รายงานประจำป 2559 Annual Report 2016 FINANCIAL STATEMENTS บร ษ ทเง นท น แอ ดวานซ จำก ด (มหาชน) ADVANCE FINANCE PUBLIC COMPANY LIMITED

Transcription

1 รายงานประจำป 2559 Annual Report 2016 FINANCIAL STATEMENTS บร ษ ทเง นท น แอ ดวานซ จำก ด (มหาชน) ADVANCE FINANCE PUBLIC COMPANY LIMITED

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3 ANNUAL REPORT รายงานประจำาป 2559 สารบ ญ รายงานของผ สอบบ ญช ร บอน ญาต งบแสดงฐานะการเง น งบกำาไรขาดท นและกำาไรขาดท นเบ ดเสร จอ น งบแสดงการเปล ยนแปลงส วนของเจ าของ งบกระแสเง นสด หมายเหต ประกอบงบการเง น สำาหร บป ส นส ดว นท 31 ธ นวาคม Index Independent Auditor s Report Statement of financial position Statements of profit or loss and other comprehensive income Statement of changes in equity Statement of cash flows

4 68 รายงานประจำาป 2559 ANNUAL REPORT 2016 Independent Auditor s Report To the Shareholders of Opinion I have audited the financial statements of (the Company ), which comprise the statement of financial position as at 31 December 2016, the statements of profit or loss and other comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information. In my opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at 31 December 2016 and its financial performance and cash flows for the year then ended in accordance with Thai Financial Reporting Standards (TFRSs). Basis for Opinion I conducted my audit in accordance with Thai Standards on Auditing (TSAs). My responsibilities under those standards are further described in the Auditor s Responsibilities for the Audit of the section of my report. I am independent of the Company in accordance with the Code of Ethics for Professional Accountants issued by the Federation of Accounting Professions under the Royal Patronage of His Majesty the King that are relevant to my audit of the financial statements, and I have fulfilled my other ethical responsibilities in accordance with these requirements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion. Other Information Management is responsible for the other information. The other information comprises the information included in the annual report, but does not include the financial statements and my auditor s report thereon. The annual report is expected to be made available to me after the date of this auditor s report. My opinion on the financial statements does not cover the other information and I will not express any form of assurance conclusion thereon. In connection with my audit of the financial statements, my responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the financial statements or my knowledge obtained in the audit, or otherwise appears to be materially misstated. Responsibilities of Management and Those Charged with Governance for the Management is responsible for the preparation and fair presentation of the financial statements in accordance with TFRSs, 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 Company 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 Company or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Company s financial reporting process.

5 ANNUAL REPORT รายงานประจำาป 2559 Auditor s Responsibilities for the Audit of the My objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor s report that includes my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with TSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered 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 audit in accordance with TSAs, I exercise professional judgment and maintain professional skepticism throughout the audit. I 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 obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related 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 Company s ability to continue as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in my auditor s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify my opinion. My conclusions are based on the audit evidence obtained up to the date of my auditor s report. However, future events or conditions may cause the Company to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. I communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that I identify during my audit. (Pantip Gulsantithamrong) Certified Public Accountant Registration No KPMG Phoomchai Audit Ltd. Bangkok 1 March 2017

6 70 รายงานประจำาป 2559 ANNUAL REPORT 2016 Statement of financial position 31 December Assets Note Cash 30,000 30,000 Intercompany and money market items 7 1,021,906, ,657,749 Investments, net 8 1,633,732, ,853,718 Loans to customers and accrued interest 9 receivables, net Loans to customers 26 6,761,382,205 5,119,168,162 Accrued interest receivables 26 3,537,464 4,335,976 Total loans to customers and accrued interest receivables 6,764,919,669 5,123,504,138 Less allowance for doubtful accounts 12 (122,249,037) (50,342,468) Total loans to customers and accrued interest receivables, net 6,642,670,632 5,073,161,670 Properties for sale, net 13 63,654,066 59,957,399 Equipment, net 14 14,531,472 19,411,398 Intangible assets, net , ,868 Deferred tax assets 16 8,863,405 13,172,227 Receivable from Legal Execution Department 3,468,750 2,340,250 Accrued service fees - 321,000 Deposits 2,471,289 3,086,446 Other assets, net 17 2,247,809 1,596,756 Total assets 9,394,566,600 6,878,280,481 The accompanying notes are an integral part of these financial statements.

7 ANNUAL REPORT รายงานประจำาป 2559 Statement of financial position 31 December Liabilities and equity Note Liabilities Deposits 18, 26 7,775,202,641 5,401,892,997 Intercompany and money market items ,947, ,500,259 Accrued interest payable 26 27,502,878 20,899,773 Contributions to the Financial Institutions Development Fund and the Deposit Protection Agency payable 18,108,610 12,496,490 Income tax payable 6,657,654 12,007,950 Employee benefit obligations 20 14,434,597 15,076,813 Withholding tax payable 7,482,372 5,741,482 Accrued expenses 3,453,409 2,224,406 Other liabilities 21 6,012,918 5,038,816 Total liabilities 8,128,802,818 5,668,878,986 The accompanying notes are an integral part of these financial statements.

8 72 รายงานประจำาป 2559 ANNUAL REPORT 2016 Statement of financial position 31 December Liabilities and equity Note Equity Share capital 22 Authorised share capital 1,350,000,000 ordinary shares of Baht 1 each 1,350,000,000-10,000,000 ordinary shares of Baht 100 each - 1,000,000,000 Issued and fully paid-up share capital 1,000,000,000 ordinary shares of Baht 1 each 1,000,000,000-10,000,000 ordinary shares of Baht 100 each - 1,000,000,000 Other components of equity 8.3 (1,342,955) (18,064,468) Retained earnings Appropriated Legal reserve 23 20,432,516 15,600,476 Unappropriated 246,674, ,865,487 Total equity 1,265,763,782 1,209,401,495 Total liabilities and equity 9,394,566,600 6,878,280,481 The accompanying notes are an integral part of these financial statements.

9 ANNUAL REPORT รายงานประจำาป 2559 Statements of profit or loss and other comprehensive income Year ended 31 December Note Interest income 26, ,850, ,867,275 Interest expense 26, ,439, ,205,218 Net interest income 274,411, ,662,057 Fees and service income 26, 31 62,747,583 70,137,880 Net fees and service income 62,747,583 70,137,880 Net gain on investments 32 3,769,965 - Dividend income 8,319,677 4,974,200 Gain on sale of properties for sale - 33,322,797 Other operating income 7,922 1,332,367 Total operating income 349,256, ,429,301 Other operating expenses Employee expenses 26 92,223,594 79,923,539 Directors remuneration 26 3,060,008 2,190,000 Premises and equipment expenses 16,690,850 15,315,901 Taxes and duties 18,605,752 18,731,156 Others 27,210,651 15,056,631 Total other operating expenses 157,790, ,217,227 Bad debt, doubtful accounts and loss on impairment 33 71,224,199 24,575,623 Profit from operating before income tax expense 120,241, ,636,451 Income tax expense 34 23,600,580 23,576,174 Profit for the year 96,640,774 95,060,277 The accompanying notes are an integral part of these financial statements.

10 74 รายงานประจำาป 2559 ANNUAL REPORT 2016 Statements of profit or loss and other comprehensive income Other comprehensive income (loss) Items that are or may be reclassified to profit or loss Year ended 31 December Note Gain (loss) on re-measuring available-for-sale investments 20,901,891 (13,505,634) Income tax on other comprehensive income (loss) 34 (4,180,378) 2,701,127 Items that will not be reclassified to profit or loss 16,721,513 (10,804,507) Defined benefit plan actuarial losses 20 - (1,670,007) Income tax on other comprehensive income ,001 - (1,336,006) Other comprehensive income (loss) for the year, net of income tax 16,721,513 (12,140,513) Total comprehensive income for the year 113,362,287 82,919,764 Basic earnings per share The accompanying notes are an integral part of these financial statements.

11 ANNUAL REPORT รายงานประจำาป 2559 Statement of changes in equity Other components of equity Retained earnings Note Issued and paid-up share capital Revaluation surplus (deficit) on available-for-sale investments Legal reserve Unappropriated Total equity Year ended 31 December 2015 Balance at 1 January ,000,000 (7,259,961) 10,847, ,894, ,481,731 Transactions with owners, recorded directly in equity Issue of ordinary shares ,000, ,000,000 Dividends to shareholders of the Company (21,000,000) (21,000,000) Total contributions by and distributions to shareholders of the Company 350,000, (21,000,000) 329,000,000 Total transactions with owners, recorded directly in equity 350,000, (21,000,000) 329,000,000 Comprehensive income for the year Profit for the year ,060,277 95,060,277 Other comprehensive income - (10,804,507) - (1,336,006) (12,140,513) Total comprehensive income for the year - (10,804,507) - 93,724,271 82,919,764 Transfer to legal reserve - - 4,753,014 (4,753,014) - Balance at 31 December ,000,000,000 (18,064,468) 15,600, ,865,487 1,209,401,495 The accompanying notes are an integral part of these financial statements.

12 76 รายงานประจำาป 2559 ANNUAL REPORT 2016 Statement of changes in equity Other components of equity Retained earnings Note Issued and paid-up share capital Revaluation surplus (deficit) on available-for-sale investments Legal reserve Unappropriated Total equity Year ended 31 December 2016 Balance at 1 January ,000,000,000 (18,064,468) 15,600, ,865,487 1,209,401,495 Transactions with owners, recorded directly in equity Dividends to shareholders of the Company (57,000,000) (57,000,000) Total distributions to shareholders of the Company (57,000,000) (57,000,000) Total transactions with owners, recorded directly in equity (57,000,000) (57,000,000) Comprehensive income for the year Profit for the year ,640,774 96,640,774 Other comprehensive income - 16,721, ,721,513 Total comprehensive income for the year - 16,721,513-96,640, ,362,287 Transfer to legal reserve - - 4,832,040 (4,832,040) - Balance at 31 December ,000,000,000 (1,342,955) 20,432, ,674,221 1,265,763,782 The accompanying notes are an integral part of these financial statements.

13 ANNUAL REPORT รายงานประจำาป 2559 Statement of cash flows Year ended 31 December Cash flows from operating activities Profit from operating before income tax expense 120,241, ,636,451 Adjustments for Depreciation and amortisation 6,516,385 5,556,262 Bad debt and doubtful accounts 71,906,569 25,264,158 Reversal of impairment of properties for sale - (1,694,061) Loss (gain) on sales of properties for sale 90,391 (33,322,797) Loss (gain) on disposal of equipment 241 (1,331,913) Employee benefit expense 1,770,984 3,318,698 Net interest income (274,411,261) (164,662,057) Net gain on investments (3,769,965) - Dividend income (8,319,677) (4,974,200) Proceeds from interest 517,080, ,640,442 Interest paid (229,224,356) (160,953,218) Proceeds from dividend 8,319,677 4,974,200 Income tax paid (28,822,433) (20,564,258) Profit from operations before changes in operating assets and liabilities 181,378, ,887,707 (Increase) decrease in operating assets Intercompany and money market items (169,357,545) (86,277,887) Loans to customers (1,642,214,043) (2,005,598,447) Properties for sale (3,787,058) 154,660,582 Receivable from Legal Execution Department (1,128,500) 3,822,500 Accrued service fees 321,000 1,177,000 Deposits 615,157 1,250,154 Other assets (659,910) (228,661) The accompanying notes are an integral part of these financial statements.

14 78 รายงานประจำาป 2559 ANNUAL REPORT 2016 Statement of cash flows Year ended 31 December Increase (decrease) in operating liabilities Deposits 2,373,309,644 2,034,457,642 Intercompany and money market items 76,447,480 (18,466,026) Short-term debt issued and borrowings - (2,630,000) Employee benefit paid (2,413,200) - Withholding tax payable 1,740,890 3,203,632 Accrued expenses 1,229, ,615 Other liabilities 974,102 3,573,040 Net cash provided by operating activities 816,455, ,757,851 Cash flows from investing activities Purchases of available-for-sale securities - (110,390,000) Proceeds from sales of available-for-sale securities 42,479,149 71,880 Purchases of held-to-maturity debt securities (19,400,000,000) (17,900,000,000) Proceeds from redemption of held-to-maturity debt securities 18,600,000,000 17,500,000,000 Purchases of equipment (1,280,630) (14,575,988) Proceeds from sales of equipment 935 1,478,586 Purchases of intangible assets (655,109) (342,329) Net cash used in investing activities (759,455,655) (523,757,851) The accompanying notes are an integral part of these financial statements.

15 ANNUAL REPORT รายงานประจำาป 2559 Statement of cash flows Cash flows from financing activities Year ended 31 December Note Dividends paid to shareholders of the Company 24 (57,000,000) (21,000,000) Proceeds from issue of ordinary shares ,000,000 Net cash (used in) provided by financing activities (57,000,000) 329,000,000 Net cash - - Cash at 1 January 30,000 30,000 Cash at 31 December 30,000 30,000 Non-cash transactions Gain (loss) on re-measuring available-for-sale investments 20,901,891 (13,505,634) Defined benefit plan actuarial losses - (1,670,007) The accompanying notes are an integral part of these financial statements.

16 80 รายงานประจำาป 2559 ANNUAL REPORT 2016 Note Contents 1. General information 2. Basis of preparation of the financial statements 3. Significant accounting policies 4. Financial risk management 5. Financial instruments 6. Maintenance of capital fund 7. Intercompany and money market items (assets) 8. Investments, net 9. Loans to customers and accrued interest receivables, net 10. Troubled debt restructuring 11. Classified assets 12. Allowance for doubtful accounts 13. Properties for sale, net 14. Equipment, net 15. Intangible assets, net 16. Deferred tax assets 17. Other assets, net 18. Deposits 19. Intercompany and money market items (liabilities) 20. Employee benefit obligations 21. Other liabilities 22. Share capital 23. Reserves 24. Dividends 25. Contingencies 26. Related parties 27. Operating leases 28. Segment information 29. Interest income 30. Interest expense 31. Fees and service income 32. Net gain on investments 33. Bad debt, doubtful accounts and loss on impairment 34. Income tax expense 35. Basic earnings per share 36. Events after the reporting period 37. Thai Financial Reporting Standards (TFRS) not yet adopted

17 ANNUAL REPORT รายงานประจำาป 2559 These notes form an integral part of the financial statements. The financial statements issued for Thai statutory and regulatory reporting purposes are prepared in the Thai language. These English language financial statements have been prepared from the Thai language statutory financial statements, and were approved and authorised for issue by the Board of Directors on 1 March General information, the Company, is incorporated in Thailand. The Company engages in finance business in accordance with the Financial Institutions Business Act B.E and has its registered office at 87/2, 40th Floor, CRC Tower, All Seasons Place, Wireless Road, Lumpini, Pathumwan, Bangkok. The Company registered as a public company limited in accordance with the Public Limited Company Act B.E on 26 May 2004 and had been approved from Ministry of Finance on 20 December The Company s major shareholders as at 31 December 2016 were Seamico Securities Public Company Limited (10% shareholding) and The Brooker Group Public Company Limited (10% shareholding), which were incorporated in Thailand, IFS Capital Limited (10% shareholding), which was incorporated in the Republic of Singapore and Miss Kantima Pornsriniyom (10% shareholding). The Company s major shareholders as at 31 December 2015 were Seamico Securities Public Company Limited (10% shareholding), which was incorporated in Thailand, IFS Capital Limited (10% shareholding), which was incorporated in the Republic of Singapore, and Miss Kantima Pornsriniyom (10% shareholding). 2 Basis of preparation of the financial statements (a) Statement of compliance The financial statements are prepared in accordance with Thai Financial Reporting Standards (TFRS); guidelines promulgated by the Federation of Accounting Professions (FAP); and presented as prescribed by the Bank of Thailand (BoT) notification number Sor Nor Sor 21/2558, directive dated 4 December 2015, regarding The preparation and announcement of the financial statements of commercial banks and holding companies which are the parent company of group of companies offering financial services. The FAP has issued revised TFRS effective for annual accounting periods beginning on or after 1 January The initial application of these revised TFRS has resulted in change in certain of the Company s accounting policies. These changes have no material effect on the financial statements. In addition to the above revised TFRS, the FAP has issued a number of other new and revised TFRS which are effective for annual financial periods beginning on or after 1 January 2017 and have not been adopted in the preparation of these financial statements. Those new and revised TFRS that are relevant to the Company s

18 82 รายงานประจำาป 2559 ANNUAL REPORT 2016 operations are disclosed in note 37. (a) Basis of measurement The financial statements have been prepared on the historical cost basis except for the following items. Items Available-for-sale financial assets Defined benefit liability Measurement bases Fair value Present value of the defined benefit obligation, limited as explained in Note 3 (k) (c) Functional and presentation currency The financial statements are presented in Thai Baht, which is the Company s functional currency. All financial information presented in Thai Baht has been rounded in the notes to the financial statements to the nearest Baht. (d) Use of judgments and estimates The preparation of financial statements in conformity with TFRS requires management to make judgments, estimates and assumptions that affect the application of 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 accounting estimates are recognised prospectively. Assumptions and estimations uncertainties are as follows: Impairment of equity investments The Company treats available-for-sale investments and general investments as impaired when the management judges that there have been a significant or prolonged decline in the fair value below their cost. The determination of what is significant or prolonged requires management judgment. Allowance for doubtful accounts for loans to customers Allowances for doubtful accounts for loans to customers are intended to adjust the value of loans to customers for probable credit losses. The management uses judgment to establish reserves for estimated losses on outstanding loans when there is any doubt about the borrower s capacity to repay the principal and the interest by determined through a combination of specific reviews, probability of default, statistical modeling and estimates, taking into account change in the value of collateral and current economic conditions. However, the use of different estimates and assumptions could affect the amounts of allowances for doubtful accounts

19 ANNUAL REPORT รายงานประจำาป 2559 and adjustments to the allowances may therefore be required in the future. Measurement of defined benefit obligations The calculation of the defined benefit obligations is sensitive to the assumptions on discount rate and future salary increases as set out in note 20. Measurement of fair values A number of the Company s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets. Details of the methods and assumptions over the measurement of fair values are provided in note 5. Assessment of risk and rewards When considering the recognition or derecognition of assets and liabilities, the management is required to use judgment in assessing risk and rewards. Although management uses its best knowledge of current events and actions in making assessments of risk and rewards, actual risk and rewards may ultimately differ. 3 Significant accounting policies The accounting policies set out below have been applied consistently to all periods presented in these financial statements. (a) Foreign currencies Foreign currency transactions Transactions in foreign currencies are translated to the functional currency at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated to the functional currency at the exchange rate at the reporting date. (b) Cash Cash comprises cash in hand.

20 84 รายงานประจำาป 2559 ANNUAL REPORT 2016 (c) Investments Investments in other debt and equity securities Debt securities that the Company has the positive intent and ability to hold to maturity are classified as held-to-maturity investments. Held-to-maturity investments are stated at amortised cost, less any impairment losses. The difference between the acquisition cost and redemption value of such debt securities is amortised using the effective interest rate method over the period to maturity. Debt securities and marketable equity securities, other than those securities held for trading or intended to be held to maturity, are classified as available-for-sale investments. Available-for-sale investments are, subsequent to initial recognition, stated at fair value, and changes therein, other than impairment losses on monetary items, are recognised directly in equity. Impairment losses are recognised in profit or loss. When these investments are derecognised, the cumulative gain or loss previously recognised directly in equity is recognised in profit or loss. Where these investments are interest-bearing, interest calculated using the effective interest method is recognised in profit or loss. Equity securities which are not marketable are stated at cost less any impairment losses. The fair value of financial instruments for available-for-sale is determined as the quoted bid price at the reporting date. Disposal of investments On disposal of an investment, the difference between net disposal proceeds and the carrying amount together with the associated cumulative gain or loss that was reported in equity is recognised in profit or loss. If the Company disposes of part of its holding of a particular investment, the deemed cost of the part sold is determined using the weighted average method applied to the carrying value of the total holding of the investment. (d) Loans to customers Loans to customers are shown exclusive of accrued interest receivables. (e) Allowance for doubtful accounts The Company provides allowance for doubtful accounts in accordance with the notifications of the BoT based on an evaluation of the current status of the debtors, taking into consideration the recovery risk and the value of collateral.

21 ANNUAL REPORT รายงานประจำาป 2559 Minimum requirement of allowance for doubtful accounts is determined based on the BoT s notification dated 3 August 2008, Classification and allowance criteria of the financial institution. The Company classified their loan portfolios into six categories, primarily based on the non-accrual period. For loans classified as pass and special-mention, the calculation of allowances for doubtful accounts is based on the BoT s minimum percentage requirement, taking into consideration the collateral value, where the collateral type and date of the latest appraisal are qualifying factors. For loans classified as sub-standard, doubtful and doubtful of loss, the allowances on these accounts will be set at 100 percent for the difference between the outstanding book value of the debt and the present value of future cash flows expected to be received or the expected proceeds from the disposal of collateral in accordance with the BoT s regulations. The discount interest rate and the period of collateral disposal are set with reference to BoT s notifications. In addition, the Company set up allowance for doubtful accounts in regard to Possible Impaired Loan. The allowance is based on a rate of 1.2% of performing loans, except in cases where analysis of historic payment patterns indicates a different rate for particular categories of debtor. Any additional allowances for doubtful accounts are charged to bad debts and doubtful accounts in profit or loss. The Company writes off bad debts against the allowance for doubtful accounts for the uncollectible amounts. Bad debts recovery is recognised as income and is presented net of bad debt and doubtful accounts in profit or loss. (f) Troubled debt restructuring The Company records troubled debt restructuring transactions in accordance with the Bank of Thailand s regulations and Accounting Standard No.104 (revised 2002) Accounting for Troubled Debt Restructuring. If repayment of debt is received through the transfer of property, financial instruments, or equity in the debtor is received as a result of a debt to equity swap, the Company records the assets received at their fair value net of estimated disposal expenses not exceeding the carrying value of debt and unearned interest to which the Company is legally entitled. Losses arising from differences between the carrying value of debt and the fair value of the assets are recorded in profit or loss, taking into account existing allowance for doubtful accounts. Where restructuring a loan involves modification of its terms, the Company will record the loss arising from the calculation of the present value of the future cash flows expected to be received from those customers by using the Minimum Loan Rate (MLR) at the time of restructuring in discounting. The difference between the present value of the future cash flows expected to be received and the outstanding balances of loans is recorded as a loss from restructuring in profit or loss. Losses from troubled debt restructuring arising from reductions of principal and accrued interest of overdue debt amount and the various methods of debt restructuring as modification of its terms, transfer of assets etc. are recognised as expense in profit or loss.

22 86 รายงานประจำาป 2559 ANNUAL REPORT 2016 (g) Properties for sale Properties for sale are stated at the lower of fair value at the acquisition date or the amount of the legal claim on the related debt, including interest receivables. The fair value is estimated by using the latest appraisal value after deduction of estimated disposal expenses. The assets bought from Legal Execution Department s public auction are recognised at purchase price plus transfer costs, less expected direct selling expenses. Loss on impairment is charged to profit or loss. Gains or losses on the sales of properties for sale are recognised as other operating income or expense upon disposal. (h) Equipment Recognition and measurement Owned assets Equipment is stated at cost less accumulated depreciation and impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset and any other costs directly attributable to bringing the assets to a working condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are located. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. When parts of an item of equipment have different useful lives, they are accounted for as separate items (major components) of equipment. Gains and losses on disposal of an item of equipment is determined by comparing the proceeds from disposal with the carrying amount of equipment, and are recognised net within other income in profit or loss. Subsequent costs The cost of replacing a part of an item of equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company, and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of equipment are recognised in profit or loss as incurred. Depreciation Depreciation is calculated based on the depreciable amount, which is the cost of an asset, or other amount substituted for cost, less its residual value.

23 ANNUAL REPORT รายงานประจำาป 2559 Depreciation is charged to profit or loss on a straight-line basis over the estimated useful lives of each component of an item of equipment. The estimated useful lives are as follows: Leasehold improvement 5 years Computer and equipment 5 years Furniture and fixtures 5 years Vehicles 5 years No depreciation is provided on assets in progress. Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate. (i) Intangible assets (j) Intangible assets that are acquired by the Company and have finite useful lives are measured at cost less accumulated amortisation and accumulated impairment losses. Subsequent expenditure Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is recognised in profit or loss as incurred. Amortisation Amortisation is based on the cost of the asset, or other amount substituted for cost, less its residual value. Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. The estimated useful lives for software licenses in the current and comparative years are 5 years. Amortisation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate. Impairment The carrying amounts of the Company s assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the assets recoverable amounts are estimated. An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. The impairment loss is recognised in profit or loss unless it reverses a previous revaluation credited to equity, in which case it is charged to equity.

24 88 รายงานประจำาป 2559 ANNUAL REPORT 2016 When a decline in the fair value of an available-for-sale financial asset has been recognised directly in equity and there is objective evidence that the value of the asset is impaired, the cumulative loss that had been recognised directly in equity is recognised in profit or loss even though the financial asset has not been derecognised. The amount of the cumulative loss that is recognised in profit or loss is the difference between the acquisition cost and current fair value, less any impairment loss on that financial asset previously recognised in profit or loss. Calculation of recoverable amount The recoverable amount of held-to-maturity securities carried at amortised cost is calculated as the present value of the estimated future cash flows discounted at the original effective interest rate. The recoverable amount of available-for-sale financial assets is calculated by reference to the fair value. The recoverable amount of a non-financial asset is the greater of the asset s value in use and fair value less costs to sell. In assessing value in use, the estimate future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Reversals of impairment An impairment loss in respect of a financial asset is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognised in profit or loss. For financial assets carried at amortised cost and available-for-sale financial assets that are debt securities, the reversal is recognised in profit or loss. For available-for-sale financial assets that are equity securities, the reversal is recognised in other comprehensive income. Impairment losses recognised in prior years in respect of other non-financial assets are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. (k) Employee benefits Defined contribution plans Obligations for contributions to defined contribution plans are expensed as the related service is provided. Defined benefit plans

25 ANNUAL REPORT รายงานประจำาป 2559 The Company s net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior years, discounting that amount. The calculation of defined benefit obligations is performed by a qualified actuary using the projected unit credit method. Remeasurements of the net defined benefit liability, actuarial gain or loss are recognised immediately in OCI. The Company determines the interest expense on the net defined benefit liability for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period, taking into account any changes in the net defined benefit liability during the period as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognised in profit or loss. When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognised immediately in profit or loss. The Company recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs. Short-term employee benefits Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. (l) Provisions A provision is recognised if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost. (m) Revenue Interest income and discounts on loans to customers Interest income on loans is recognised over term of the loans based on the amount of principal outstanding. Interest and discount income on loans are generally recognised on an accrual basis. In accordance with the BoT s regulations, interest in arrears for more than 3 months, regardless of whether the loans are covered by collateral, are not accrued but is instead recognised as income on a cash basis.

26 90 รายงานประจำาป 2559 ANNUAL REPORT 2016 The Company has reversed accrued interest income on loans which have been recognised as income, for interest in arrears more than 3 months, in accordance with the BoT s regulations. Interest income and dividend income on investments Interest income on investment is recognised on an accrual basis. Dividend income is recognised in profit or loss on the date the Company s right to receive payments is established. Fees and service charges Fees and service charges are recognised as income on an accrual basis. (n) Expenses Finance costs Interest expense is recognised as expenses in profit or loss on an accrual basis. Operating leases Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed. Determining whether an arrangement contains a lease At inception of an arrangement, the Company determines whether such an arrangement is or contains a lease. A specific asset is the subject of a lease if fulfilment of the arrangement is dependent on the use of that specified asset. An arrangement conveys the right to use the asset if the arrangement conveys to the Company the right to control the use of the underlying asset. At inception or upon reassessment of the arrangement, the Company separates payments and other consideration required by such an arrangement into those for the lease and those for other elements on the basis of their relative fair values. If the Company concludes for a finance lease that it is impracticable to separate the payments reliably, an asset and a liability are recognised at an amount equal to the fair value of the underlying asset. Subsequently the liability is reduced as payments are made and an imputed finance charge on the liability is recognised using the Company s incremental borrowing rate.

27 ANNUAL REPORT รายงานประจำาป 2559 (o) Income tax Income tax expense for the year comprises current and deferred tax. Current and deferred taxes are recognised in profit or loss except to the extent that they relate to a business combination, or items recognised directly in equity or in other comprehensive income. Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using the tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss. The measurement of deferred tax reflects the tax consequences that would follow the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, using tax rates enacted or substantively enacted by the reporting date. In determining the amount of current and deferred tax, the Company takes into account the impact of uncertain tax positions and whether additional taxes and interest may be due. The Company believes that its accruals for tax liabilities are adequate for all open tax years based on its assessment of many factors, including interpretations of tax law and prior experience. This assessment relies on estimates and assumptions and may involve a series of judgments about future events. New information may become available that causes the Company to change its judgment regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense in the period that such a determination is made. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax assets and liabilities, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is no longer probable that the related tax benefit will be realised.

28 92 รายงานประจำาป 2559 ANNUAL REPORT 2016 (p) Earnings per share The Company presents basic earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year. (q) Segment reporting Segment results that are reported to the Company s CEO (the chief operating decision maker) include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. 4 Financial risk management Financial risk management policies The Company is exposed to normal business risks from changes in market interest rates and from non-performance of contractual obligations by counterparties. The Company does not hold or issue derivative financial instruments for speculative or trading purposes. Risk Management is an important basis for financial institution business. The purpose of risk management is to enable the Company to manage and maintain risks management at the target and acceptable level in accordance with the rules of the BoT and corporate governance. Risk Management Committee is in charge of managing overall risks of the Company by planning, reviewing and monitoring risk management strategies to maintain a balance between risks and return. Principally, the Company s risk management strategies consist of (a) risk identification, (b) risk measurement, (c) risk monitoring (d) risk control in order to manage risks at a proper level in accordance with good governance. Other consolidating committees, e.g. Asset and Liability Management Committee (ALCO), Credit Committee, Debt Restructuring Committee and Operational Risk Working Group were also formed to be responsible for each specific risk to ensure the Company s risk management efficiency. Credit risk Credit risk refers to the risk that a counterparty or a borrower may default on its contractual obligations and agreements or commitment identified in financial instruments. Such default may be caused by the counterparty s inability to pay due to financial encumbrances or their intention not to abide by the contractual agreements, resulting in a loss to the Company. The Company has disclosed significant concentrations of credit risk in note 9 to the financial statements.

29 ANNUAL REPORT รายงานประจำาป 2559 For the loans item shown in the statement of financial position, the Company s maximum credit loss is the carrying amount of net loans after deduction of applicable allowance for losses without considering the value of collateral. In addition, credit risk may arise from off-financial reporting items relating to other guarantees. The Company has implemented credit risk management processes to measure and control credit risk. For retail customers, the Company used credit scoring as a tool to determine an appropriate return given the risk level of each loan. In the credit approval process, the Company considers the customer s ability to repay and the loan objectives as key factors in the approval of credit and may obtain sufficient collateral or other securities, where appropriate, as a means of mitigating the risk of financial losses from default. The Company also has processes for regularly reviewing customers credit and performance on all approved transactions. For non-performing loans (NPL), the Company has closely and continuously monitored, resolved and/or restructured them to retain maximum benefits for the Company. Market risk Market risk is any risk due to changes in interest rates, foreign exchange rates or securities prices that will have an effect on the Company s funding costs, investment position or foreign currency position, resulting in possible loss to the Company. Market risk for the Company can be categorised as interest rate risk, foreign exchange risk and equity risk. 1. Interest rate risk Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates and it will affect the result of the Company s operation and cash flows. The Company has managed interest rate risk which results from a change in interest rate of assets and liabilities that may affect the Company s net interest income by using an Interest Rate Gap Model to ensure that any possible effects are at the acceptable level in accordance with the interest rate risk management policy of the Company.

30 94 รายงานประจำาป 2559 ANNUAL REPORT 2016 As at 31 December 2016 and 2015, significant financial assets and liabilities classified by type of interest rate were as follows: Floating interest rate 2016 Fixed interest rate Non - interest bearing Financial assets Intercompany and money market items 120,293, ,000,000 71,612,907 1,021,906,526 Investments, net - 1,479,802, ,930,028 1,633,732,679 Loans to customers* 6,383,303,981 8,546,706-6,391,850,687 Total 6,503,597,600 2,318,349, ,542,935 9,047,489,892 Financial liabilities Deposits - 7,775,202,641-7,775,202,641 Intercompany and money market items - 269,947, ,947,739 Total - 8,045,150,380-8,045,150,380 * Excluding non-accrual loans 2015 Floating interest rate Fixed interest rate Non - interest bearing Financial assets Intercompany and money market items 60,729, ,000,000 61,928, ,657,749 Investments, net - 680,116, ,737, ,853,718 Loans to customers* 4,838,322,090 13,085,693-4,851,407,783 Total 4,899,051,581 1,423,202, ,665,578 6,555,919,250 Financial liabilities Deposits - 5,401,892,997-5,401,892,997 Intercompany and money market items - 193,500, ,500,259 Total - 5,595,393,256-5,595,393,256 * Excluding non-accrual loans Total Total