Page 30 - GTBank Annual Report 2020 eBook

2.4.6 Determination of the lease term for 3. Significant Accounting Policies
lease contracts with renewal and termination The accounting policies set out below have been
options (Bank as a lessee) applied consistently to all years presented in
these financial statements.
The Bank determines the lease term as the non-
cancellable term of the lease, together with any 3.1 Changes in significant accounting
years covered by an option to extend the lease if policies - New and amended standards and
it is reasonably certain to be exercised, or any interpretations
years covered by an option to terminate the
lease, if it is reasonably certain not to be The accounting policies adopted are consistent
exercised. with those of the previous financial period.
The Bank has several lease contracts that include
extension and termination options. The Bank Standards and interpretations effective during the
applies judgement in evaluating whether it is reporting period
reasonably certain to exercise or not to exercise
the option to renew or terminate the lease. That Amendments to the following standard(s)
is, it considers all relevant factors that create an became effective in the annual period starting
economic incentive for it to exercise either the from 1 January 2020. The new reporting
renewal or termination. After the commencement requirements as a result of the amendments
date, the Bank reassesses the lease term if there and/or clarifications have been evaluated and
is a significant event or change in circumstances their impact or otherwise are noted below:
that is within its control that affects its ability to
exercise or not to exercise the option to renew or Amendment to IAS 1 and IAS 8
to terminate (e.g., construction of significant
leasehold improvements or significant In October 2018, the IASB issued the definition of
customization of the leased asset). ‘material’. The amendments which became
effective in the annual reporting periods starting
2.4.7 Estimating the incremental borrowing from 1 January 2020 are intended to clarify,
rate modify and ensure that the definition of ‘material’
is consistent across all IFRS. In IAS 1
The Bank cannot readily determine the interest (Presentation of Financial Statements) and IAS 8
rate implicit in the lease, therefore, it uses its (Accounting Policies, Changes in Accounting
incremental borrowing rate (‘IBR’) to measure Estimates and Errors), the revised definition of
lease liabilities. The IBR is the rate of interest that ‘material’ is quoted below:
the Bank would have to pay to borrow over a “An information is material if omitting, misstating
similar term, and with a similar security, the funds or obscuring it could reasonably be expected to
necessary to obtain an asset of a similar value to influence decisions that the primary users of
the right-of-use asset in a similar economic general-purpose financial statements make
environment. The IBR therefore reflects what the based on those financial statements, which
Bank ‘would have to pay’, which requires provide financial information about a specific
estimation when no observable rates are reporting entity”
available or when they need to be adjusted to The amendments laid emphasis on five (5) ways
reflect the terms and conditions of the lease (for material information can be obscured. These
example, when leases are not in the Bank’s include:
functional currency).The Bank estimates the IBR If the language regarding a material item,
using observable inputs (such as market interest transaction or other event is vague or unclear;
rates) when available and is required to make If information regarding a material item,
certain entity-specific adjustments (such as the transaction or other event is scattered in different
Bank’s stand-alone credit rating, or to reflect the places in the financial statements;
terms and conditions of the lease). If dissimilar items, transactions or other events
are inappropriately aggregated;
If similar items, transactions or other events are
inappropriately disaggregated; and
Annual Report 2020

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