Initially measurement should be at cost and subsequent measuring at fair value (except for loans originated by the enterprise, held-to-maturity and assets without quoted market, which have to be valued at amortized cost).
The International Financial Reporting Standard 37 — Provisions, Contingent Liabilities and Contingent Assets — states what kinds of situations entitle banks (and other entities too) to recognize provisions. Generally, provisions are sub-class of liabilities and should not be disclose separately. They should be estimated on a prudent basis. Any provision is allowed if (and only if) the liabilities connected with provisions exist in the face of balance sheet.
It is necessary to tell a few words about the Polish commercial banks’ situation in the international environment. As Polish banks, in many cases, belong to foreign capital groups (including international or even global banking institutions), they are generally well prepared to implementing international regulations. For example, if Polish bank belongs to any institution that presents its financial report in accordance with the IFRS, it ought to apply these rules, apart from local accounting requirements. As far as Basel Committee Accord is concerned, banks are trying to introduce the best system for estimating different kinds of risk (credit, operational, and market). The banks’ staffs realize that earlier or later, the same regulations will be obligatory in Poland, too. The easier situation is in those banks, which have foreign branch investor. They have unlimited source of global know-how.
The banks that are quoted on Warsaw Stock Exchange, must also be prepared for implementing new corporate governance to be in accordance with Polish Security and Exchange Commission’s law. An appropriate corporate governance policy and investors’ relationship will make reports readers more familiar with what they read.
As one can see, every bank and credit institution should apply different law regulations set by international bodies. Some of them are included into the local law system, in fact, but some of them must be applied by banks themselves, because it makes their activity and financial statements clearer to the investors. Otherwise, they will look like entities that have something to hide, which is not favourable for modern commercial institutions.
References: 1. First Council Directive 77/780/EEC of 12 December 1977 on the coordination of the law, regulations and administrative provisions relating to the taking up and pursuit of the business of credit institutions // Official journal. — No. L 322, 17/12/1977. — P. 0030 – 0037. 2. Second Council Directive 89/646/EEC of 15 December 1989 on the coordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of credit institutions and amending Directive 77/780/EEC // Official journal. — No. L. 386, 30/12/1989. — P. 0001 – 0013. 3. Directive 94/19/EC of the European Parliament and the Council of 30 May 1994 on deposit-guarantee schemes // Official journal. — No. L. 135, 31/05/1994. — P. 0005 – 0014. 4. Council Directive 89/299/EEC of 17 April 1989 on the own funds of credit institutions // Official journal. — No. L. 124, 05/05/1989. — P. 0016 – 0020. 5. Council Directive 92/30/EEC of 6 April 1992 on the supervision of credit institutions on a consolidated basis // Official journal. — No. L. 110, 280/04/1992. — P. 0052 – 0058. 6. Council Directive 92/121/EEC of 21 December 1992 on the monitoring and control of large exposures of credit institutions // Official journal. — No. L. 029, 05/02/1992. — P. 0001 – 0008. 7. Fourth Council Directive 78/660/EEC of 25 July 1978 based on Article 54 (3) (g) of the Treaty on the annual accounts of certain types of companies // Official journal. — No. L. 122, 14/08/1978. — P. 0011 – 0031. 8. Seventh Council Directive 83/349/EEC of 13 July 1983 based on the Article 54 (3) (g) of the Treaty on consolidated accounts // Official journal. — No. L. 193, 18/07/1983. — P. 0001 – 0017. 9. Eighth Council Directive 84/253/EEC of 10 April 1984 based on Article 54 (3) (g) of the Treaty on the approval of persons responsible for carrying out statutory audits of accounting documents // Official journal. — No. L. 126, 12/05/1984. — P. 0020 – 0026. 10. Council Directive 86/635/EEC of 8 December 1986 on the annual accounts and consolidated accounts of banks and other financial institutions // Official journal. — No. L. 372, 31/12/1986. — P. 0001 – 0017. 11. The New Basel Capital Accord: an explanatory note, Secretariat of the Basel Committee on Banking Supervision, Bank for International Settlements. — January. — 2001. — P. 3. 12. International Financial Reporting Standard 30 – Disclosures in the Financial Statements of Banks and Similar Financial Institutions, International Accounting Standards Board. — London, 2001. 13. International Financial Reporting Standard 32 – Financial Instruments: Disclosure and Presentation, International Accounting Standards Board. — London, 2001. 14. International Financial Reporting Standard 39 — Financial Instruments: Recognition and Measurement, International Accounting Standards Board. — London, 2001. 15. International Financial Reporting Standard 37 — Provisions, Contingent Liabilities and Contingent Assets, International Accounting Standards Board. — London, 2001.
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