The Monitor (Botswana)

SUMMARY OF AUDITED CONSOLIDAT­ED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021

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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.

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