SUMMARY OF AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021
SIGNIFICANT ACCOUNTING POLICIES for the year ended 31 December 2021
General information
Access Bank Botswana Limited, formely African Banking Corporation of Botswana Limited trading as BancABC Botswana, provides corporate banking, retail and investment banking services. The Bank is a limited liability company and is incorporated and domiciled in Botswana (registration number BW00001089931).
The summarised consolidated financial statements for the year ended 31 December 2021 have been approved for issue by the members of the Board on 18th March 2022. Neither the members of the Board nor others have the power to amend financial statements after issue.
1. Basis of presentation
1.1 STATEMENT OF COMPLIANCE
Accounting policies
The financial statements comprise the statement of profit or loss and other comprehensive income showing as one statement, the statement of financial position, the statement of changes in equity, the statement of cash flows and the notes.
The Group’s financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). The financial statements have been prepared on the historical cost basis, except for revaluation of property , plant and equipment and certain financial instruments which are measured at fair value. The Group has consistently applied the accounting policies and, where necessary, the Group adjusts comparative figures to conform to changes in presentation in the current year. The principal accounting policies applied are disclosed in the annual financial statements.
New Accounting Standards and Changes in Accounting policies
1 January 2021 Interest Rate Benchmark Reform -Phase 2 - Amendments to IFRS 7. The amendment sets out additional disclosure requirements related to interest rate benchmark reform. The effective date of the group is for years beginning on or after January 1, 2021. The group has adopted the amendment for the first time in the 2021 consolidated and separate annual financial statements. The amendments address issues affecting financial reporting in the period leading up to IBOR reform, are mandatory and apply to all hedging relationships directly affected by uncertainties related to IBOR reform.
The value of loans linked to USD LIBOR as at 31 December 2021 have not yet transitioned into an alternative benchmark is USD45million (approximately P491 million). However, the new standard is not expected to have a material impact on the Group’s reported results as we have assessed the available alternative reference rates such as Reuters and Secured Overnight Financing Rate (SOFR) and noted these not to be materially different from the LIBOR rate used.
Use of estimates and judgements
The preparation of consolidated financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the bank’s accounting policies. The areas involving a higher degree of judgment or complexity or areas where assumptions and estimates are significant to the financial statements are disclosed, in the annual financial statements.
The critical accounting estimates and areas of judgement relate to the following elements of the interim financial results:
/ Impairment of financial instruments: key assumptions used in estimating recoverable
cash flows
/ Determination of the fair value of financial instruments with significant unobservable
inputs
/ Determination of the fair value of land and buildings with significant unobservable inputs
Going concern
The directors are responsible for ensuring that the group keeps accounting records which disclose with reasonable accuracy at any time the profit or loss and other comprehensive income, financial position, changes in equity and cash flows of the group which enable them to ensure that the financial statements comply with the Botswana Companies Act, 2003, the Banking Act (Cap 46:04) and International Financial Reporting Standards (IFRS).
The continued fight against the COVID-19 pandemic and the measures adopted by governments in countries worldwide to mitigate the pandemic’s spread have not significantly impacted the Group. As such, these consolidated and separate financial statements have been prepared on a going concern basis and do not include any adjustments to the carrying amounts and classification of assets, liabilities and reported expenses that may otherwise be required if the going concern basis was not appropriate.
Various economic experts predict a recovery to the economy of Botswana, including growth in consumer spending, growth in GDP, increased global demand for diamonds and little deterioration to the unemployment rate. Despite the positive outlook, the path to recovery from the COVID-19 pandemic remains uncertain as it is hinged on efforts to ensure the country achieves herd immunity along and continued recovery of our key sectors of the economy. As such, the Bank continues to exercise prudence in lending in order to maintain a reasonable match against deposits and also continues to closely monitor and proactively respond to any adverse indicators arising from the pandemic. The Bank’s financial, liquidity and capital projections remain positive, despite the possible adverse consequences of the pandemic.
2. Stated Capital
The issued share capital of the Bank comprises of 725 000 000 ordinary shares which are 78.15% owned by Access Bank PLC. There has been no change in the Bank’s stated capital during the period.
3. Prior period error
(1) Value added tax on imported services (VOIS)
In computing the amounts of transaction and other costs, management identified errors where VAT on imported services was incorrectly calculated due to misinterpretation of the relevant legislation. This resulted in the VAT on imported services expense (included under General and administration expenses) and amount payable to the Tax Authorities (Other liabilities) being understated in prior periods. Increasing the prior year Other operating General and administration expenses to correct the error resulted in reduction of prior year Retained income (which has been restated), reduction in taxable income and therefore, reduction in the prior year Income tax expense (also restated) and corresponding reduction in the current tax payable liability (also restated).
This constitutes a prior year error in terms of International Accounting Standards 8: Accounting policies, Changes in Accounting Estimates and Errors (IAS 8). The impact of this error has materially misstated statement of financial position for the year 2020 and 2019.
The cumulative mistatement on retained earnings as at 31 December 2020, net ox tax, amounted to P 10,343,452.51
(2) Presentation and disclosure (IAS 1)
In the preparation of the 2021 financial statements, we noted some balances that were incorrectly presented in the prior year financial statements. This was in terms of presentation and disclosure only per the requirements of the relevant accounting standard, without impacting the overall reported results. These include (1) Fee and commission expenses which were incorrectly netted off against fee and commission income, on the statement of profit and loss (2) Impairment of other financial assets which was included under Other liabilities instead of being netted off against Other assets (3) Presentation of the Statement of financial position in order of liquidity which resulted in their order of presentation changing for some assets and liabilities (4) Presentation of the Statement of Cash flows where interest paid on lease liabilities has been reclassified from cash flows from financing activities to cash flows from operating activities. Also, changes in debt instruments held for investment purposes have been restated to show the additions and disposals separately whereas in previous years these were presented on a net basis.
The errors above has been corrected with retrospective effect in accordance with the requirements of IAS 8. The impact of the restatements is shown below.