
3.125.373.959. 745
3.567.084.294
216.625.297.493
97.472.713
2.720.088.800.000
2.940.378.654.500
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements (continued) For the year ended 31 December 2019
(1) Foreign exchange risk (continued)
LAK
Financial assets
Cash 543.263.901
Interbank and money market items 6.579.018.493
Inter-office accounts with Head Office
Statutory deposits 87.412.500
Loans to customers and accrued interest receivable 16.755.058.802
Investment secmities at amortised cost and accrued interest receivable 70.339.424.658
Total financial assets 94.304.178.354
Financial liabilities
Interbank and money market items
Deposit from customers 10.032.001.205
Liabilities payable on demand
Bon-owing -Total financial liabilities 10.032.001.205
48
2018 USD THB Total
(In LAK)
429.579.330 2.104.360.977 3.077.204.208
477.201.262. 621 13.735.886.992 497.516.168.106
95.913.297.681 238.165.788.430 334.079.086.111
51.957 .594.800 15.395.943.494 67.440.950. 794
4.213.139.878.508 184.592.033 4.230.079.529.343
- 70.339.424.658
4.838.641.612.940 269.586.571.926 5.202.532.363.220
3.455.432.713 698.801.048 4.154.233.761
316.611.049.837 150.675.216.187 477.318.267.229
217.226.698 - 217.226.698
4.073.501.500.000 - 4.073.501.500.000
4.393.785.209.248 151.374.017.235 4.555.191.227.688
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements ( continued) For the year ended 31 December 2019
(]) Interest rate risk
The Branch takes on exposure to the effects of fluctuations in the prevailing levels of market interest rates on its financial position and cash flows. Interest margins may increase as a result of such changes, but may reduce or create losses in the event that unexpected movements arise. Management monitors on a daily basis and sets limits on the level of mismatch of interest rate repricing that may be undertaken.
The table below summarises the Branch's exposure to interest rate risks at 31 December 2019 and 2018. The table presents the aggregated amounts of the Branch's financial assets and liabilities at carrying amounts, categorised by the earlier of contractual interest repricing or maturity dates:
49
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements (continued) For the year ended 31 December 2019
(2) Interest rate risk (continued)
2019 Interest rate
More than 12 Floating rate Fixed rate Up to 1 month 1 - 3 months 3 -12 months months Non-interest bearini Total ¾p.a %p.a
(In LAK) Financial assets
Interbank and money market items 50.000.000.000 174.110.362.970 224.110.362.970 5,20
Inter-office accounts with Head Office 104.358.601.092 104.358.601.092
Statutory deposits 66.643.563.885 66.643.563.885
Loans to customers and accrued interest receivable 642.554.088 37.307.396.101 673.402.653.610 l .945.758.293.905 2.657.110.897.704 4,84- 7,83 13,00
Investment securities at amortised cost 70.339.424.658 70.339.424.658 5,00
Total financial assets 642.554.088 37.307.396.101 793. 742.078.268 1.945. 758.293.905 345.112.527.947 3.122.562.850.309
Financial liabilities
Interbank and money market items 3.567.084.294 3.567.084.294
Deposit from customers 143.483.740.006 335.254.955 72.806.302.532 216.625.297.493 0,5 - 4,75
Liabilities payable on demand 97.472.713 97.472.713
Bo1Towing l.609.179.000.000 924.723.800.000 186.186.000.000 2. 720.088.800.000 2,32 - 3,99
Total financial liabilities 1. 752.662. 7 40.006 925.059.054.955 258.992.302.532 - 3.664.557.007 2.940.378.654.500
50
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements (continued) For the year ended 31 December 2019
(2) Interest rate risk (continued)
Up to 1 month 1 - 3 months 3 -12 months
2018
More than 12 month Non-interest bearinf
Interest rate
Floating rate Fixed rate Total %p.a %p.a
(In LAK) Financial assets
Interbank and money market items
Inter-office accounts with Head Office
Statutory deposits
Loans to customers and accrued interest receivable
Investment securities at amortised cost
Total financial assets
Financial liabilities
Interbank and money market items
Deposit from customers
Liabilities payable on demand
Borrowing
Total financial liabilities
2.510.928.276.045 1.448.287 .346.594 270.863.906.704
70.984.054.795
2.510.928.276.045 1.519.271.401.389 270.863.906.704
327.830.920.620 51.244.057.679 7.766.103.787
2.480.097.500.000 1.341. 769 .000.000 251.635 .000.000
2.807.928.420.620 1.393.013.057.679 259.401.103.787
51
-
497.516.168.106
334.079.086.111
67.440.950.794
899.036.205.011
4.154.233.761
90.477.185.143
497.516.168.106
334.079.086.111
67.440.950. 794
4.230.079 .529 .343
70.984.054. 795
5.200.099.789.149
4.154.233.761
477.318.267.229
4.84- 7.83
217.226.698 217.226.698
4.073.501.500.000 1.83 - 4.68
94.848.645.602 4.555.191.227.688
13.00
5.00
0.5 - 4.75
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements ( continued) For the year ended 31 December 2019
30. Financial risk management (continued)
(b) Liquidity risk
Liquidity 1isk relates to the ability to maintain sufficient liquid assets to meet its financial commitments and obligations when they fall due at a reasonable cost. The management of the Branch closely monitors all inflows and outflows and matmity gaps through periodical reporting. Movements in loans and customers' deposits are monitored and liquidity requirements adjusted to ensure sufficient liquid assets to meet its financial commitments and obligations as and when they fall due.
(1) Liquidity risk management process
The Branch's liquidity management process, as carried out within the Branch and monitored by a separate team in ALCO, includes:
Day-to-day funding, managed by monitoring future cash flows to ensure that requirements can be met. This includes replenishment of funds as they mature or are borrowed by customers. The Branch maintains an active presence in global money markets to enable this to happen;
Maintaining a portfolio of highly marketable assets that can easily be liquidated as protection against any unforeseen intenuption to cash flow;
Monitoring the liquidity ratios of the statement of financial position against internal and regulatory requirements; and
Managing the concentration and profile of debt maturities.
52
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements (continued) For the year ended 31 December 2019
30. Financial risk management (continued)
(c) Liquidity risk
(1) Liquidity risk management process
Monitoring and reporting take the fom1 of cash flow measurement and projections for the next day, week and month respectively, as these are key periods for liquidity management. The starting point for those projections is an analysis of the contractual maturity of the financial liabilities and the expected collection date of the financial assets.
Branch also monitors unmatched medium-term assets, the level and type of undrawn lending commitments, the usage of overdraft facilities and the impact of contingent liabilities such as standby letters of credit and guarantees.
Short tenn liquidity risk is closely monitored by maintaining flexibility in funding of the Branch's revolving borrowing with the Bank. The borrowing is revolved on an annual basis to match with loans to customer schedule and contracts.
(2) Assets held for managing liquidity risk
The Branch holds a diversified portfolio of cash to support payment obligations and contingent funding in a stressed market environment. The Branch's assets held for managing liquidity risk comprise:
Cash and balances at BoL; and
Certificates of deposit.
(3) Non-derivativeji11a11cial liabilities and assets held for managing liquidity risk
The table below presents financial assets and liabilities categorized by remaining contractual maturities at the date of the statement of financial position. The amounts disclosed in the table are the contractual undiscounted cash flow, whereas the Branch manages the liquidity risk based on a different basis, not resulting in a significantly different analysis.
53
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements (continued) For the year ended 31 December 2019
At 31 December 2019, the maturity analysis of financial statements is as follows:
At call Within 3 months
Financial assets
Cash 2.811.109.436
Interbank and money market items 174.110.362.970
Inter-office accounts with Head Office 104.358.601.092 -
Statutory deposits 66.643.563.885
Loans to customers and accrued interest receivable 7 .221.569 .695
Investment securities at amortised cost and accrued interest receivable - -
Total financial assets 347.923.637.383 7 .221.569 .695
Financial liabilities
Interbank and money market items 3.567.084.294
Deposit from customers 143.483.740.006 335.254.955
Liabilities payable on demand 97.472.713 -Borrowing l.609.179.000.000 924.723.800.000
Total financial liabilities 1. 756.327.297.013 925.059.054.955
54
2019 3 -12 months 1 -5 years More than 5 years Total
(In LAK)
2.811.109 .436
50.000.000.000 - 224.110.362.970
- - 104.358.601.092
66.643.563.885
666.823.638.003 l.098.059.857.898 885.005.832.108 2.657.110.897.704
70.339.424.658 - 70.339.424.658
787.163.062.661 1.098.059.857.898 885.005.832.108 3.125.373.959.745
- - 3.567.084.294
72.806.302.532 - 216.625.297.493
- 97.472.713
186.186.000.000 - 2. 720.088.800.000
258.992.302.532 - - 2.940.378.654.500
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements ( continued) For the year ended 31 December 2019
At 31 December 2018, the maturity analysis of financial statements is as follows:
At call Within 3 months 2018
3 -12 months 1 -5 years
(In LAK) Financial assets
Cash
Interbank and money market items
Inter-office accounts with Head Office
Statutory deposits
Loans to customers and accrued interest receivable
Investment securities at amortised cost and accrued interest receivable
Total financial assets
Financial liabilities
3.077.204.208
497.516.168.106
334.079.086.11 l
67.440.950.794
902.113.409.219
Interbank and money market items 4.154.233.761
Deposit from customers 417 .235 .225 .465
Liabilities payable on demand 217 .226.698
264.057.853.981
70.984.054.795
335.041.908.776
52.316.937.977
Bon-owing - 3.821.866.500.000 ------
Total financial liabilities 421.606.685.924 3.874.183.437.977
l .322.566.775.350
1.322.566.775.350
55
7.766.103.787
251.635.000.000
259.401.103. 787
2.175.212.290.899
2.175.212.290.899
More than 5 years
-
468.242.609.113
468.242.609.113
Total
3.077.204.208
497.516.168.106
334.079.086.111
67.440.950.794
4.230.079.529.343
70.984.054.795
5.203.176.993.357
4.154.233.761
4 77 .318 .267 .229
217 .226.698
4.073.501.500.000
4.555.191.227.688
.,,.
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements (continued) For the year ended 31 December 2019
(d) Capital management
The Branch objectives when managing capital, which is a broader concept than the 'equity' on the face of the statement of financial position, are:
To comply with the capital requirements set by the regulators of the banking markets where the entities within the Branch operate;
To safeguard the Branch's ability to continue as going concern so that it can continue to provide returns for shareholders and benefits for other stakeholders; and
To maintain a strong capital base to support the development of its business.
31. Fair value estimation
A fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Methodology of fair value measurement depends upon characteristics of the financial instruments. For the financial instruments which are regarded as trade in an active market, fair value has been determined by the latest quoted market price. If however the appropriate quoted market price cannot be detern1ined, the fair value is determined using an appropriate valuation technique.
At 31 December 2019 and 31 December 2018, financial assets are not measured at fair value.
The table below analyses financial instruments can-ied at fair value, by valuation method. The different levels have been defined as follows:
Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1 ).
Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2).
Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3).
56
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements (continued) For the year ended 31 December 2019
31. Fair value estimation (continued)
The following table presents the Branch's financial assets and liabilities that are not measured at fair value but for which fair value is disclosed at 31 December 2019 and 2018.
Financial assets
Cash
Interbank and money market items
Inter-office accounts with Head Office
Loans to customers and accrued interest receivable
Investment securities at amortised cost and accrued interest receivable
Total financial assets
Financial liabilities
Interbank and money market items
Deposit from customers
Liabilities payable on demand
Borrowing
Total financial liabilities
Level I
57
2019 Level2
(In LAK)
2.811.109.436
224.110.362.970
104.358.601.092
70.339.424.658
401.619.498.156
3.567.084.294
216.625.297.493
97.472.713
2. 720.088.800.000
2.940.378.654.500
Level3
2.657.110.897.704
2.657.110.897.704
Total
2.811.109.436
224.110.362.970
104.358.601.092
2.657.110.897.704
70.339.424.658
3.058. 730.395.860
3.567.084.294
216.625 .297.493
97.472.713
2.720.088.800.000
2.940.378.654.500
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements (continued) For the year ended 31 December 2019
31. Fair value estimation (continued)
The following table presents the Branch's financial assets and liabilities that are not measured at fair value but for which fair value is disclosed at 31 December 2019 and 2018.
Financial assets
Cash
Interbank and money market items
Inter-office accounts with Head Office
Loans to customers and accrued interest receivable
Investment securities at amortised cost
Total financial assets
Financial liabilities
Interbank and money market items
Deposit from customers
Liabilities payable on demand
Borrowing
Total financial liabilities
Level 1
58
2018 Level2
(In LAK)
3.077.204.208
492.469.286.128
334.079.086.111
70.984.054.795
900.609.631.242
4.154.233.761
477.318.267.229
217.226.698
4.073.501.500.000
4.555.191.227.688
Level 3
4.230.079.529.343
4.230.079.529.343
Total
3.077.204.208
492.469.286.128
334.079.086.111
4.230.079.529.343
70.984.054.795
5.130.689.160.585
4.154.233.761
477.318.267.229
217.226.698
4.073.501.500.000
4.555.191.227 .688
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements (continued) For the year ended 31 December 2019
31. Fair value estimation (continued)
The fair value are based on the following methodologies and assumptions:
Cash
Cash and cash equivalents comprise balances with less than three months' maturity from the date of acquisition include cash on hand. Cash and cash equivalents are caITied at amortised cost that approximate to fair value.
Interbank and money market items, net
The interbank and money market items (assets) are loans to or deposit at financial institutions which are short-term or at call. Accordingly, their carrying amount is a reasonable approximation of fair value.
The interbank and money market items (liabilities) are borrowing and fixed deposits which are short-term. Accordingly, their carrying amount is a reasonable approximation of fair value.
Inter-office accounts with Head Office
Inter-office accounts with Head Office are caITied at amortised cost that approximate to fair value.
Loans and accrued interest receivables, net
For floating rate loans, the caiTying value is generally a reasonable estimate of fair value.
For fixed rate loans, all of them have maturities within six months so the estimated fair values of these loan types approximate the caITying values.
Investment securities at amortised cost
Investment in government bond has the maturity within one year so the estimated fair value of the investment approximate the caITying value.
Deposit from customers
Deposit from customers comprise of current, saving and fixed deposit from customers. CmTent, saving, and within one year fixed deposits are carried at amortised cost that approximate to fair value.
For more than one year fixed deposit from customers, the fair value is estimated using discounted cash flow, applying cmTent rate offered for fixed deposits of similar remaining maturities.
59
Krung Thai Bank Public Company Limited - Vientiane Branch
Notes to the financial statements (continued) For the year ended 31 December 2019
31. Fair value estimation (continued)
Liabilities payable on demand
Liabilities payable on demand is typically sh01i-ten11 in nature and reprice to cunent market rate frequently. Accordingly, their ca1Tying amount is a reasonable approximation of fair value.
Borrowing
All the bo1Towings have maturity within one year. The estimated fair values of the b01Towings approximate the ca1Tying values.
32. Events after the reporting period
Other than as disclosed elsewhere in these financial statements, at the date of this repo1i, there were no events, which occu1Ted subsequent to 31 December 2019 that significantly impacted the financial position of the Branch as at 31 December 2019.
33. International Financial Reporting Standards (IFRS) not yet adopted
A number of new standards and amendments to standards are effective for annual periods beginning after 1 January 2020; however, the Branch has not applied the following new or amended standards in preparing these financial statements.
IFRS
IFRS 17 IFRS 3
Topic
Insurance contracts Definition of a Business (Amendments to IFRS 3) Amendments to References to Conceptual Framework in IFRS Standards
Year
effective
2023 2020 2020
The Branch anticipates no material impact of the above standards on its financial statements.
60