PASHA_BANK ANNUAL REPORT 2021

141 Annual Report 2021 PASHA Bank (Convenience Translation of Publicly Announced Financial Statements Originally Issued in Turkish, See Note I of Section Three) (Amounts are expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.) PASHA Yatırım Bank A.Ş. Notes to Unconsolidated Financial Statements At 31 December 2021 EXPLANATIONS ON ACCOUNTING POLICIES (Continued) With the “Law Amending the Tax Procedure Law and the Corporate Tax Law”, which was accepted on the agenda of the Turkish Grand National Assembly on January 20, 2022, the application of inflation accounting was postponed starting from the balance sheet dated on December 31, 2023 Transfer Pricing Transfer pricing is regulated through article 13 of Corporate Tax Law titled “Transfer Pricing through camouflage of earnings”. Detailed information for the practice regarding the subject is found in the “General Communiqué Regarding Camouflage of Earnings Through Transfer Pricing”. According to the aforementioned regulations, in the case of making purchase or sales of goods or services with relevant persons/corporations at a price that is determined against “arm’s length principle”, the gain is considered to be distributed implicitly through transfer pricing and such distribution of gains is not subject to deductions in means of corporate tax. XVIII. EXPLANATIONS ON BORROWINGS Trading and derivative financial liabilities are valued with their fair values and the other financial liabilities are carried at “amortised cost” using the effective interest method. The Bank utilises various hedging techniques to minimise the currency, interest rate and liquidity risks of its financial liabilities. XIX. EXPLANATIONS ON ISSUANCE OF SHARES CERTIFICATES Transaction costs regarding the issuance of share certificates are accounted under shareholders’ equity after eliminating the tax effects. Dividend payments are determined by the General Assembly of Bank. The Bank has not issued any share certificates. No dividend payments were announced after the balance sheet date. XX. EXPLANATIONS ON AVALIZED DRAFTS AND ACCEPTANCES Avalized drafts and acceptances shown as liabilities against assets are included in the “Off-balance sheet commitments”. XXI. EXPLANATIONS ON GOVERNMENT INCENTIVES None. XXII. EXPLANATIONS ON PROFIT RESERVES AND PROFIT DISTRIBUTION Retained earnings as per the statutory financial statements other than legal reserves are available for distribution, subject to the legal reserve requirement referred to below. Under the Turkish Commercial Code (“TCC”) the legal reserves are composed of first and second reserves. The TCC requires first reserves to be 5% of the profit until the total reserve is equal to 20% of issued and fully paid-in share capital. Second reserves are required to be 10% of all cash profit distributions that are in excess of 5% of the issued and fully paid-in share capital. However holding companies are exempt from this application. According to the Turkish Commercial Code, legal reserves can only be used to compensate accumulated losses and cannot be used for other purposes unless they exceed 50% of paid-in capital.