PASHA BANK ANNUAL REPOT 2024

EXPLANATIONS ON ACCOUNTING POLICIES (Continued) I. BASIS OF PRESENTATION (Continued) Judgements and estimates used in the preparation of the financial statements The effects of differences between accounting principles and standards set out by regulations in conformity with Article 37 of the Banking Law No. 5411, accounting principles generally accepted in countries in which the accompanying unconsolidated financial statements are to be distributed and the International Financial Reporting Standards (“IFRS”) have not been quantified in the accompanying unconsolidated financial statements. Accordingly, the accompanying unconsolidated financial statements are not intended to present the financial position, results of operations and changes in financial position and cash flows in accordance with the accounting principles generally accepted in such countries and IFRS. II. EXPLANATIONS ON STRATEGY OF USING FINANCIAL INSTRUMENTS AND FOREIGN CURRENCY TRANSACTIONS The general strategy of the Bank of using financial instruments is to sustain an optimal balance between the yield of the instruments and their risks. The most important funding sources of the Bank are shareholders’ equity, borrowing from domestic and foreign financial institutions, subordinated loan and debt securities issued. Funds obtained from internal and external sources are invested in high yield and quality financial assets and currency, interest rate and liquidity risks are being kept within the limits following the asset-liability management strategy. The currency, interest and liquidity risks of on-balance sheet and off-balance sheet assets and liabilities are managed in accordance with the risk limits accepted by the Bank and the related legal limits. Derivative instruments are mainly utilised for liquidity needs and for mitigating currency and interest rate risks. The position of the Bank as a result of foreign currency activities being held at minimum levels and the exposed currency risk is followed within the determined levels by the Board of Directors by considering the limits given by the Banking Law. Foreign currency denominated monetary assets and liabilities are translated with the Bank’s foreign currency bid rates prevailing at the balance sheet date. Gains and losses arising from such valuations are recognised in the income statement under the account of “Foreign exchange gains or losses”. III. EXPLANATIONS ON FORWARD TRANSACTIONS, OPTIONS AND DERIVATIVE INSTRUMENTS Derivative financial instruments of the Bank are classified in accordance with “TFRS 9 Financial Instruments” (“TFRS 9”), “Derivative Financial Assets/Liabilities Designated at Fair Value through Profit or Loss”. The receivables and liabilities arising from derivative transactions are recorded in the off-balance sheet accounts based on the notional amounts of the contracts. Derivative transactions are initially recorded at their fair values on the contract date, and the receivables and payables arising from these transactions are monitored in off-balance sheet accounts. Derivative transactions are valued at their fair values subsequent to their acquisition. In accordance with the classification of derivative financial instruments, if the fair value is positive, the amount is classified as “Derivative Financial Assets Designated at Fair Value Through Profit or Loss”, if the fair value is negative, the amount is classified as “Derivative Financial Liabilities Designated at Fair Value Through Profit or Loss”. The fair value differences arising from the valuation of derivative transactions are recognized in the income statement. 143 Financial Information and Risk Management Review PASHA Yatırım Bankası A.Ş. Notes to the Unconsolidated Financial Statements As of and for the Year Ended 31 December 2024 (Continued) (Convenience translation of publicly announced financial statements originally issued in Turkish) (Amounts are expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)