PASHA BANK ANNUAL REPOT 2024

EXPLANATIONS ON ACCOUNTING POLICIES (Continued) IV. EXPLANATIONS ON INTEREST INCOME AND EXPENSE Interest income and expense are accounted for on an accrual basis using the effective interest rate method. In accordance with the “Regulation on the Classification of Loans and the Procedures and Principles Regarding the Provisions to Be Allocated for Them,” published in the Official Gazette dated 22 June 2016, and numbered 29750, which came into effect on 1 January 2018, the Bank does not cancel the interest accruals and discounting for loans and other receivables that have become impaired. Instead, the Bank continues to recognize these amounts as interest income. Under the TFRS 9 methodology, the calculation of expected credit losses is performed based on the amounts including the interest accruals and discounts added. V. EXPLANATIONS ON FEE AND COMMISSION INCOME AND EXPENSE Except for fees and commissions that are integral part of the effective interest rates of financial instruments measured at amortized costs, the fees and commissions are accounted for in accordance with TFRS 15 Revenue from Contracts with Customers. Except for certain fees related to certain banking transactions and recognized when the related service is given, fees and commissions received or paid, and other fees and commissions paid to financial institutions are accounted under accrual basis of accounting throughout the service period. VI. EXPLANATIONS ON FINANCIAL ASSETS Financial assets fundamentally constitute the Bank’s commercial activities and operations. These instruments have the ability to reveal, influence, and mitigate liquidity, credit, and interest rate risks in the financial statements. The Bank categorizes its financial assets as “Financial Assets at Fair Value Through Profit/Loss”, “Financial Assets at Fair Value Through Other Comprehensive Income” or “Financial Assets Measured at Amortized Cost”. These financial assets are recorded or derecognized in accordance with the provisions of the “TFRS 9 Financial Instruments” standard, specifically the “Recognition and Derecognition of Financial Statements” section in the third part of the standard, as published by the Public Oversight Accounting and Auditing Standards Authority (POA) in the Official Gazette dated 19 January 2017, and numbered 29953. Financial assets are measured at fair value at initial recognition in the financial statements. During the initial recognition of financial assets other than “Financial Assets at Fair Value Through Profit or Loss”, transaction costs are added to fair value or deducted from fair value. Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are financial assets other than the ones that are managed with business model that aims to hold to collect contractual cash flows or business model that aims to collect both the contractual cash flows and cash flows arising from the sale of the assets; and if the contractual terms of the financial asset do not lead to cash flows representing solely payments of principal and interest at certain date; that are either acquired for generating a profit from short term fluctuations in prices or are financial assets included in a portfolio aiming to short-term profit making. Financial assets at the fair value through profit or loss are initially recognized at fair value and remeasured at their fair value after recognition. All gains and losses arising from these valuations are reflected in the income statement. Financial assets at the fair value through profit or loss are reflected on the balance sheet at their cost values and, subsequent to their recognition, are measured at their fair values. Fair values for securities traded on Borsa İstanbul (BIST) are determined using the weighted average settlement prices on BIST as of the balance sheet date, while for non-traded securities, investor valuation and price reports are used to determine their fair values. Financial Assets at Fair Value Through Other Comprehensive Income Financial assets at fair value through other comprehensive income are financial assets which are managed with business model that aims to hold to collect contractual cash flows and aims to hold to sell; and if the contractual terms of the financial assets lead to cash flows representing solely payments of principal and interest at certain dates. 144 PASHA Yatırım Bankası A.Ş. Notes to the Unconsolidated Financial Statements As of and for the Year Ended 31 December 2024 (Continued) PASHA Bank 2024 Annual Report (Convenience translation of publicly announced financial statements originally issued in Turkish) (Amounts are expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)