MASTERCARD PAYMENT TRANSACTION SERVICES TURKEY BİLİŞİM HİZMETLERİ A.Ş.

Transcription

1 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2016 TOGETHER WITH INDEPENDENT AUDITOR S REPORT (ORIGINALLY ISSUED IN TURKISH)

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4 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL CONTENTS TO THE CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2016 CONTENTS PAGE CONSOLIDATED BALANCE SHEETS CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME... 3 CONSOLIDATED STATEMENT OF CHANGE IN EQUITY... 4 CONSOLIDATED STATEMENT OF CASH FLOW

5 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL AUDITED CONSOLIDATED BALANCE SHEETS AT 31 DECEMBER 2016 AND 2015 ASSETS Notes Current assets 38,504,038 42,958,954 Cash and cash equivalents 4 14,319,915 21,137,702 Trade receivables - Trade receivables from related parties 22 86, Trade receivables from non-related parties 5 20,098,690 16,914,785 Other receivables - Other receivables from related parties , Other receivables from non-related parties 360, ,280 Inventories 343, ,753 Prepaid expenses 6 2,055,359 1,983,740 Current income tax assets 105, ,236 Other current assets 7 848,483 1,710,458 Non-current Assets 24,781,651 23,936,658 Other receivables - Other receivables from non-related parties 17,897 25,606 Property, plant and equipment 8 21,014,674 19,523,129 Intangible assets 9 2,127,449 2,819,176 Prepaid expenses 6 381, ,056 Other non-current assets 7 1,240,040 1,020,691 Total assets 63,285,689 66,895,612 These consolidated financial statements were signed by Sedat Kesik on behalf of the Board of Directors to be issued on the 8 September The consolidated financial statements will be finalized with the approval of the General Assembly. The accompanying notes form an integral part of these consolidated financial statements. 1

6 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL AUDITED CONSOLIDATED BALANCE SHEETS AT 31 DECEMBER 2016 AND 2015 LIABILITIES Notes Current liabilities 29,551,766 25,075,500 Financial leasing liabilities 10 1,962,906 1,024,861 Trade payables - Trade payables to related parties 487,310 2,849 - Trade payables to non-related parties 5 19,744,846 18,093,666 Liabilities for employee benefits , ,562 Other payables - Other payables to non-related parties 417, ,304 Deferred income 6 854, ,074 Current income tax liabilities 6,256 5,708 Short-term provisions - Provisions for employee benefits 13 4,325,746 3,780,039 - Other short-term provisions 146,000 65,000 Other current liabilites 7 1,010,232 1,022,437 Non-current liabilities 2,644,759 4,236,727 Financial leasing liabilities 10 1,214,992 1,156,920 Deferred income 6-953,280 Long-term provisions - Provisions for employee benefits 13 1,222,505 1,750,434 Deferred tax liabilities , ,093 Equity 31,089,164 37,583,385 Share capital ,449,628 97,184,249 Other comprehensive income and expenses not no be reclassified to profit or loss - Re-measurement of provision for employment termination benefits 830,192 27,742 Legal reserves , ,381 Accumulated losses (60,487,987) (53,883,512) Net loss for the period (15,562,050) (6,604,475) Total liabilities and equity 63,285,689 66,895,612 The accompanying notes form an integral part of these consolidated financial statements. 2

7 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL AUDITED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME (Amounts expressed in Turkish Lira ( TRY ) unless otherwise indicated.) PROFIT OR LOSS Notes Revenue 16 63,451,103 60,521,008 Cost of sales (-) 16 (65,337,158) (52,472,526) Gross profit (1,886,055) 8,048,482 Selling and marketing expenses (-) 17 (4,543,310) (2,823,331) General administrative expenses (-) 18 (8,603,857) (10,566,342) Other operating income 20 1,205,251 3,231,895 Other operating expenses (-) 20 (2,622,600) (4,618,995) Operating loss (16,450,571) (6,728,291) Income from investing activities 53,442 - Operating loss before financial income (16,397,129) (6,728,291) Finance income 21 3,525,693 2,680,619 Finance expenses (-) 21 (2,525,249) (2,293,576) Loss from continuing operations before tax (15,396,685) (6,341,248) Continuing operations tax expense: Current income tax expense 15 (333,785) (71,361) Deferred income tax expense ,420 (191,866) Continuing operations net loss for the period (15,562,050) (6,604,475) OTHER COMPREHENSIVE INCOME Re-measurement of provision for employment termination benefits ,039 28,695 Other comprehensive tax expenses not no be reclassified to profit or loss - Deferred income tax expense (953) Other comprehensive income not no be reclassified to profit or loss 802,450 27,742 Total comprehensive loss (14,759,600) (6,576,733) The accompanying notes form an integral part of these consolidated financial statements. 3

8 STATEMENTS ORIGINALLY ISSUED IN TURKISH AUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Amounts expressed in Turkish Lira ( TRY ) unless otherwise indicated) Re-measurement of provision for Share employement Legal Accumulated Net loss capital terminatıon benefits reserves Losses for the period Total equity 1 January ,286, ,381 (52,023,647) - 23,122,678 Capital increase (Note 14) 22,897, (1,859,865) - 21,037,440 Total comprehensive loss - 27, (6,604,475) (6,576,733) 31 December ,184,249 27, ,381 (53,883,512) (6,604,475) 37,583,385 1 January ,184,249 27, ,381 (53,883,512) (6,604,475) 37,583,385 Capital increase (Note 14) 8,265, ,265,379 Transfers (6,604,475) 6,604,475 - Total comprehensive loss - 802, (15,562,050) (14,759,600) 31 December ,449, , ,381 (60,487,987) (15,562,050) 31,089,164 The accompanying notes form an integral part of these consolidated financial statements. 4

9 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL AUDITED CONSOLIDATED STATEMENT OF CASH FLOW AT 31 DECEMBER 2016 (Amounts expressed in Turkish Lira ( TRY ) unless otherwise indicated) Notes A. Cash flows from operating activities (10,831,867) (176,736) Loss before income tax (15,396,685) (6,341,248) Adjustments to reconcile net profit to net cash provided by operating activities 9,121,210 9,579,295 Adjustments related to impairment ,705 2,811,263 - Adjustments related to impairment on trade receivable , ,263 - Adjustments related to other impairments 20-2,500,000 Adjustments related to provisions 3,961,907 3,682,736 - Adjustments related to provisions for employee benefits 13 3,880,907 3,702,937 - Adjustments related to provisions (reverse) for litigation 81,000 (20,201) Adjustments related to interest (income) and expenses 21 (603,067) (679,704) - Adjustments related to interest income 21 (847,930) (1,148,416) - Adjustments related to interest expenses , ,712 Depreciation and amortization expense 8, 9 5,050,665 3,765,000 Cash flows before changes in net working capital (4,556,392) (3,414,783) Adjustments related to trade receivables (3,982,450) (4,798,902) - (İncrease) decrease in trade receivables from related parties (86,840) 7,416 - İncrease in trade receivables from non-related parties (3,895,610) (4,806,318) Adjustments related to other receivables (427,002) (2,193,061) - (İncrease) decrease in other receivables from related parties (285,000) 380,000 - İncrease in other receivables from non-related parties (142,002) (2,573,061) Adjustments related to decrease (increase) in inventories 498,745 (273,739) Decrease (increase) in prepaid expenses 94,846 (37,257) Adjustments related to trade payables 2,135,641 9,912,413 - İncrease in trade payables to related parties 484,461 2,849 - İncrease in trade payables to non related parties 1,651,180 9,909,564 Increase in liabilities for employee benefits 81, ,910 Adjustments related to increase (decrease) in other payables 301,060 (263,247) Decrease in deferred income (548,424) (1,104,249) Payments related to provisions for employee benefits (3,061,090) (2,887,234) Tax payments (333,237) (246,545) Adjustments related to decrease (increase) in other net working capital 683,905 (1,646,872) - Decrease (increase) in other assets 696,109 (1,954,827) - Decrease (increase) in other liabilities (12,204) 307,955 B. Cash flows from investing activities (5,850,483) (10,637,364) Purchase of tangible and intangible assets (5,908,729) (10,695,506) - Purchase of tangible assets (5,732,572) (9,500,800) - Purchase of intangible assets (176,157) (1,194,706) Proceeds from sale of tangible and intangible assets 58,246 58,142 - Proceeds from sale of tangible assets 58,246 58,142 C. Cash flows from financing activities 9,628,984 19,548,960 Cash flows arising from capital increase 8,265,379 21,037,440 Repayments of other financial liabilities (705,799) (2,022,804) Proceeds from other financial liabilities 1,701,916 - Interest paid (244,863) (468,712) Interest received 847,930 1,148,416 Other cash outflows (235,579) (145,380) Net increase in cash and cash equivalents (A+B+C) (7,053,366) 8,734,860 D. Cash and cash equivalents at the beginning of the year 4 20,992,322 12,257,462 Cash and cash equivalents at the end of the year (A+B+C+D) 4 13,938,956 20,992,322 The accompanying notes form an integral part of these consolidated financial statements. 5

10 NOTE 1 - ORGANIZATION AND NATURE OF OPERATIONS Mastercard Payment Transaction Services Turkey Bilişim Hizmetleri A.Ş. ( The Company or Mastercard Bilişim ) was established on 5 April The main activities of the Company and its subsidiaries (collectively referred to as a the Group ) are end-to-end credit card operating services, bank card and prepaid card operation, point of sale ( POS ) and automated teller machine ( ATM ) operations and high volume abstract printing. The Company is controlled by the Mastercard/Europay U.K. Limited. The ultimate parent of the Company is the Mastercard Incorporated. The address of its registered office is as follows: Ayazağa Mahallesi Mezarlık Sokak No:3 Ayazaga/Istanbul NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS 2.1 Basis of presentation The accompanying consolidated financial statements are prepared in accordance with Turkish Accounting Standards ( TAS ) issued by Turkish Accounting Standards issued by Public Oversight Accounting and Auditing Standards Authority ( POAASA ). TAS comprises; Turkish Accounting Standards, Turkish Financial Reporting Standards ( TFRS ) and its addendum and interpretations. The Group and its Turkish subsidiaries maintain their books of accounts and prepare their statutory financial statements in accordance with the Turkish Commercial Code ( TCC ), tax legislation, the Uniform Chart of Accounts issued by the Ministry of Finance. The consolidated financial statements are based on the statutory records with the required adjustments and reclassifications reflected for the purpose of fair presentation in accordance with TAS based on the accounting policies disclosed in Note 2.2. The Group has made necessary adjustments and reclassifications in accordance with the format defined in the Illustrative Financial Statements and User Guide issued by POA and TAS taxonomy approved by the Board decision dated 2 June Summary of significant accounting policies Basis of consolidation a) Consolidated subsidiaries Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. 6

11 NOTE 2 - BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued) a) Consolidated subsidiaries (Continued) The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquire and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquire on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest s proportionate share of the recognised amounts of acquiree s identifiable net assets. Acquisition-related costs are expensed as incurred. If the business combination is achieved in stages, the acquisition date carrying value of the acquirer s previously held equity interest in the acquire is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognised in profit or loss. Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within equity. Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss. Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated. When necessary, amounts reported by subsidiaries have been adjusted to conform with the Group s accounting policies. b) Joint agreements Joint agreements are classified as joint operation or joint ventures according to the rights and liabilities of the parties. Since the Group has rights and liabilities for the relevant assets, as per the joint agreement to which it is a party, this agreement is classified as a joint operation. The group recognises the following as per its share in the joint operation: - its assets including the share in the jointly owned assets, - its liabilities including the share in the jointly borne liabilities, - revenues arising from the sales of the share in the output of the joint operation, - its share in the revenue arising from the output of the joint operation, and - its expenses including the share in the jointly borne expenses. The group recognises assets, liabilities, revenues, and expenses related with its share in the joint agreement according to the TFRS, which it applies on said assets, liabilities, revenues, and expenses. 7

12 NOTE 2 - BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued) Functional and presentation currency Items included in the consolidated financial statements of the Group are measured using the currency of the primary economic environment in which the entity operates. The Group s functional and presentation currency is TRY. Property, plant and equipment Property, plant and equipment are carried at cost less accumulated depreciation and any accumulated impairment losses. Assets to be used for administrative purposes, or used in the production of goods and services and are in the course of construction are carried at cost, less any recognized impairment loss. Legal fees are included in the cost. Depreciation is calculated on a straight line basis over the estimated useful life of the assets. Expected useful life, residual value and amortization method are evaluated every year for the probable effects of changes arising in the expectations and are accounted for prospectively. The depreciation terms are as follows: 8 Years Machinery and equipment 4-16 Furniture and fixtures 3-15 Leasehold improvements 5-10 Property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset s fair value less costs to sell and value in use. Fair value less cost to sell is the amount obtainable from the sale of an asset less the costs of disposal. Repairs and maintenance are charged to the statements of income during the financial period in which they were incurred. Costs of property plant and equipment are included in the asset s carrying amount or recognized as a separate asset as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. Gains or losses on disposals or suspension of property, plant and equipment are determined by sale revenue less net book value and collected amount and included in the related other income or other expense accounts, as appropriate. Intangible assets Intangible assets mainly comprise of softwares. Acquired computer software licenses are capitalized on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortized over their estimated useful lives (3-15 years).

13 NOTE 2 - BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued) Impairment of assets The carrying amounts of the Group s assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. When an indication of impairment exists, the Group compares the carrying amount of the asset with its net realizable value which is the higher of value in use or fair value less costs to sell. Impairment exists if the carrying value of an asset or a cash generating unit is greater than its recoverable amount which is the higher of value in use or fair value less costs to sell. An impairment loss is recognized immediately in the statement of profit or loss. The increase in carrying value of the assets (or a cash generated unit) due to the reversal of recognized impairment loss shall not exceed the carrying amount of the asset (net of amortisation amount) in case where the impairment loss was reflected in the financial statements in prior periods. Such a reversal is accounted for in the statement of profit or loss. Financial assets a) Classification The Group classifies its financial assets in the following categories: loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. The Group s loans and receivables comprise trade receivables, due from related parties and cash and cash equivalents in the balance sheet. b) Recognition and measurement Regular purchases and sales of financial assets are recognised on the trade-date the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Loans and receivables are subsequently carried at amortised cost using the effective interest method. Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted average method. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. 9

14 NOTE 2 - BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued) Trade receivables Trade receivables due from customers for services performed in the ordinary course of business are recoggnized with net off unearned financial income. Trade receivables, are measured at amortized cost, using the effective interest rate method, less the unearned financial income. Short duration receivables with no stated interest rate are measured at the original invoice amount unless the effect of imputing interest is significant. A credit risk provision for trade receivables is established if there is objective evidence that the Group will not be able to collect all amounts due. The amount of the provision is the difference between the carrying amount and the recoverable amount. The recoverable amount is the present value of all cash flows, including amounts recoverable from guarantees and collateral, discounted by the original effective interest rate of the originated receivables at inception. If the amount of the impairment subsequently decreases due to an event occurring after the writedown, the release of the provision is credited to the statement of profit or loss. Cash and cash equivalents Cash and cash equivalents includes cash in hand, deposits held at call with banks and other short-term liquid investments with original maturities of 3 months or less. Capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares are shown in equity as a deduction, net of tax, from the proceeds. Trade payables Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. Borrowings Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the statement of comprehensive income over the period of the borrowings using the effective interest method. Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in profit or loss in the period in which they are incurred. 10

15 NOTE 2 - BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued) Current and deferred income tax Taxes include current period income taxes and deferred taxes. Current and deferred tax is recognized as income or loss in the statement of profit or loss, except to the extent that it relates to items recognized directly in equity or other comprehensive income. In such case, the tax is recognized in equity or other comprehensive income. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis. Provision for employment termination benefits The provision for employment termination benefits represents the present value of the estimated total provision of the future probable obligation of the Group arising from the retirement of the employees calculated in accordance with Turkish Labour Law. The provision for unused vacation represents the present value of the estimated total provision for potential liabilities related to employees' unused vacation days accrued in period and qualified of the Group calculated in accordance with Turkish Labour Law. The effects of differences between the actuarial assumptions and the actual outcome together with the effects of changes in actuarial assumptions are recognised within the statement of comprehensive income. Previous service costs are recognised in profit or loss in the period in which they are incurred. 11

16 NOTE 2 - BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued) Revenue Revenue is recognized on an accrual basis at the fair value of considerations received or receivable for the sale of goods and services. Net sales represent the invoiced value of goods sold less sales returns and commission, and exclude sales taxes. When the arrangement effectively constitutes a financing transaction, the fair value of the consideration is determined by discounting all future receipts using an imputed rate of interest. The difference between the fair value and the nominal amount of the consideration is recognized in the period on an accrual basis as income from other operating activities. Revenue from card operation, POS, ATM and Fast Toll Collection System ( HGS ) is recognized on an accrual basis during periods of agreements signed between Group and customers. Revenue of printing is accounted on an accrual basis in consolidated financial statements when delivered or accepted by the customers. Interest income Interest income is accrued using the effective interest method which brings the remaining principal amount and expected future cash flows to the net book value of the related deposit during the expected life of the deposit. Financial leases Leasing of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are classified as finance leasing. Finance leases are capitalized at the inception of the lease at the lower of the fair value of the leased property or the present value of the minimum lease payments. Financial costs of leasing are distributed over the lease period with a fixed interest rate. The property, plant and equipment acquired under financial leases are depreciated over the useful lives of the assets. If there is a decrease in the value of the property, plant and equipment under financial leasing, the Group provides impairment. The foreign exchange and interest expenses related with financial leasing have been recorded in the income statement. Lease payments have been deducted from leasing debts. Operating leases Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the consolidated statement of income on a straight-line basis over the period of the lease. Related parties For the purpose of these consolidated financial statements, shareholders, key management personnel and Board members, in each case together with the companies controlled by/or affiliated with them, associated companies and other companies within the Group are considered and referred to as related parties. 12

17 NOTE 2 - BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued) Statement of cash flows The Group prepares statements of cash flows as an integral part of its of financial statements to enable financial statement analysis about the change in its net assets, financial structure and the ability to direct cash flow amounts and timing according to evolving conditions. Cash flows include those from operating activities, working capital, investing activities and financing activities. Cash flows from operating activities represent the cash flows generated from the Group s activities. Cash flows related to investing activities represent the cash flows that are used in or provided from the investing activities of the Group (fixed investments and financial investments). Cash flows arising from financing activities represent the cash proceeds from the financing activities of the Group and the repayments of these funds. Events after the balance sheet date The Group adjusts the amounts recognised in the financial statements to reflect the adjusting events after the balance sheet date. If non-adjusting events after the balance sheet date have material influences on the economic decisions of users of the financial statements, they are disclosed in the notes to the financial statements. 2.3 Significant accounting estimates and assumptions Preparation of consolidated financial statements requires presenting amounts of assets and liabilities as of reporting date, presenting contingent assets and liabilities and estimations which can affect income or expense amounts presented at reporting date. The evaluation, expectation and estimation of accounting are made by considering past experience, other factors and reasonable expectations for situations in the future. These expectations and estimations may vary even if management made their estimation using their best knowledge. Estimations which can affect assets and liabilities in the next financial reporting period stated below: a) Useful lives of tangible and intangible assets In accordance with the accounting policy stated in Note 2.2, tangible and intangible assets are stated at historical cost less depreciation and net of any impairment. Depreciation on tangible assets is calculated using the straight-line method to allocate their cost amounts to their residual values over their estimated useful lives. Useful lives depend on the best estimates of management, and are reviewed in each financial period and corrected accordingly. b) Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. 13

18 NOTE 2 - BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued) 2.3 Significant accounting estimates and assumptions (Continued) c) Going concern The consolidated financial statements have been prepared in accordance with the going concern assumption. The Group s management has made an assessment of the Group s ability to continue as a going concern and is satisfied that the Group has the resources to continue in business for the foreseeable future. d) Provision for doubtful receivables The provision for doubtful receivables is an estimated amount that management believes to be adequate to absorb possible future losses on existing receivables that may become uncollectible due to current economic conditions and inherent risks in the receivables. When evaluating the impairment of the receivables, credibility and prior performance of the other debtors in the market, performance of related assets from the balance sheet date to the report issue date and renegotiated terms are also considered. The Group provides reserve for doubtful trade receivables which will not be collected from the customers or the non-realizable portion of guarantees obtained against these receivables. In case of deterioration of the financial situation in order to reduce the solvency of customers, may require additional provisions for future. e) Deferred income tax assets Deferred income tax asset is only recorded if it is probable that a taxable income will be realized in the future. Under the circumstances that a taxable income will be realized in the future, deferred tax is calculated over the temporary differences and tax losses carried forward. The deferred tax income tax assets is not recognized by Mastercard Bilişim due to it is not probable that a taxable income will be realized in the future. 2.4 New and amended international financial reporting standards a) Standards, amendments and interpretations applicable as of 31 December 2016: - TFRS 14, Regulatory deferral accounts, effective from annual periods beginning on or after 1 January TFRS 14, Regulatory deferral accounts permits first-time adopters to continue to recognise amounts related to rate regulation in accordance with their previous GAAP requirements when they adopt TFRS. However, to enhance comparability with entities that already apply TFRS and do not recognise such amounts, the standard requires that the effect of rate regulation must be presented separately from other items. 14

19 NOTE 2 - BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued) a) Standards, amendments and interpretations applicable as of 31 December 2016 (Continued): - Annual improvements 2014, effective from annual periods beginning on or after 1 January These set of amendments impacts 4 standards: TFRS 5, Non-current assets held for sale and discontinued operations regarding methods of disposal TFRS 7, Financial instruments: Disclosures, (with consequential amendments to TFRS 1) regarding servicing contracts TAS 19, Employee benefits regarding discount rates TAS 34, Interim financial reporting regarding disclosure of information - Amendment to TFRS 11, Joint arrangements on acquisition of an interest in a joint operation, effective from annual periods beginning on or after 1 January This amendment adds new guidance on how to account for the acquisition of an interest in a joint operation that constitutes a business. The amendments specify the appropriate accounting treatment for such acquisitions. - Amendments to TAS 16, Property, plant and equipment and TAS 41, Agriculture, regarding bearer plants, effective from annual periods beginning on or after 1 January These amendments change the financial reporting for bearer plants, such as grape vines, rubber trees and oil palms. It has been decided that bearer plants should be accounted for in the same way as property, plant and equipment because their operation is similar to that of manufacturing. Consequently, the amendments include them within the scope of TAS 16, instead of TAS 41. The produce growing on bearer plants will remain within the scope of TAS Amendment to TAS 16, Property, plant and equipment and TAS 38, Intangible assets, on depreciation and amortisation, effective from annual periods beginning on or after 1 January In this amendment the it has clarified that the use of revenue based methods to calculate the depreciation of an asset is not appropriate because revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset. It is also clarified that revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset. - Amendments to TAS 27, Separate financial statements on the equity method, effective from annual periods beginning on or after 1 January These amendments allow entities to use the equity method to account for investments in subsidiaries, joint ventures and associates in their separate financial statements. - Amendment to TFRS 10, Consolidated financial statements and TAS 28, Investments in associates and joint ventures, effective from annual periods beginning on or after 1 January These amendments clarify the application of the consolidation exception for investment entities and their subsidiaries. - Amendment to TAS 1, Presentation of financial statements on the disclosure initiative, effective from annual periods beginning on or after 1 January 2016, these amendments are as part of the TASB initiative to improve presentation and disclosure in financial reports. 15

20 NOTE 2 - BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued) b) Standards, amendments and interpretations effective after 1 January 2017: - Amendments to TAS 7, Statement of cash flows, on disclosure initiative, effective from annual periods beginning on or after 1 January These amendments introduce an additional disclosure that will enable users of financial statements to evaluate changes in liabilities arising from financing activities. The amendment is part of the TASB s Disclosure Initiative, which continues to explore how financial statement disclosure can be improved. - Amendments TAS 12, Income Taxes, effective from annual periods beginning on or after 1 January The amendments clarify the accounting for deferred tax where an asset is measured at fair value and that fair value is below the asset s tax base. It also clarify certain other aspects of accounting for deferred tax assets. - Amendments to TFRS 2, Share based payments on clarifying how to account for certain types of share-based payment transactions, effective from annual periods beginning on or after 1 January This amendment clarifies the measurement basis for cash-settled, share-based payments and the accounting for modifications that change an award from cash-settled to equity-settled. It also introduces an exception to the principles in TFRS 2 that will require an award to be treated as if it was wholly equity-settled, where an employer is obliged to withhold an amount for the employee s tax obligation associated with a share-based payment and pay that amount to the tax authority. - TFRS 9, Financial instruments, effective from annual periods beginning on or after 1 January This standard replaces the guidance in TAS 39. It includes requirements on the classification and measurement of financial assets and liabilities; it also includes an expected credit losses model that replaces the current incurred loss impairment model. - TFRS 15 Revenue from contracts with customers, effective from annual periods beginning on or after 1 January TFRS 15, Revenue from contracts with customers is a converged standard from the TASB and FASB on revenue recognition. The standard will improve the financial reporting of revenue and improve comparability of the top line in financial statements globally. - Amendment to TFRS 15, Revenue from contracts with customers, effective from annual periods begining on or after 1 January These amendments comprise clarifications of the guidance on identifying performance obligations, accounting for licences of intellectual property and the principal versus agent assessment (gross versus net revenue presentation). New and amended illustrative examples have been added for each of those areas of guidance. The TASB has also included additional practical expedients related to transition to the new revenue standard. 16

21 NOTE 2 - BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued) b) Standards, amendments and interpretations effective after 1 January 2017 (Continued): - TFRS 16, Leases, effective from annual periods beginning on or after 1 January 2019, This standard replaces the current guidance in TAS 17 and is a farreaching change in accounting by lessees in particular. Under TAS 17, lessees were required to make a distinction between a finance lease (on balance sheet) and an operating lease (off balance sheet). TFRS 16 now requires lessees to recognise a lease liability reflecting future lease payments and a right-of-use asset for virtually all lease contracts. The TASB has included an optional exemption for certain short-term leases and leases of low-value assets; however, this exemption can only be applied by lessees. For lessors, the accounting stays almost the same. However, as the TASB has updated the guidance on the definition of a lease (as well as the guidance on the combination and separation of contracts), lessors will also be affected by the new standard. At the very least, the new accounting model for lessees is expected to impact negotiations between lessors and lessees. Under TFRS 16, 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. - Amendments to TFRS 4, Insurance contracts regarding the implementation of TFRS 9, Financial instruments, effective from annual periods beginning on or after 1 January These amendments introduce two approaches: an overlay approach and a deferral approach. The amended standard will Give all companies that issue insurance contracts the option to recognise in other comprehensive income, rather than profit or loss, the volatility that could arise when TFRS 9 is applied before the new insurance contracts standard is issued; and Give companies whose activities are predominantly connected with insurance an optional temporary exemption from applying IFRS 9 until The entities that defer the application of TFRS 9 will continue to apply the existing Financial instruments standard-tas Amendment to TAS 40, Investment property relating to transfers of investment property, effective from annual periods beginning on or after 1 January These amendments clarify that to transfer to, or from, investment properties there must be a change in use. To conclude if a property has changed use there should be an assessment of whether the property meets the definition. This change must be supported by evidence. - Annual improvements , effective from annual periods beginning on or after 1 January These amendments impact 3 standards: TFRS 1, First-time adoption of TFRS, regarding the deletion of short-term exemptions for first-time adopters regarding TFRS 7, TAS 19, and IFRS 10 effective 1 January 2018 TFRS 12, Disclosure of interests in other entities regarding clarification of the scope of the standard. These amendments should be applied retrospectively for annual periods beginning on or after 1 January 2017 TAS 28, Investments in associates and joint ventures regarding measuring an associate or joint venture at fair value effective 1 January TFRIC 22, Foreign currency transactions and advance consideration, effective from annual periods beginning on or after 1 January This TFRIC addresses foreign currency transactions or parts of transactions where there is consideration that is denominated or priced in a foreign currency. The interpretation provides guidance for when a single payment/receipt is made as well as for situations where multiple payments/receipts are made. The guidance aims to reduce diversity in practice. 17

22 NOTE 2 - BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued) The Group is considering the implications of the standards, the impacts on the Group and the timing of their adoption by the Group. The amendments do not have significant impact on the Group s consolidated financial statements. NOTE 3 - INTERESTS IN OTHER ENTITIES a) Subsidiaries The Group has the following consolidated subsidiaries at 31 December 2016 and Proportion of ordinary Proportion Proportion shares of ordinary of ordinary held by shares shares non-controlling Nature of held by held by interest 31 December 2016 Country business parent (%) group (%) (%) Mastercard Payment Transaction Services Turkey Teknik ATM operation Hizmetleri ve Bilişim A.Ş. Turkey systems Proportion of ordinary Proportion Proportion shares of ordinary of ordinary held by shares shares non-controlling Nature of held by held by interest 31 December 2015 Country business parent (%) group (%) (%) Provus Teknik Hizmetler ve ATM operation Bilişim A.Ş. (*) Turkey systems Mastercard Payment Transaction Services Turkey Ödeme Payment operation Sistemleri A.Ş. (**) Turkey systems (*) Trade name of Provus Teknik Hizmetler ve Bilişim A.Ş. was changed with Mastercard Payment Transaction Services Turkey Teknik Hizmetleri ve Bilişim A.Ş. at the Extraordinary General Assembly Meeting held on 7 January (**) All assets and liabilities was transferred to Mastercard Payment Transaction Services Turkey Ödeme Sistemleri A.Ş. at the Extraordinary General Assembly Meeting held on 21 November b) Joint operation Proportion of ordinary shares Nature of held by 31 December 2016 Country business group(%) Mastercard Payment Transaction Services Turkey Bilişim Hizmetleri A.Ş. - Su Damlaları Teknoloji Yazılım Tasarım Reklam ve Matbaacılık Sanayi Ticaret A.Ş. Printing Ortak Girişimi Adi Ortaklığı ( Mastercard - Su Damlaları ) Turkey solutions

23 NOTE 3 - INTERESTS IN OTHER ENTITIES (Continued) Proportion of ordinary shares Nature of held by 31 December 2015 Country business group (%) Printing Mastercard - Su Damlaları Turkey solutions NOTE 4 - CASH AND CASH EQUIVALENTS Cash in hand 3 1,264 Banks - Demand deposits 14,319,912 13,436,438 - Time deposits - 7,700,000 Total 14,319,915 21,137,702 The average interest rate of TRY denominated time deposits of TRY7,700,000 is 13.25% per annum ( p.a. ) at 31 December The maturities of time deposits are less than three months. Cash and cash equivalents include the following for the purposes of the statement of cash flows: Cash and cash equivalents 14,319,915 21,137,702 Less: Blocked deposit (380,959) (145,380) Total 13,938,956 20,992,322 NOTE 5 - TRADE RECEIVABLES AND PAYABLES a) Trade receivables Trade receivables 12,979,835 16,363,712 Receivables from settlements 10,155,048 2,875,561 Less: provision for doubtful receivables (3,036,193) (2,324,488) Total 20,098,690 16,914,785 19

24 NOTE 5 - TRADE RECEIVABLES AND PAYABLES (Continued) The fair value of trade receivables equals their carrying amount, as the impact of discounting is not significant. As of 31 December 2016, trade receivables of TRY8,459,152 (2015: TRY7,658,492) were past but not impaired. These relate to a number of independent customers for whom there is no recent history of default. The ageing analysis of these trade receivables is as follows: 1-30 days 3,584, , months 3,366, , months 1,417,267 3,690, years 91,413 2,880,800 Total 8,459,152 7,658,492 As of 31 December 2016, trade receivables TRY3,036,193 (2015: TRY2,324,488) were impaired and provisions made. The ageing of these receivables is as follows: 1-3 months 192, months 195,191 - Over 1 year 2,648,678 2,324,488 Total 3,036,193 2,324,488 Movements on the provision for impairment of trade receivables are as follows: 1 January 2,324,488 2,144,504 Provision for doubtful receivables 711, ,263 Collections - (131,279) 31 December 3,036,193 2,324,488 The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. 20

25 NOTE 5 - TRADE RECEIVABLES AND PAYABLES (Continued) b) Trade payables Trade payables 11,984,995 16,520,054 Payables to settlement 7,759,851 1,573,612 Total 19,744,846 18,093,666 The fair value of trade payables equals their carrying amount, as the impact of discounting is not significant. NOTE 6 - PREPAID EXPENSES AND DEFERRED REVENUE a) Short-term prepaid expenses Prepaid expenses for the following months 1,740,521 1,893,824 Given order advances 314,838 - Other - 89,916 Total 2,055,359 1,983,740 b) Long-term prepaid expenses Prepaid expenses for following years 381, ,056 Total 381, ,056 c) Short-term deferred revenue Deferred revenue 854,930 - Advances received - 450,074 Total 854, ,074 d) Long-term deferred revenue Advances received - 953,280 Total - 953,280 21

26 NOTE 7 - OTHER ASSETS AND LIABILITIES a) Other current assets Value Added Tax receivables ( VAT ) 741,405 1,658,527 Other 107,078 51,931 Total 848,483 1,710,458 b) Other non-current assets VAT 1,240,040 1,020,691 Total 1,240,040 1,020,691 c) Other current liabilities Taxes and funds payable 1,010,232 1,009,159 Other - 13,278 Total 1,010,232 1,022,437 NOTE 8 - PROPERTY, PLANT AND EQUIPMENTS 1 January 31 December 2016 Additions Disposals (-) 2016 Cost: Machinery and equipment 29,647,817 5,508,338 (255,848) 34,900,307 Motor vehicles 93,850 - (93,850) - Furniture and fixtures 2,065,486 58,068-2,123,554 Leasehold improvements 3,756, ,166-3,923,006 Total 35,563,993 5,732,572 (349,698) 40,946,867 Accumulated depreciation: Machinery and equipment (13,517,167) (3,325,148) 197,602 (16,644,713) Motor vehicles (93,850) - 93,850 - Furniture and fixtures (710,401) (341,093) - (1,051,494) Leasehold improvements (1,719,446) (516,540) - (2,235,986) Total (16,040,864) (4,182,781) 291,452 (19,932,193) Net book value 19,523,129 21,014,674 22