PASHA_BANK_ANNUAL REPORT 2022

EXPLANATIONS ON ACCOUNTING POLICIES (Continued) XIV. EXPLANATIONS ON LEASING TRANSACTIONS Assets acquired under finance lease agreements are capitalised at the inception of the lease at the “lower of the fair value of the leased asset or the present value of the amount of cash consideration given for the leased asset”. Leased assets are included in the property and equipment and depreciation is charged on a straight-line basis over the useful life of these assets. If there is any diminution in value of the leased asset, a “Provision for value decrease” is recognised. Liabilities arising from the leasing transactions are included in “Financial Lease Payables” on the balance sheet. Interest and foreign exchange expenses regarding lease transactions are charged to the income statement. The Bank can engage in financial lease transactions as the lessor. The Bank records the gross amount of minimum lease receivables comprising of principal and interest amounts as “financial lease receivables” under lease receivables account. The difference between the aggregate of lease receivables and the cost of the related leased assets, corresponding to interest, is recorded under “unearned income” item. The interest income is recognised in the income statement on an accrual basis. The Bank adopted TFRS 16 Leases and started to present most leases on-balance sheet except its short term leases and its low value assets. XV. EXPLANATIONS ON PROVISIONS AND CONTINGENT COMMITMENTS Provisions and contingent liabilities except for the financial instruments within the scope of the TFRS 9 or the provisions recognised in accordance with other standards such as TAS 12 and TAS 19 are accounted in accordance with the “Turkish Accounting Standard for Provisions, Contingent Liabilities and Contingent Assets” (TAS 37). Provisions are recognised when the Bank has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. The provision for contingent liabilities arising from past events should be recognised in the same period of occurrence in accordance with the “Matching principle”. When the amount of the obligation cannot be estimated and there is no possibility of an outflow of resources from the Bank, it is considered that a “Contingent” liability exists and it is disclosed in the related notes to the financial statements. XVI. EXPLANATIONS ON OBLIGATIONS RELATED TO EMPLOYEE RIGHTS Obligations related to employee termination and vacation rights are accounted for in accordance with “Turkish Accounting Standard for Employee Rights” (“TAS 19”) and are classified under “Reserve for Employee Rights” account in the balance sheet. Under the Turkish Labour Law, the Bank is required to pay a specific amount to the employees who have retired or whose employment is terminated other than the reasons specified in the Turkish Labour Law. The reserve for employment termination benefits represents the present value of the estimated total reserve for the future probable obligation of the Bank arising from this liability. 31 December 2022 31 December 2021 Discount Rate (%) 2.19 3.48 Inflation Rate (%) 14.00 15.00 140 PASHA Bank 2022 Annual Report Notes to Unconsolidated Financial Statements at 31 December 2022 Pasha Yatırım Bankası A.Ş. (Amounts are expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.) Convenience translation of publicly announced unconsolidated financial statements originally issued in turkish, see note I of section three