easycred 2013 ifrs fs _ final for issue

8/9/2019 Easycred 2013 IFRS FS _ Final for Issue

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Microfinance Organization

Easycred Georgia LLC

Consolidated Financial Statements

for the year ended 31 December 213


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Contents

Independent Auditors Report.......................................................................................................

Consolidated statement of profit or loss and other comprehensive income..................................

Consolidated statement of financial position................................................................................

Consolidated statement of cash flows...........................................................................................

Consolidated statement of changes in equity................................................................................

Notes to the consolidated financial statements.............................................................................


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!nde"endent #$ditors% &e"ort

To the Supervisory oard

!icrofinance "rgani#ation $asycred %eorgia &&C

'e have audited the accompanying consolidated financial statements of !icrofinance

"rgani#ation $asycred %eorgia &&C (the )Company*+ and its su,sidiary (the )%roup*+- which

comprise the consolidated statement of financial position as at / 0ecem,er 12/- and the

consolidated 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 e3planatory information.

Managements Responsibility for the onsolidated Financial Statements

!anagement is responsi,le for the preparation and fair presentation of these consolidated

financial statements in accordance with International 4inancial Reporting Standards- and for

such internal control as management determines is necessary to ena,le the preparation of

consolidated financial statements that are free from material misstatement- whether due to fraud

or error.

Auditors Responsibility

"ur responsi,ility is to e3press an opinion on these consolidated financial statements ,ased on

our audit. 'e conducted our audit in accordance with International Standards on Auditing.

Those standards require that we comply with ethical requirements and plan and perform the

audit to o,tain reasona,le assurance a,out whether the consolidated financial statements are

free from material misstatement.

An audit involves performing procedures to o,tain audit evidence a,out the amounts and

disclosures in the consolidated financial statements. The procedures selected depend on the

auditors 5udgment- including the assessment of the ris6s of material misstatement of the

consolidated financial statements- whether due to fraud or error. In ma6ing those ris6assessments- the auditor considers internal control relevant to the entitys preparation and fair

presentation of the consolidated financial statements in order to design audit procedures that are

appropriate in the circumstances- ,ut not for the purpose of e3pressing an opinion on the

effectiveness of the entitys internal control. An audit also includes evaluating the

appropriateness of accounting policies used and the reasona,leness of accounting estimates

made ,y management- as well as evaluating the overall presentation of the consolidated

financial statements.

KPMG Georgia LLC, a company incorporated under the Laws ofGeorgia, a member rm of the KPMG network of independent

rms aliated with KPMG nternational Cooperati!e "#KPMGnternational$%, a &wiss entity'

KPMG Georgia LLC

(, )esiki &treet,

*bilisi, ++-,

Georgia

*elephone .//0 "12%

2/103/0

4a5 .//0 "12%

2/1061

nternet www'kpmg'ge


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'e ,elieve that the audit evidence we have o,tained is sufficient and appropriate to provide a,asis for our audit opinion.

Opinion

In our opinion- the consolidated financial statements present fairly- in all material respects- the

financial position of the %roup as at / 0ecem,er 12/- and its financial performance and its

cash flows for the year then ended in accordance with International 4inancial Reporting

Standards.

78!% %eorgia &&C19 0ecem,er 12/:

KPMG Georgia LLC, a company incorporated under the Laws ofGeorgia, a member rm of the KPMG network of independent

rms aliated with KPMG nternational Cooperati!e "#KPMGnternational$%, a &wiss entity'

KPMG Georgia LLC

(, )esiki &treet,

*bilisi, ++-,

Georgia

*elephone .//0 "12%

2/103/0

4a5 .//0 "12%

2/1061

nternet www'kpmg'ge


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Microfinance Organization Easycred Georgia LLC

Consolidated Statement of Profit or Loss and Other Comprehensie !ncome

for the year ended "# $ecember %"

'otes

213

GEL%

212

GEL%

Interest income : 1-;99 1-:

otal assets 11()12 )(0

L!#!L!!ES

&oans and ,orrowings /9 9-91: -;>+

Assets held for sale (1


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Consolidated Statement of Profit or Loss and Other Comprehensie !ncome

for the year ended "# $ecember %"

'otes

213

GEL%

212

GEL%

8roceeds from sale of property and equipment :< ;

Acquisition of investment property @ (>;+8roceeds from sale of repossessed assets /= >

Cash flo>s $sed in inesting actiities


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Consolidated Statement of Changes in )*uity for the year ended "# $ecember %"

Charter ca"ital &etained earnings otal e7$ity

GEL% GEL% GEL%

alance as at 1 ?an$ary 212 -1/ >:2 :-/ith o>ners( recorded directly in e7$ity

Increase in charter capital ::2 (::2+ @

0ividends declared and paid @ (1=2+ (1=2+

0ividends declared ,ut not paid @ (12+ (12+

otal transactions >ith o>ners -- ith o>ners( recorded directly in e7$ity

Increase in charter capital := (:=+ @

0ividends declared and paid @ (/;+ (/;+

0ividends declared ,ut not paid @ (;1+ (;1+

otal transactions >ith o>ners -03


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+otes to, and forming part of, the consolidated financial statements for the year ended "# $ecember %"

1 acAgro$nd. The legal

address of the Company is 9: !its6evich Street- T,ilisi- %eorgia.

"n 1> Novem,er 12// the Company esta,lished a su,sidiary- $asycred Capital &&C (together

the )%roup*+- an asset management company with /22 ownership.

The principal su,sidiaries are as follows?

O>nershi" B

'ame Co$ntry of incor"oration .rinci"al actiities 213 212

$asycred Capital &&C %eorgia Asset management /22 /22

(,+ Shareholders

As at / 0ecem,er 12/ and 12/1 the %roups shareholders were as follows?

213

O>nershi" interest( B

212

O>nershi" interest( B

&aerti Du,adalashvili =9.2 1


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The legal- ta3 and regulatory framewor6s continue development- ,ut are su,5ect to varying

interpretations and frequent changes which together with other legal and fiscal impediments

contri,ute to the challenges faced ,y entities operating in %eorgia. The consolidated financial

statements reflect managements assessment of the impact of the %eorgian ,usiness environment

on the operations and the financial position of the %roup. The future ,usiness environment may

differ from managements assessment.

2 asis of "re"aration


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I4RS /1$isclosure of !nterests in Other )ntities (see (ii++

I4RS /Fair -alue Measurements(see (iii++

Presentation of !tems of Other Comprehensie !ncome(Amendments to IAS /+ (see (iv++

Financial !nstruments( $isclosures . Offsetting Financial Assets and Financial Liabilities

(Amendments to I4RS =+(see (v++

The nature and the effect of the changes are e3plained ,elow.

i Subsidiaries, including structured entities

As a result of adoption of I4RS /2- the %roup changed its accounting policy with respect to

determining whether it has control over and consequently whether it consolidates its investees.

I4RS /2 introduces a new control model that is applica,le to all investees- including structured

entities. See notes (a+ and (ii+.

In accordance with the transitional provisions of I4RS /2- the %roup reassessed the control

conclusion for its investees as at / Banuary 12/. The %roup determined that its consolidated

group structure remained unchanged under I4RS /2- and as a result- the consolidated financial

statements are unaffected.

ii Disclosure of interests in other entities

The new standard contains disclosure requirements for entities that have interests in su,sidiaries-

5oint arrangements- associates and unconsolidated structured entities. Interests are widely defined

as contractual and non@contractual involvement that e3poses an entity to varia,ility of returns

from the performance of the other entity. The e3panded and new disclosure requirements aim to

provide information to ena,le the users to evaluate the nature of ris6s associated with an entitys

interests in other entities and the effects of those interests on the entitys financial position-

financial performance and cash flows. The adoption of I4RS /1 has no impact on the disclosures

in the consolidated financial statements.

iii Fair value measurement

I4RS / esta,lishes a single framewor6 for measuring fair value and ma6ing disclosures a,out

fair value measurements- when such measurements are required or permitted ,y other I4RSs. In

particular- it unifies the definition of fair value as the prices at which an orderly transaction to sell

an asset or to transfer a lia,ility would ta6e place ,etween mar6et participants at the measurement

date. It also replaces and e3pands the disclosure requirements a,out fair value measurements in

other I4RSs- including I4RS =Financial !nstruments( $isclosures/

As a result- the %roup adopted a new definition of fair value- as set out in note (d+(v+. Thechange had no significant impact on the measurements of assets and lia,ilities. Eowever- the

%roup included new disclosures in the consolidated financial statements that are required under

I4RS / and provided comparative information for new disclosures.

/1


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iv resentation of items of other com!rehensive income

As a result of the amendments to IAS /- the %roup modified the presentation of items of other

comprehensive income in its consolidated statement of profit or loss and other comprehensive

income- to present separately items that would ,e reclassified to profit or loss in the future from

those that would never ,e. Comparative information is also re@presented accordingly.

The adoption of the amendment to IAS / has no impact on the recognised assets- lia,ilities or

comprehensive income.

v Financial instruments" Disclosures # Offsetting financial assets and financialliabilities

Amendments to I4RS =Financial !nstruments( $isclosures . Offsetting Financial Assets and

Financial Liabilities introduced new disclosure requirements for financial assets and lia,ilities

that are offset in the statement of financial position or su,5ect to master netting arrangements or

similar agreements. As the %roup is not setting off financial instruments in accordance with IAS

1 and does not have relevant offsetting arrangements- the amendment does not have an impact

on the %roup.

3 Significant acco$nting "olicies

The accounting policies set out ,elow are applied consistently to all periods presented in these

consolidated financial statements- and are applied consistently ,y %roup entities- e3cept as

e3plained in note 1(e+- which addresses changes in accounting policies.

(a+ asis of consolidation

$i% Subsidiaries

Su,sidiaries are investees controlled ,y the %roup. The %roup controls an investee when it is

e3posed to- or has rights to- varia,le returns from its involvement with the investee and has the

a,ility to affect those returns through its power over the investee. In particular the %roup

consolidates investees that it controls on the ,asis of de facto circumstances. The financial

statements of su,sidiaries are included in the consolidated financial statements from the date that

control commences until the date that control ceases.

$ii% &ransactions eliminated on consolidation

/
http://www.iasplus.com/en/standards/standard47http://www.iasplus.com/en/standards/standard47


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Intra@group ,alances and transactions- and any unrealised gains arising from intra@group

transactions- are eliminated in preparing the consolidated financial statements. Fnrealised gains

arising from transactions with associates are eliminated to the e3tent of the %roups interest in the

enterprise. Fnrealised gains resulting from transactions with associates are eliminated against the

investment in the associate. Fnrealised losses are eliminated in the same way as unrealised gains

e3cept that they are only eliminated to the e3tent that there is no evidence of impairment.

(,+ Foreign c$rrency

Transactions in foreign currencies are translated to %$& at e3change rates at the dates of the

transactions. !onetary assets and lia,ilities denominated in foreign currencies at the reporting

date are retranslated to the functional currency at the e3change rate at that date. The foreigncurrency gain or loss on monetary items is the difference ,etween amortised cost in the functional

currency at the ,eginning of the period- ad5usted for effective interest and payments during the

period- and the amortised cost in foreign currency translated at the e3change rate at the end of the

reporting period. Non@monetary items that are measured in terms of historical cost in a foreign

currency are translated using the e3change rate at the date of the transaction. 4oreign currency

differences arising on retranslation are recognised in profit or loss.

(c+ Cash and cash e7$ialents

Cash and cash equivalents include notes and coins on hand- unrestricted ,alances and call

deposits held with the ,an6s with maturities of three months or lessfrom the acquisition date that

are su,5ect to insignificant ris6 of changes in their fair value. Cash and cash equivalents are

carried at amortised cost in the consolidated statement of financial position.

/:


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(d+ Financial instr$ments

$i% Classification

Loans and receiables are non@derivative financial assets with fi3ed or determina,le payments

that are not quoted in an active mar6et- other than those that the %roup?

intends to sell immediately or in the near term

upon initial recognition designates as at fair value through profit or loss

upon initial recognition designates as availa,le@for@sale or-

may not recover su,stantially all of its initial investment- other than ,ecause of credit

deterioration.

$ii% 'ecognition

4inancial assets and lia,ilities are recogni#ed in the consolidated statement of financial position

when the %roup ,ecomes a party to the contractual provisions of the instrument.

$iii% Measurement

A financial asset or lia,ility is initially measured at its fair value plus transaction costs that are

directly attri,uta,le to the acquisition or issue of the financial asset or lia,ility.

Su,sequent to initial recognition- financial assets- comprising loans and receiva,les- are

measured at amorti#ed cost using the effective interest method.

All financial lia,ilities are measured at amorti#ed cost.

$iv% (mortised cost

The amortised cost of a financial asset or lia,ility is the amount at which the financial asset or

lia,ility is measured at initial recognition- minus principal repayments- plus or minus the

cumulative amortisation using the effective interest method of any difference ,etween the initial

amount recognised and the maturity amount- minus any reduction for impairment. 8remiums and

discounts- including initial transaction costs- are included in the carrying amount of the related

instrument and amorti#ed ,ased on the effective interest rate of the instrument.

$v% Fair value measurement !rinci!les

/


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4air value is the price that would ,e received to sell an asset or paid to transfer a lia,ility in an

orderly transaction ,etween mar6et participants at the measurement date in the principal- or in its

a,sence- the most advantageous mar6et to which the %roup has access at that date. The fair value

of a lia,ility reflects its non@performance ris6.

'hen availa,le- the %roup measures the fair value of an instrument using quoted prices in an

active mar6et for that instrument. A mar6et is regarded as active if transactions for the asset or

lia,ility ta6e place with sufficient frequency and volume to provide pricing information on an

ongoing ,asis.

'hen there is no quoted price in an active mar6et- the %roup uses valuation techniques that

ma3imise the use of relevant o,serva,le inputs and minimise the use of uno,serva,le inputs. The

chosen valuation technique incorporates all the factors that mar6et participants would ta6e into

account in pricing transaction.

The ,est evidence of the fair value of a financial instrument at initial recognition is normally the

transaction price- i.e.- the fair value of the consideration given or received. If the %roup

determines that the fair value at initial recognition differs from the transaction price and the fair

value is evidenced neither ,y a quoted price in an active mar6et for an identical asset or lia,ility

nor ,ased on a valuation technique that uses only data from o,serva,le mar6ets- the financial

instrument is initially measured at fair value- ad5usted to defer the difference ,etween the fair

value at initial recognition and the transaction price. Su,sequently- that difference is recognised

in profit or loss on an appropriate ,asis over the life of the instrument ,ut no later than when the

valuation is supported wholly ,y o,serva,le mar6et data or the transaction is closed out.

$vi% Gains and losses on subse)uent measurement

4or financial assets and lia,ilities carried at amorti#ed cost- a gain or loss is recogni#ed in profit

or loss when the financial asset or lia,ility is derecogni#ed or impaired- and through the

amorti#ation process.

$vii% Derecognition

The %roup derecognises a financial asset when the contractual rights to the cash flows from the

financial asset e3pire- or when it transfers the financial asset in a transaction in which

su,stantially all the ris6s and rewards of ownership of the financial asset are transferred or in

which the %roup neither transfers nor retains su,stantially all the ris6s and rewards of ownership

and it does not retain control of the financial asset. Any interest in transferred financial assets that

qualify for derecognition that is created or retained ,y the %roup is recognised as a separate asset

or lia,ility in the consolidated statement of financial position. The %roup derecognises a financial

lia,ility when its contractual o,ligations are discharged or cancelled or e3pire.

The %roup writes off assets deemed to ,e uncollecti,le.

/9


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(f+ !nestment "ro"erty

Investment property is property held either to earn rental income or for capital appreciation or for

,oth- ,ut not for sale in normal course of ,usiness- or for the use in production or supply of goods

or services or for administrative purposes. Investment property is measured at cost less

accumulated depreciation and impairment losses.

Cost includes e3penditure that is directly attri,uta,le to the acquisition of investment property.

Cost includes the cost of materials and direct la,our- any other costs directly attri,uta,le to

,ringing the assets to wor6ing condition for its intended use.

'hen the use of a property changes such that it is reclassified as property and equipment- its fair

value at the date of reclassification ,ecomes its cost for su,sequent accounting.

(g+ #ssets held for sale or distrib$tion

Non@current assets- or disposal groups comprising assets and lia,ilities- that are e3pected to ,e

recovered primarily through sale or distri,ution rather than through continuing use- are classified

as held for sale or distri,ution.

Such assets- or disposal group- are generally measured at the lower of their carrying amount and

fair value less cost to sell. Any impairment loss on a disposal group is allocated first to goodwill-

and then to the remaining assets and lia,ilities on pro rata ,asis- e3cept that no loss is allocated to

inventories- financial assets- deferred ta3 assets or employee ,enefit assets or investment

property- which continue to ,e measured in accordance with the %roups other accounting

policies. Impairment losses on initial classification as held for sale or distri,ution and su,sequent

gains or losses on remeasurement are recognised in profit or loss. %ains are not recognised in

e3cess of any cumulative impairment loss.

8roperty- plant and equipment once classified as held for sale or distri,ution are not amortised or

depreciated.

(h+ &e"ossessed assets

The %roup recognises repossessed assets in the consolidated statement of financial position when

it has the full and final settlement rights to the collateral- and when it is entitled to retain any

e3cess proceeds from the realisation of the collateral.

Repossessed assets are measured at the lower of the carrying amount and the fair value less costs

to sell. At initial recognition repossessed assets are measured ,ased on the value of the defaulted

loan- including e3penditure incurred in the process of collateral foreclosure. 4air value less coststo sell is the estimated selling price of the collateral in the ordinary course of ,usiness- less the

related selling costs. Su,sequent to initial recognition- repossessed assets are reviewed for held

for sale classification criteria and are reclassified accordingly when the criteria are met.

/;


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Repossessed assets are included in other assets.

%ains and losses on disposal of repossessed assets are recognised net in )other operating income*

in profit or loss.

(i+ !m"airment

The %roup assesses at the end of each reporting period whether there is any o,5ective evidence

that a financial asset or group of financial assets is impaired. If any such evidence e3ists- the

%roup determines the amount of any impairment loss.

A financial asset or a group of financial assets is impaired and impairment losses are incurred if-

and only if- there is o,5ective evidence of impairment as a result of one or more events that

occurred after the initial recognition of the asset (a loss event+ and that event (or events+ has had

an impact on the estimated future cash flows of the financial asset or group of financial assets that

can ,e relia,ly estimated.

",5ective evidence that financial assets are impaired can include default or delinquency ,y a

,orrower- ,reach of loan covenants or conditions- restructuring of financial asset or group of

financial assets that the %roup would not otherwise consider- indications that a ,orrower or issuer

will enter ,an6ruptcy- the disappearance of an active mar6et for a security- deterioration in the

value of collateral- or other o,serva,le data relating to a group of assets such as adverse changes

in the payment status of ,orrowers in the group- or economic conditions that correlate with

defaults in the group.

$i% Financial assets carried at amortized cost

4inancial assets carried at amorti#ed cost consist principally of loans and other receiva,les (loans

and receiva,les+. The %roup reviews its loans and receiva,les to assess impairment on a regular

,asis.

The %roup first assesses whether o,5ective evidence of impairment e3ists individually for loans

and receiva,les that are individually significant- and individually or collectively for loans and

receiva,les that are not individually significant. If the %roup determines that no o,5ective

evidence of impairment e3ists for an individually assessed loan or receiva,le- whether significant

or not- it includes the loan or receiva,le in a group of loans and receiva,les with similar credit

ris6 characteristics and collectively assesses them for impairment. &oans and receiva,les that are

individually assessed for impairment and for which an impairment loss is or continues to ,e

recognised are not included in a collective assessment of impairment.

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If there is o,5ective evidence that an impairment loss on a loan or receiva,le has ,een incurred-

the amount of the loss is measured as the difference ,etween the carrying amount of the loan or

receiva,le and the present value of estimated future cash flows including amounts recovera,le

from guarantees and collateral discounted at the loan or receiva,les original effective interest

rate. Contractual cash flows and historical loss e3perience ad5usted on the ,asis of relevant

o,serva,le data that reflect current economic conditions provide the ,asis for estimating e3pected

cash flows.

In some cases the o,serva,le data required to estimate the amount of an impairment loss on a

loan or receiva,le may ,e limited or no longer fully relevant to current circumstances. This may

,e the case when a ,orrower is in financial difficulties and there is little availa,le historical data

relating to similar ,orrowers. In such cases- the %roup uses its e3perience and 5udgment to

estimate the amount of any impairment loss.

All impairment losses in respect of loans and receiva,les are recogni#ed in profit or loss and are

only reversed if a su,sequent increase in recovera,le amount can ,e related o,5ectively to an

event occurring after the impairment loss was recognised.

'hen a loan is uncollecta,le- it is written off against the related allowance for loan impairment.

The %roup writes off a loan ,alance (and any related allowances for loan losses+ when

management determines that the loans are uncollecti,le and when all necessary steps to collect

the loan are completed.

$ii% +on financial assets

"ther non financial assets- other than deferred ta3es- are assessed at each reporting date for any

indications of impairment. The recovera,le amount of non financial assets is the greater of their

fair value less costs to sell and value in use. In assessing value in use- the estimated future cash

flows are discounted to their present value using a pre@ta3 discount rate that reflects current

mar6et assessments of the time value of money and the ris6s specific to the asset. 4or an asset

that does not generate cash inflows largely independent of those from other assets- the

recovera,le amount is determined for the cash@generating unit to which the asset ,elongs. An

impairment loss is recognised when the carrying amount of an asset or its cash@generating unit

e3ceeds its recovera,le amount.

All impairment losses in respect of non financial assets are recogni#ed in profit or loss and

reversed only if there has ,een a change in the estimates used to determine the recovera,le

amount. Any impairment loss reversed is only reversed to the e3tent that the assets carrying

amount does not e3ceed the carrying amount that would have ,een determined- net of

depreciation or amortisation- if no impairment loss had ,een recognised.

(5+ Charter ca"ital

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Charter capital is classified as equity. Incremental costs directly attri,uta,le to the issue of

ordinary shares are recognised as a deduction from equity- net of any ta3 effects.

The a,ility of the %roup to declare and pay dividends is su,5ect to the rules and regulations of the

%eorgian legislation.

1/


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$i% Dividends

The a,ility of the %roup to declare and pay dividends is su,5ect to the rules and regulations of the

%eorgian legislation.

0ividends are reflected as an appropriation of retained earnings in the period when they are

declared.

(6+ a/ation

Income ta3 comprises current and deferred ta3. Income ta3 is recognised in profit or loss e3cept

to the e3tent that it relates to items of other comprehensive income or transactions withshareholders recognised directly in equity- in which case it is recognised within other

comprehensive income or directly within equity.

Current ta3 e3pense is the e3pected ta3 paya,le on the ta3a,le income for the year- using ta3 rates

enacted or su,stantially enacted at the reporting date- and any ad5ustment to ta3 paya,le in

respect of previous years.

0eferred ta3 is recognised in respect of temporary differences ,etween the carrying amounts of

assets and lia,ilities for financial reporting purposes and the amounts used for ta3ation purposes.

0eferred ta3 is not recognised for the temporary differences on the initial recognition of assets or

lia,ilities that affect neither accounting nor ta3a,le profit and temporary differences related to

investments in su,sidiaries where the parent is a,le to control the timing of the reversal of the

temporary difference and it is pro,a,le that the temporary difference will not reverse in the

foreseea,le future.

The measurement of deferred ta3es reflects the ta3 consequences that would follow the manner in

which the %roup e3pects- at the end of the reporting period- to recover or settle the carrying

amount of its assets and lia,ilities.

0eferred ta3 is measured at the ta3 rates that are e3pected to ,e applied to the temporary

differences when they reverse- ,ased on the laws that have ,een enacted or su,stantively enacted

,y the reporting date.

A deferred ta3 asset is recognised only to the e3tent that it is pro,a,le that future ta3a,le profits

will ,e availa,le against which the temporary differences- unused ta3 losses and credits can ,e

utilised. 0eferred ta3 assets are reduced to the e3tent that it is no longer pro,a,le that the related

ta3 ,enefit will ,e realised.

(l+ !ncome and e/"ense recognition

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Interest income and e3pense are recognised in profit or loss using the effective interest method.

&oan origination fees- loan servicing fees and other fees that are considered to ,e integral to the

overall profita,ility of a loan- together with the related transaction costs- are deferred and

amorti#ed to interest income over the estimated life of the financial instrument using the effective

interest method.

"ther fees- commissions and other income and e3pense items are recognised in profit or loss

when the corresponding service is provided.

0ividend income is recognised in profit or loss on the date that the dividend is declared.

8ayments made under operating leases are recognised in profit or loss on a straight@line ,asis

over the term of the lease. &ease incentives received are recognised as an integral part of the total

lease e3pense- over the term of the lease.

(m+ 'e> standards and inter"retations not yet ado"ted

A num,er of new standards- amendments to standards and interpretations are not yet effective as

at / 0ecem,er 12/- and are not applied in preparing these consolidated financial statements.

"f these pronouncements- potentially the following will have an impact on the financial position

and performance. The %roup plans to adopt these pronouncements when they ,ecome effective.

I4RS > Financial !nstruments will ,e effective for annual periods ,eginning on or after

# 0anuary %/ 2he ne3 standard is to be issued in phases and is intended ultimate ly to

replace International 4inancial Reporting Standard IAS > Financial !nstruments(

Recognition and Measurement. The first phase of I4RS > was issued in Novem,er 122> and

relates to the classification and measurement of financial assets. The second phase regarding

classification and measurement of financial lia,ilities 3as published in Octo,er 12/2. The

remaining parts of the standard are e3pected to ,e issued during 12/. The %roup recognises

that the new standard introduces many changes to the accounting for financial instruments

and is li6elyto hae a significant impact on the consolidated financial statements. The impact

of these changes will ,e analysed during the course of the pro5ect as further phases of the

standard are issued. The %roup does not intend to adopt this standard early.

Amendments to IAS 1 Financial !nstruments( Presentation . Offsetting Financial Assetsand Financial Liabilities do not introduce new rules for offsetting financial assets and

lia,ilitiesG rather they clarify the offsetting criteria to address inconsistencies in their

application. The Amendments specify that an entity currently has a legally enforcea,le right

to set@off if that right is not contingent on a future eventG and enforcea,le ,oth in the normal

course of ,usiness and in the event of default- insolvency or ,an6ruptcy of the entity and all

counterparties. The amendments are effective for annual periods ,eginning on or after /

Banuary 12/:- and are to ,e applied retrospectively.

Harious !mproements to !FRS are dealt with on a standard@,y@standard ,asis. All

amendments- which result in accounting changes for presentation- recognition or

measurement purposes- will come into effect not earlier than / Banuary 12/:. The %roup has

not yet analysed the li6ely impact of the improvements on its financial position orperformance.

1


24/56



- 'et interest income

213

GEL%

212

GEL%

!nterest income

&oans to customers 1-;9< 1-::

an6 ,alances / /

2(*,, 2(-3+

!nterest e/"ense

&oans and ,orrowings


25/56



213

GEL%

212

GEL%

Advertising and mar6eting 9< /:8rofessional services 9 :9

0epreciation and amorti#ation ; 2

Transportation 11 1/

Communications and information services /: /ance 'et loans

!m"airment

allo>ance to

gross loans(

GEL% GEL% GEL% B

Commercial loans

&oans without individual signs of impairment 12/ (1+ />> /.2

"verdue or impaired loans?

@overdue less than >2 days :2 (/+ > 1.2 days and less than / year /< (1+ / /.

@ overdue more than / year .;

Total overdue or impaired loans //1 (12+ >1 /=.>

otal commercial loans 313 n loans )-* /. days /1 (/+ // ;.

@ overdue >2@/=> days / (1+ // /


30/56


31/56



Gross loans

!m"airment

allo>ance 'et loans

!m"airment

allo>ance to

gross loans(

GEL% GEL% GEL% B

#$to loans

@ not overdue 92 (/+ /.=

otal a$to loans ,


32/56



loss migration rates are constant and can ,e estimated ,ased on the historic loss migration

pattern for the past 1: months for loans collaterali#ed ,y real estate- auto loans and other

consumer loansG

loans to individuals overdue for more than /;2 days are allocated /


33/56



31 December 212

GEL%Loans to c$stomers(

carrying amo$nt

Fair al$e of collateral

for collateral

assessed as of loanince"tion date

&oans without individual signs of impairment

8recious metals ;1 ;1

Real estate 1 1

Total loans without individual signs of impairment //: //:

"verdue or impaired loans

Real estate 1> 1>

8recious metals :/ :/

Total overdue or impaired loans =2 =2

otal commercial loans 1*- 1*-

The ta,les a,ove e3cludes overcollaterali#ation.

The %roup has loans- for which fair value of collateral was assessed at the loan inception date

and it was not updated for further changes. Information on valuation of collateral is ,ased on

when this estimate was made- if any.

4or loans secured ,y multiple types of collateral- collateral that is most relevant for impairment

assessment is disclosed.

The recovera,ility of loans which are neither past due nor impaired is primarily dependent on the

creditworthiness of the ,orrowers rather than the value of collateral- and the %roup does not

necessarily update the valuation of collateral as at each reporting date.

$ii% Loans to individuals

&oans collaterali#ed ,y real estate are secured ,y the underlying housing real estate. The %roups

policy is to issue loans collaterali#ed ,y real estate with a loan@to@value ratio of a ma3imum of


34/56



31 December 212

GEL%Loans to c$stomers(

carrying amo$nt

Fair al$e of collateral

for collateral

assessed as of loanince"tion date

Not overdue loans :-9/: :-9/:

"verdue loans 9


35/56



$iii% 'e!ossessed collateral

0uring the year ended / 0ecem,er 12/- the %roup o,tained certain assets ,y ta6ing possession

of collateral for loans to customers with a net carrying amount of %$& :9 thousand. As at

/ 0ecem,er 12/ and 12/1- the repossessed collateral comprises?

213

GEL%

212

GEL%

Real estate 92< :19

8recious metals > ;:

otal re"ossessed collateral ,1- +1

The %roups policy is to sell these assets as soon as it is practica,le.

(r+ !nd$stry and geogra"hical analysis of the loan "ortfolio

&oans to customers were issued primarily to customers located within %eorgia who operate in the

following economic sectors?

213

GEL%

212

GEL%

&oans to individuals ;-/=> 9->:>

Service /

Trade 1 //

"ther 91 /:

*(-0 0(133

(s+ Significant credit e/"os$res

As at / 0ecem,er 12/ and 12/1 no individual loan ,alances or groups of connected ,orrowers

,alances e3ceed /2 of equity.

(t+ Loan mat$rities

The maturity of the loan portfolio is presented in note (d+- which shows the remaining period

from the reporting date to the contractual maturity of the loans. 0ue to the short@term nature of

the loans issued ,y the %roup- it is li6ely that many of the loans will ,e prolonged at maturity.

Accordingly- the effective maturity of the loan portfolio may ,e significantly longer than the term

,ased on contractual terms.


36/56



12 #ssets held for sale

In 12/ management committed to sell land and ,uildings of %$& 1; @

Reclassification to property- equipment and intangi,le assets (>;+ @

alance at / 0ecem,er @ 3)*

As at / 0ecem,er 12/1 the investment property represented the construction wor6s done on a

new hotel ,uilding. 4ollowing the managements decision to operate the newly constructed hotel

themselves- in 12/ the ,alance was transferred from investment property to property and

equipment.

1- .ro"erty( e7$i"ment and intangible assets

GEL%

Land and

b$ildings

Constr$ction

in "rogress

!ntangible

assets Other otal

Costalance at / Banuary 12/ 92: @ + @ (1>+ @ (:;+

Transfer from investment property < 9 @ @ >;

alance at 31 December 213 )2 ,,3 2+ 13* 1(0-,

De"reciation and amortization

alance at / Banuary 12/ :< @ /9 :2 /2/

0epreciation and amorti#ation for the

year19 @ < = ;

0isposals @ @ (+ @ (+

alance at 31 December 213 01 @ 1* -0 13,

Carrying amo$nt#t 31 December 213 *-) ,,3 0 )1 1(,1

9


37/56



GEL%

Land and

b$ildings

Constr$ction

in "rogress

!ntangible

assets Other otal

Cost

alance at / Banuary 12/1 =

0isposals (/


38/56



1+ Other assets

213

GEL%

212

GEL%

"ther receiva,les 2

Fnsecured loans from individuals 122

1()++ 2(13

Current liabilities

Secured ,an6 loans /-/: =


39/56



>


40/56



(u+ erms and debt re"ayment sched$le

Terms and conditions of outstanding loans were as follows?

31 December 212 31 December 212

GEL% C$rrency

'ominal

interest

rate

6ear of

mat$rity

Face

al$e

Carrying

amo$nt

Face

al$e

Carrying

amo$nt

Secured ,an6 loan FS0 /1 12/:

Secured ,an6 loan FS0 /1 12/22 thousand and the %$& := thousand is unpaid charter capital.

(w+ Diidends

In accordance with %eorgian legislation the %roups distri,uta,le reserves are limited to the

,alance of retained earnings as recorded in the %roups statutory consolidated financial statements

prepared in accordance with I4RSs. As at / 0ecem,er 12/ the %roup had retained earnings of

%$& 92; thousand (12/1? %$& /-/= thousand+.

"n 1/ Banuary 12/- the %roup declared dividends of %$& =22 thousand. The dividends in the

amount of %$& /; thousand were paid to the shareholders during 12/.

:/


42/56



1) &isA management

!anagement of ris6 is fundamental to the microfinance ,usiness and is an essential element of the

%roups operations. The ma5or ris6s faced ,y the %roup are those related to mar6et ris6- credit ris6

and liquidity ris6.

(3+ &isA management "olicies and "roced$res

The ris6 management policies aim to identify- analyse and manage the ris6s faced ,y the %roup- to

set appropriate ris6 limits and controls- and to continuously monitor ris6 levels and adherence to

limits. Ris6 management policies and procedures are reviewed regularly to reflect changes in

mar6et conditions- products and services offered and emerging ,est practice.

The Supervisory oard has overall responsi,ility for the oversight of the ris6 management

framewor6- overseeing the management of 6ey ris6s and reviewing its ris6 management policies

and procedures as well as approving significantly large e3posures.

!anagement is responsi,le for monitoring and implementation of ris6 mitigation measures and

ma6ing sure that the %roup operates within the esta,lished ris6 parameters. The Chief $3ecutive

"fficer (C$"+ is responsi,le for the overall ris6 management and compliance functions- ensuring

the implementation of common principles and methods for identifying- measuring- managing and

reporting ,oth financial and non@financial ris6s. The C$" reports directly to the Supervisory

oard.

(y+ MarAet risA

!ar6et ris6 is the ris6 that the fair value or future cash flows of a financial instrument will fluctuate

,ecause of changes in mar6et prices. !ar6et ris6 comprises currency ris6- interest rate ris6 and

other price ris6s. !ar6et ris6 arises from open positions in interest rate- currency and equity

financial instruments- which are e3posed to general and specific mar6et movements and changes in

the level of volatility of mar6et prices.

The o,5ective of mar6et ris6 management is to manage and control mar6et ris6 e3posures within

accepta,le parameters- whilst optimi#ing the return on ris6.

"verall authority for mar6et ris6 is vested with management. !ar6et ris6s are approved ,y

management.

$i% -nterest rate ris.

:1


43/56



Interest rate ris6 is the ris6 that the fair value or future cash flows of a financial instrument will

fluctuate ,ecause of changes in mar6et interest rates. The %roup is e3posed to the effects of

fluctuations in the prevailing levels of mar6et interest rates on its financial position and cash flows.

Interest margins may increase as a result of such changes ,ut may also reduce or create losses in

the event that une3pected movements occur.

:


44/56



-nterest rate ga! analysis

Interest rate ris6 is managed principally through monitoring interest rate gaps A summary of the

interest gap position for ma5or financial instruments is as follows?

GEL %Demand

and less

than 1 month

From

1 to 3

months

From

3 to , months

From

, to 12

months

More than

1 year Carrying

amo$nt

31 December 213

ASS$TS

&oans to customers/-::= ;:2 ;19 /-;= -:;: ;-:=2

&IAI&ITI$S


1;; >2 =:: 1->:< /-=/= 9-91:

1(1+) / -;


45/56


46/56



$ii% Currency ris.

The %roup has assets and lia,ilities denominated in several foreign currencies.

Currency ris6 is the ris6 that the fair value or future cash flows of a financial instrument will

fluctuate ,ecause of changes in foreign currency e3change rates. Although the %roup hedges its

e3posure to currency ris6- such activities do not qualify as hedging relationships in accordance with

I4RS.

The following ta,le shows the currency e3posure structure of financial assets and lia,ilities as at

/ 0ecem,er 12/?

GEL 5SD E5& otal

GEL% GEL% GEL% GEL%

#SSES

Cash and cash equivalents 92


47/56



GEL 5SD E5& otal

GEL% GEL% GEL% GEL%

L!#!L!!ES

"ther ,orrowed funds >= 1-== /-21: -;


48/56



Individual loan credit applications are originated ,y the relevant loan officers. Analysis reports are

,ased on a structured analysis focusing on the customers ,usiness and financial performance. The

Credit Committee reviews the loan credit application on the ,asis of su,mission ,y the loanofficers. The loan credit application and the report are then independently reviewed ,y the C$".

The %roup continuously monitors the performance of individual credit e3posures and regularly

reassesses the creditworthiness of its customers. The review is ,ased on the customers most recent

financial information and other information su,mitted ,y the ,orrower- or otherwise o,tained ,y

the %roup.

The ma3imum e3posure to credit ris6 is generally reflected in the carrying amounts of financial

assets on the consolidated statement of financial position. The impact of possi,le netting of assets

and lia,ilities to reduce potential credit e3posure is not significant.

The ma3imum e3posure to credit ris6 from financial assets at the reporting date is as follows?

213

GEL%

212

GEL%

#SSES

an6 ,alances and call deposits /;: /1

&oans to customers ;-:=2 =-/

"ther financial assets


49/56



The %roup see6s to actively support a diversified and sta,le funding ,ase comprising long@term

and short@term loans from ,an6s and other financial institutions- accompanied ,y diversified

portfolios of highly liquid assets- in order to ,e a,le to respond quic6ly and smoothly to unforeseen

liquidity requirements.

The liquidity management practice includes the following?

pro5ecting cash flows ,y ma5or currencies and considering the level of liquid assets necessary

in relation thereto

maintaining a diverse range of funding sources

managing the concentration and profile of de,ts

maintaining de,t financing plans

maintaining liquidity and funding contingency plans

The following ta,les show the undiscounted cash flows on financial assets- lia,ilities and credit@

related commitments on the ,asis of their earliest possi,le contractual maturity. The total gross

inflow and outflow disclosed in the ta,les is the contractual- undiscounted cash flow on the

financial lia,ility.

The maturity analysis for financial assets and lia,ilities as at / 0ecem,er 12/ is as follows?

GEL%

Demand and

less than

1 month

From

1 to 3

months

From

3 to ,

months

From

, to 12

months

More

than

1 year

otal

gross

amo$nt

o$tflo>

Carrying

amo$nt

'on@deriatie liabilities


9< /-2=; >1 -/9< /-;;> =-:1> 9-91:

0ividends paya,le

;1 @ @ @ @ ;1 ;1

"ther financial lia,ilities

// @ @ @ @ // //

otal liabilities

0+* 1(0* )32 3(1,+ 1(**) 0(*22 0(10

The maturity analysis for financial assets and lia,ilities as at / 0ecem,er 12/1 is as follows?

:>


50/56



GEL%

Demand and

less than

1 month

From

1 to 3

months

From

3 to ,

months

From

, to 12

months

More

than

1 year

otalgross

amo$nt

o$tflo>

Carrying

amo$nt


&oans and ,orrowings /99 :> /=1 1-=22 ;= :-11: -;


51/56



GEL%

Demand and

less than1 month

From

1 to 3months

From

3 to ,months

From

, to 12months

More

than1 year 'omat$rity otal

"ther assets :2; @ @ @ @ 9/: /-211

otal assets 2(3 *- *2, 2(12+ 3(-*- 2(330 11()12


&oans and ,orrowings 1;; >2 =:: 1->:< /-=/= @ 9-91:

0ividends paya,le ;1 @ @ @ @ @ ;1

Income ta3 paya,le 9: @ @ @ @ @ 9:

"ther lia,ilities /2; @ @ @ @ @ /2;

otal liabilities *-2 )3 0-- 2()-+ 1(010 @ 0(10*

'et "osition 1(-+* 92 /-;=2 1-;;= @ =-/


52/56



GEL%

Demand Hnd

less than1 month

From

1 to 3months

From

3 to ,months

From

, to 12months More than1 year 'omat$rity otal

Investment property

@ @ @ @ @ >; >;

8roperty- equipment and

intangi,le assets

@ @ @ @ @ 9=> 9=>

0eferred ta3 asset

@ @ @ @ @

"ther assets

99 // 19 9 @

otal assets

)) 011 )*, 1(*0, 2(**0 1(,2 )(0



/1/ 1:= ;< 1-9/: =>/ @ -;


53/56



213

GEL%

212

GEL%otal liabilities 0(10* -(2--

&ess cash and cash equivalents (::


54/56



21 Contingencies

(a,+ !ns$rance

The insurance industry in %eorgia is in a developing state and many forms of insurance protection

common in other parts of the world are not yet generally availa,le. The %roup does not have full

coverage for its premises and equipment- ,usiness interruption- or third party lia,ility in respect of

property or environmental damage arising from accidents on its property or relating to operations.

Fntil the %roup o,tains adequate insurance coverage- there is a ris6 that the loss or destruction of

certain assets could have a material adverse effect on operations and financial position.

(ac+ Litigation

In the ordinary course of ,usiness- the %roup is su,5ect to legal actions and complaints.

!anagement ,elieves that the ultimate lia,ility- if any- arising from such actions or complaints will

not have a material adverse effect on the financial condition or the results of future operations.

(ad+ a/ation contingencies

The ta3ation system in %eorgia continues to evolve and is characterised ,y frequent changes in

legislation- official pronouncements and court decisions- which are sometimes contradictory andsu,5ect to varying interpretation ,y different ta3 authorities. Ta3es are su,5ect to review and

investigation ,y a num,er of authorities who have the authority to impose severe fines- penalties

and interest charges.

These circumstances may create ta3 ris6s in %eorgia that are su,stantially more significant than in

other countries. !anagement ,elieves that it has provided adequately for ta3 lia,ilities ,ased on its

interpretations of applica,le %eorgian ta3 legislation- official pronouncements and court decisions.

Eowever- the interpretations of the relevant authorities could differ and the effect on the financial

position- if the authorities were successful in enforcing their interpretations- could ,e significant.

22 &elated "arty transactions

(ae+ Control relationshi"s

The party with ultimate control over the %roup is &aerti Du,adalashvili.

(af+ ransactions >ith the members of the S$"erisory oard and the Management

oard


55/56



Total remuneration included in personnel e3penses for the years ended / 0ecem,er 12/ and

12/1 is as follows?

213

GEL%

212

GEL%

$mployee compensation 33- 20)

These amounts include cash and non@cash ,enefits in respect of the mem,ers of the oard of

0irectors and the !anagement oard.

(ag+ ransactions >ith other related "arties

"ther related parties include close family mem,ers of 6ey management personnel.

The outstanding ,alances and the related average interest rates as at / 0ecem,er 12/ and 12/1

with other related parties are as follows.

213

GEL%

#erage

interest rate( B

212

GEL%

#erage interest

rate( B

Consolidated statement of financial

"osition

&oans and ,orrowings 1< /;


56/56



!anagement ,elieves that estimated fair value of financial assets and lia,ilities appro3imates their

carrying amounts. The principles for determining fair values is disclosed in note d(v+.

The estimated fair values of all financial assets and lia,ilities are calculated using discounted cash

flow techniques ,ased on estimated future cash flows and discount rates for similar instruments at

the reporting date.

The following assumptions are used ,y management to estimate the fair values of financial

instruments?

discount rates of 19@1> are used for discounting future cash flows from loans to customers

(12/1? @

easycred 2013 ifrs fs _ final for issue

Documents