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element of judgement regarding the expected behavior and life-cycle of the instruments, as well expected
changes to the base rate and other fee income/expense that are integral parts of the instrument.

2.4.5 Provisions and other contingent liabilities

The Bank operates in a regulatory and legal environment that, by nature, has a heightened element of
litigation risk inherent to its operations. As a result, it is involved in various litigation, arbitration and
regulatory investigations and proceedings, arising in the ordinary course of the Bank’s business. When the
Bank can reliably measure the outflow of economic benefits in relation to a specific case and considers
such outflows to be probable, the Bank records a provision against the case. Where the probability of
outflow is considered to be remote, or probable, but a reliable estimate cannot be made, a contingent liability
is disclosed. However, when the Bank is of the opinion that disclosing these estimates on a case-by-case
basis would prejudice their outcome, then the Bank does not include detailed, case-specific disclosers in
its financial statements. Given the subjectivity and uncertainty of determining the probability and amount of
losses, the Bank takes into account a number of factors including legal advice, the stage of the matter and
historical evidence from similar incidents. Significant judgement is required to conclude on these estimates.
For further details on provisions and other contingencies see Note 29.

2.4.6 Determination of the lease term for lease contracts with renewal and termination options (Bank as a
lessee)

The Bank determines the lease term as the non-cancellable term of the lease, together with any years
covered by an option to extend the lease if it is reasonably certain to be exercised, or any years covered
by an option to terminate the lease, if it is reasonably certain not to be exercised.
The Bank has several lease contracts that include extension and termination options. The Bank applies
judgement in evaluating whether it is reasonably certain to exercise or not to exercise the option to renew
or terminate the lease. That is, it considers all relevant factors that create an economic incentive for it to
exercise either the renewal or termination. After the commencement date, the Bank reassesses the lease
term if there is a significant event or change in circumstances that is within its control that affects its ability
to exercise or not to exercise the option to renew or to terminate (e.g., construction of significant leasehold
improvements or significant customization of the leased asset).

2.4.7 Estimating the incremental borrowing rate

The Bank cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental
borrowing rate (‘IBR’) to measure lease liabilities. The IBR is the rate of interest that the Bank would have
to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of
a similar value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what
the Bank ‘would have to pay’, which requires estimation when no observable rates are available or when
they need to be adjusted to reflect the terms and conditions of the lease (for example, when leases are not
in the Bank’s functional currency).The Bank estimates the IBR using observable inputs (such as market
interest rates) when available and is required to make certain entity-specific adjustments (such as the
Bank’s stand-alone credit rating, or to reflect the terms and conditions of the lease).

3. Significant Accounting Policies

The accounting policies set out below have been applied consistently to all years presented in these
financial statements.

3.1 Changes in significant accounting policies - New and amended standards and interpretations

The accounting policies adopted are consistent with those of the previous financial period.

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Guaranty Trust Bank (Gambia) Limited Financial Statements December 2021