Page 63 - 2021 ANNUAL REPORT draft

3.16 Interest income and expense

Interest income and expense for all interest bearing financial instruments are recognized in the income
statement within “interest income” and “interest expense” using the effective interest method.
The calculation of the effective interest rate includes contractual fees and points paid or received transaction
costs, and discounts or premiums that are an integral part of the effective interest rate. Transaction costs
are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial asset
or liability.

Interest income and expense presented in the Income statement include:

• Interest on financial assets and liabilities measured at amortized cost calculated on an effective
interest rate basis.
• Interest on financial assets measured at fair value through OCI calculated on an effective interest
rate basis.

3.17 Fees and commission income

Fees and Commission that are integral to the effective interest rate on a financial asset are included in the
measurement of the effective interest rate. Fees, such as processing and management fees charged for
assessing the financial position of the borrower, evaluating and reviewing guarantee, collateral and other
security, negotiation of instruments’ terms, preparing and processing documentation and finalizing the
transaction are an integral part of the effective interest rate on a financial asset or liability and are included
in the measurement of the effective interest rate of financial assets or liabilities.
Other fees and commissions which relates mainly to transaction and service fees, including loan account
structuring, management fees and legal fees are recognized as the related services are provided /
performed.

3.18 Net trading income

Net trading income comprises of gains and losses related to trading assets and liabilities and foreign
exchange differences.

3.19 Operating expenses

Expenses are decreases in economic benefits during the accounting year in the form of outflows, depletion
of assets or incurrence of liabilities that result in decrease of equity, other than those relating to distribution
to equity participants.
Expenses are recognized on an accruals basis regardless of the time of spending cash. Expenses are
recognized in the income statement when a decrease in future economic benefit related to a decrease in
an assets or an increase of a liability has arisen that can be measured reliably. Expenses are measured at
historical cost

3.20. Taxes
(i) Current tax

Tax is charged on the basis of the higher of 1% of gross income and 27% of tax adjusted accounting profits
in accordance with sections 79 (3a,b) and first schedule of the Income and VAT Act 2012. For the year of
assessment 2021, tax has been provided on the basis of 27% of adjusted profits. Current income tax

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Guaranty Trust Bank (Gambia) Limited Financial Statements December 2021