Abyssinia Bank 2019

Annual

Report
2018/19
VISION
To become a leading commercial bank in East Africa by the year
2030.

MISSION

To provide excellent financial services through competent,

motivated employees and digital technology in order to maximize
value to all stakeholders.
CORE VALUES
Customer satisfaction
Integrity
Team work and collaboration
Caring for our community
TABLE OF CONTENTS
Operational Highlight 4
Message of the Board Chairperson 8
Statement of the CEO 10
Report of Board of Director 12
Bank of Abyssinia Report and Financial Statements

For The Year Ended June 30, 2019
Directors and Professional Advisors 2
Report of the Directors 3
Statement of Director's Responsibilities 4
Independent Auditor's Report 5-6
Statement of Profit or Loss and Other 7

Comprehensive Income
Statement of Financial Position 8
Statement of Changes in Equity 9
Statement of Cash Flows 10
Notes to the Financial Statements 11 - 71

Operational Highlights
(FY 2013/14 – 2018/19)
2018/19 Annual Report
MESSAGE
OF THE BOARD CHAIRPERSON
Honorable Shareholders!
On behalf of the Board of Directors of the Bank of Abyssinia S.C and myself, I am honored to
present the Board of Directors’ Report along with the “Audited Financial Statements” of the Bank
to the 23rd Ordinary Annual General Meeting of the Shareholders of the Bank for the Fiscal Year
2018/19 ended June 30, 2019.
In the 2018/19 a number of ups and downs in economic activities were observed globally as well
as in Ethiopia, with significant implications to the national economy and political environment.
The global economy saw set back after a decade of sustained expansion, mainly due to softened
momentum in global activity following trade tension between the leading world economies, USA and
China and prolonged uncertainty on Brexit (IMF’s WEO update, July 2019).
The Ethiopian economy has also undergone a challenging time amidst continued security concerns,
which affected business activity, that was also compounded by lower than anticipated export
earnings, and rising fuel oil price. These had put stress on trade balance, increasing price level, and
forex shortage. Against the backdrop of these challenging circumstances, the Ethiopian economy
had registered commendable growth at 8.5%.
It was under these challenging global and domestic economic conditions that the financial sector
posted strong performance in resource mobilization and profit. Under the circumstances, it is my
pleasure to express that Bank of Abyssinia has registered a commendable result in both financial
and non-financial (operational) outcomes.
During the ended fiscal year, Bank of Abyssinia had achieved a significant incremental deposit
growth and thus the total outstanding deposit balance reached Birr 32.15 billion as at June 30,
2019, i.e. a 25% growth from Birr 25.79 billion of last year. Outstanding loans and advances
increased by 32% and reached Birr 23.74 billion in 2018/19, from the 2017/18 position of Birr 17.99
billion. The Bank earned a total revenue of Birr 4.29 billion which is an increase of Birr 1,024 million
from Birr 3.27 billion in end of 2017/18. I am glad also to announce that the Bank has registered
a remarkable profit that reached Birr 1.02 billion before tax which is a high record in the Bank’s
8 | Bank of Abyssinia S.C Annual Report 2018/19

history. Total asset and capital levels also increased by 23% and 17% registering Birr 39.29 billion
and Birr 4.95 billion, respectively.
Furthermore, the Bank has been able to lay strong ground for sustainable growth and profitability.
In an effort to bring sustainable growth and profitability, there have been various activities and
projects undertaken throughout the Bank. To mention few among the major ones, upgrading of
the Bank’s T24 core banking system to the latest version, implementation of interest free banking
products solution, development and implementation of new strategy have been carried out. In the
year under review, the Bank has developed its five-year strategy by using its own expertise in-
house. Accordingly, it has validated its vision, mission and core values, wherein the Bank identified
three pillars of excellence and key strategic drivers on which the Bank puts adequate focus in order
to achieve strategic aspirations in the years to come. The Bank’s organizational structure has been
reviewed accordingly in a manner that it supports achievement of the strategic objectives. Besides,
in order to address strategic issues identified in the course of strategy crafting, and to ensure
continuous improvement in all areas of the Bank’s businesses, different strategic initiatives have
been developed and are being implemented.
The Bank also embarked on the work of various construction projects, to strengthen its asset
position and good brand image, including the head office building finishing works. During the period
under review, the finishing works of Ras Branch Building in which the head office resides has been
kicked off and going well in a fast pace. The Bank finalized construction work of the G + 7 building
at Belay Zeleke Road and a branch office has commenced delivering services. The G+6 building
construction work in Hawassa town has continued, while finishing construction of a G+5 building in
Jimma town has been commenced based on a new design and its progress is in a good condition.
On top of these, the Bank is undertaking preparation of pre-construction works of the Bank’s future
Headquarters building around Mexico Square.
Honorable Shareholders!
Bank of Abyssinia recognizes that it is operating in a rapidly changing banking environment, a

number of challenges have been faced in the course of business undertakings. To cope with these
dynamics in the external as well as internal environments, the Bank had undergone change in the
management and adopted a new five-year strategic plan and the ensuing organizational structure.
With a view to realize the Bank’s vision, which is “To become a leading commercial bank in East
Africa by 2030”, the Bank remains committed to pursuing these aspirations and thereby meet the
interest of its stakeholders.
Going forward, the Management and the entire employees of the Bank shall make renewed effort
to bring higher performance in the coming years of strategic period by executing strategic initiatives
and projects in the areas of digitalization, human resources development, IT infrastructure,
processes improvements and business development. Hence, the Board of Directors and the
Management need unreserved support from all its stakeholders including shareholders, staff, and
the regulatory body.
I am sure, with the full support of all stakeholders at our disposal, we will achieve the targets set in
the new strategy, play our role in the financial inclusion agenda of the country and realize our vision
to the satisfaction of all stakeholders.
Finally, on behalf of the Board of Directors and myself, I would like to seize this opportunity to
express my sincere gratitude to our esteemed customers for their confidence and trust to continue
to do business with our Bank, to our shareholders for their support, to my fellow members of
the Board of Directors, Executive Management and employees of BoA for their dedication and
commitment, and to the National Bank of Ethiopia for its guidance.
Thank you all!!
Messeret Taye
9
STATEMENT OF THE
CHIEF EXECUTIVE OFFICER
Dear Esteemed Shareholders,
It is my pleasure to briefly describe the 2018/19 fiscal year which has been a period of profound
political and economic change.
Global economic growth has subdued after a decade of strong growth. Government intervention,
in the form of bailing out “too big to fail” banks and strong financial stimulus were responsible for
global economic expansion for the past decade. However, since the second half of 2018, global
growth seemed to have reached its natural limit and economic slowdown set in.
The Ethiopian economy had also felt this global slowdown through declining export performance,
decreased FDI and price changes of fuel, which in unison accentuated the foreign exchange
shortage, widening trade deficit putting the country’s debt high. This again has been compounded
with unfavorable business environment as a result of the eruption of conflicts around the country,
and rising price levels. Despite such conditions, the GDP growth in 2018/19 is still positive, which
enfolds Ethiopia among the fastest growing economies.
The ever-increasing profit of the banking industry is indicative of the potential for further business
expansion, though the past fiscal year have also hinted, more than ever, the inevitability of opening
up the banking sector to foreign competition. While this may sound threatening, it would serve the
banking sector as incentive to modernize and enhance its competitive edge.
Our competitive position has been one among the leading peers which are moving farther ahead
in the private banking industry. The financial and non-financial performance of our Bank, while
encouraging, deviated from targets. Nevertheless, compared with last year performance, we
registered encouraging results to build upon, which should be strengthened in the upcoming
2019/20 fiscal year.

The total net deposit mobilized in the review period stood at Birr 6.35 billion having an
accomplishment of 128.8% against last year same period increases. The deposit position of the
Bank during the year 2018/19 had also reached Birr 32.1 billion. As a result of these, outstanding
loans and advances reached Birr 23.7 billion, up by 32% compared to that of the year 2017/18.
The Bank’s profitability has also continued to rise where it passed the one billion mark; increasing by
Birr 258.3 million over the preceding year results.
The Bank has continued extending its outreach, and branch network has expanded to 337 by
opening 51 additional branches in the year 2018/19. In relation to that, the Bank’s deposit customer
base has reached 1.3 million in number of accounts.
Furthermore, in an effort to expand customer base in digital banking, the Bank managed to increase
card holders and mobile banking users by more than hundred thousand each; and encouraging
results registered in other digital banking services.
In a nutshell, it is promising how much we have accomplished, not only in terms of financial
performance but in our steadfast dedication and readiness to enable the bank anchor its strategy on
three thematic areas of growth, digitalization and operational excellence.
Respected Shareholders
The new fiscal year is anticipated to be both challenging and exciting as the Bank is poised to
strengthen its competitive position in the banking industry, and register remarkable growth following
change of leadership and formulation of a new five years corporate strategy.
With visionary leadership from the Board of Directors, improved commitment from the management
and staff of the Bank; and having the patronage of our esteemed shareholders and customers at our
side, I am confident that we will achieve far better results in the next fiscal year.
Finally, on behalf of the Executive Management and myself, I would like to thank the Board of
Directors for their guidance and assistance; the Bank’s honored customers, shareholders and other
stakeholders for their conviction and confidence in our Bank’s every activity; and all employees for
their unreserved effort to materialize BoA’s aspirations during the year.
Thank you all!!
Bekalu Zeleke
11
Report of Board of Drector
1. Operational Performance
1.1 Deposits
The deposit mobilization efforts of the Bank showed encouraging results in the fiscal year
2018/19 and the total incremental deposit mobilized by the Bank was Birr 6.35 billion or 25%
growth from the deposit balance of the previous fiscal year, thus the total outstanding deposit
has reached Birr 32.15 billion.
During the review period, growth was observed in all types of deposits. The share of savings,
demand, time and IFB deposits from the total outstanding deposits stood at 67%, 17%, 13%
and 3%, respectively.
In addition, the total number of deposit account holders reached 1,282,723 as at 30 June 2019,
which showed a growth by 270,546 or 26.73% from the position last year.
Fig. 1: Deposits Mobilized

(In Billions of Birr)
Fig. 2: Percentage Share of Deposits

1.2 Loans and Advances
At the close of FY 2018/19, the total outstanding loans and advances of the Bank
reached Birr 23.74 billion, which exhibited an increase by Birr 5.74 billion or 31.9% from
that of the preceding year. The growth came from increase in term loans by Birr 5.02
billion or 42.1%, overdraft by Birr 0.62 million or 16.2%, and of advances by Birr 0.02
million or 0.4%, respectively.
Fig. 3: Outstanding Loans and Advances

The share for term loans, overdraft and advances from the total outstanding loans and
advances stood at 71.3%, 18.7% and 9.9%, respectively.
Fig. 4: Percentage Share of Loans and Advances
13
In the review period, a significant net increase was observed in domestic trade with Birr 6.71
billion which is 116% increase while agriculture and other loans categories showed moderate
increment of Birr 115 million and Birr 462 million respectively. Whereas, all the rest loans
category showed decrease of varying degrees. The highest amount of decrease was registered
in export sector loans that declined by Birr 770 million, followed by import loans (Birr 467
million) and transport sector loans declined by Birr 230 million from that of June 2018 balances.
Table 1: Loans and Advances by Economic Sector

(In Millions of Birr)
Growth
Sector 19-Jun 18-Jun
Absolute %age
Domestic Trade 12,502.52 5,797.28 6,705.24 116%
Export 4,358.86 5,129.62 (770.76) -15%
Import 1,038.87 1,505.54 (466.67) -31%
Construction 2,194.09 2,216.71 (22.62) -1%
Industry 1,913.42 1,962.36 (48.94) -2%
Transport 719.79 949.70 (229.91) -24%
Agriculture 276.95 161.69 115.27 71%
Others 730.50 268.09 462.41 172%
Total 23,735.01 17,990.99 5,806.58 32%
The sectoral distribution shows the share of domestic trade, industry, agriculture and others
categories have shown increase from total loans, while the rest of the sectors proportions
decreased.
Likewise, the percentage share of sectoral distribution of loans and advances in domestic trade
(53%), export (18%), and industry (8%) took the lion’s share; whereas construction, import,
transport, others, and agriculture make up the rest at 9%, 4%, 3%, 3% and 1%, respectively.

Fig. 5: Percentage Share by Economic Sector
1.3 International Banking Services
The overall foreign exchange earnings of the Bank in the budget year reached USD 342.64
million showing a decline by USD 39.1 million or 10.2% from that earned in the previous fiscal
year.
With respect to sources of FCY, except interest on correspondent account and cash items,
all other sources of FCY exhibited earnings performance below that of last year’s similar
period. Regarding percentage share of foreign currency sources, incoming transfer and export
constitute major share of 53.7% and 31.1%, respectively while cash, interest on correspondent
banks, and dealings make up 13.6%, 1.4%, and 0.3% in that order.
The Bank strives to broaden sources of foreign currency, seeks to establish business
relationship with more number of Money Transfer Companies and enhance its correspondent
bank relationship management with international banks. Furthermore, the Bank continued
partnership with international card associations like MasterCard, China Union Pay and Visa Card
and by acquiring international cards on its ATMs and POS machines a sizeable amount of FCY
has been earned.
15
2. Financial Performance
2.1 Income
The total income earned during the year was Birr 4.29 billion, which surpasses that of the previous
fiscal year by Birr 1,015 million (30.9%). Interest income took the highest proportion with 82%,
while service charges, commission income, Net foreign exchange income and other income made up
the rest, i.e. 10%, 4%, 2% and 2%, respectively.
Fig. 6: Income by Major Categories

2.2 Expenses
The total expense at the end of the fiscal year stood at Birr 3.26 billion with an increase of Birr
756.45 million (30.1%) as compared against the total expense incurred last fiscal year. Interest
expense, salaries and benefits and general and administrative expenses were among the major
components of the total expenses constituting 46%, 30% and 19%, respectively.

The increase in major expense items could mainly be attributed to the rise in the cost of funds
(saving and time deposits) and branch network expansion undertakings.
Fig. 7: Expense by Major Categories

2.3 Profitability
The Bank registered profit before tax of Birr 1.02 billion at the end of June 30, 2019 exceeding last
year’s figure by Birr 258 million or 33.7%.
Fig. 8: Comparison of Income, Expense and Gross Profit

17
2.4 Equity of the Bank
The equity of the Bank at the end of the fiscal year 2018/19 reached Birr 4.95 billion registering
an absolute growth of Birr 0.705 billion (17%) over that of the previous year. Likewise, the paid-
up capital reached Birr 2.81 billion with an absolute growth of Birr 0.248 billion (9.7%) from the
preceding fiscal year’s balance.
Table 2: Equity of the Bank

2018/19 2017/18 Growth
Absolute
Capital Category Amount Amount % Share % age
% Share (A-B)
(A) (B)
Paid-up Capital 2,811.56 57% 2,563.11 60.37% 248.45 9.69
Share Premium 6.00 0% 6.00 0.14% 0.00 (0.03)
Legal Reserve 998.15 20% 803.90 18.94% 194.25 24.16
Special Reserve 25.92 1% 25.92 0.61% 0.00 0.00
Retained Earnings 490.88 10% 361.65 8.52% 129.23 35.73
Revaluation Surplus Account 462.21 9% 462.21 10.89% 0.00 0.00

Regulatory Risk Reserve 164.56 3% 47.63 1.12% 116.93 245.49
Other Reserve (8.88) 0% (25.05) (0.59%) 16.17 (64.53)
Total 4,950.39 100% 4,245.37 100% 705.02 17%
2.5 Liquidity
The Bank was able to fulfill the regulatory body’s requirements to curb the liquidity risk which might
arise from its operations. To this effect, the liquidity position of the Bank, measured as liquid asset
to its net current liabilities, stood at 15.27% during the stated period. Besides, the Bank’s capital
adequacy measured in terms of capital-to-risk-weighted assets reached 13.90% which is above the
minimum 8% requirement set by the supervisory authority for the banking industry. These ratios are
also expected to improve further in the future due to increase in the Bank’s capital.

3. Administrative and other Issues
3.1 Human Resources
The Bank continued to strengthen its human resource which increased by 709 or 12% and reached
6,534 at the end of the fiscal year. The human resource grew following additional number of
branch opening above the target for the period and recruitment of new personnel to meet the new
organizational structure human resource requirements. The overall attrition in the budget year was
154 personnel of which 68% was attributed to resignation, while the rest left the Bank owing to
retirement, suspension and dismissal.
Meanwhile, following the organizational structure of the Bank starting the final two quarters, the
Bank introduced new positions at chief officers and vice-president levels. To this end, efforts were
made to fill the new positions with the right candidates.
Besides, various trainings were offered to 6,087 staff of the Bank that took 2,024 hours of
developmental, technical, and ethical trainings including all of the planned trainings offered at the
Ethiopian Institute of Financial Studies.
3.2 Expansion of Branches
With a view to become more accessible to the public, BoA has been aggressively expanding its
branch networks. To this end, during the period ended June 30, 2019; the Bank Opened 51 new
branches and sub-branches thereby bringing the total number of branches to 337 exceeding the
target set for the plan period. The total number of branches in the preceding fiscal year was 286.
Out of these newly opened branches, 16 were city while the remaining 35 were regional branches.
Listed below are those branches, which went operational during the reviewed fiscal year.
Table 3: New Branches and Sub-Branches Opened in 2018/19
Atikilt Tera Athlet Beshale Kidist

Sub-Branch Wami Biratu Arabsa Mariam
City
Woldemeskel Kostre Tewodros Square Bulbula Mariam Kolfe 18
Branches Ambassdor Zewdie
(16) Arabsa Sidamo Tera No. 2 Aklilu Habtewold
Retta
Arabsa
Military Tera No. 2 Tero Teklehaimanot
Condominium
Weserbi Arsi Robe Yabelo Ghinnir

Negele Borena Estie Kemissie Ataye
Sendafa Debrework Wollo Bahil Amba Haik Estifanos
Outlying Elala Addis Kidam Tembien Sekota
Bekoji Shewa Ber Welwalo Babile
Branches
(35) Molale Shewareged Gedle Bati Bedessa
Dilla Sub-Branch Abba Geda Lalibela Dejen
Metehara Hirna Mehal Meda Sede
Ras Abebe Aregay Maichew Halaba Kulito
19
3.3 Business Development
During the 2018/19 fiscal year, BoA has devised its fifth generation of five-year strategy that runs
2019/20-2023/24. In this strategy the Bank has revised its area of business focus (value discipline)
to Operational Excellence. The Bank strives to achieve competitive advantage by excelling in
Operational Excellence while meeting industry standards in the other disciplines. In this way, BoA
shall strive to bring excellence in products and services offerings across all channels, provide
standardized, simple, and fast services, through continuous process improvement and effective
collaboration between front and back offices. The strategy implementation goes in full force in the
2019/20 fiscal year.
To gain market advantage, the Bank has undertaken a range of marketing activities including
strengthening of new savings deposit initiatives, namely Balewiletawoch (for senior citizens), Aday
(women’s savings) and Afla (for the youth) on top of the Muday savings product which was launched
earlier. Besides, during the year under review, the Bank has expanded offering Interest Free Banking
services to its esteemed customers. As a result, a sizeable amount of deposit has been mobilized
through these deposit initiatives.
During the stated period, the Bank had continued undertaking various business initiatives aimed
at increasing accessibility wherein mobile financial service project is a major one. The initiative is
part of the digitalization objective of the Bank by providing an electronic payment platform through
mobile wallet. The phase I mobile wallet product development and phase II integration of the
mobile wallet with the core banking and Switch are complete. Integration with third party entities for
value added services are awaiting approval from NBE.
3.4 Information Systems
The Bank has continually been undertaking changes and improvements to its IT and operational
systems. In this regard, BoA has elevated its Core Banking System from R10 release to R17, the
scope of which includes such key operational areas as Retail Banking, Credit Operations, Finance
and Accounts, Treasury Functions and Trade Finance Operations. In this relation the Bank also
implemented interest free banking products on the system which has been synchronized for Interest
free deposit and financing as well.
Furthermore, the Bank has also invested in the deployment of electronic channels including ATM,
PoS, and started enhancement and improvement works in its internet banking while mobile financial
services system has been undergoing pilot test to get approval from the National Bank of Ethiopia.
In this regard, in end of 2018/19, the number of ATM and PoS machines deployed grew by 56
and 91, respectively from that of the previous year. On top of that, the Bank managed to increase
the number of card holders and mobile banking users by 131,661 and 133,105, respectively as
compared to that of last fiscal year. Thus, the number of mobile and card banking service users
reached 336,659 and 365,390, respectively while the number of internet banking subscribers has
become 4,655 following an increase of 3,327 new subscribers.

4. Adoption of IFRS
With the enactment of proclamation no 847/2014, i.e. “Financial Report Proclamation of Ethiopia”,
banks, insurance companies and public enterprises are required to comply with the International
Financial Reporting System (IFRS). The Accounting and Auditing Board of Ethiopia which is in
charge of coordinating, and mandated to enforce the implementation of IFRS in the country, has
indicated that financial institutions are required to implement IFRS by end of 2018 and onwards.
Consequently, the Bank had adopted IFRS last year and issued its financial reports of the fiscal year
2017/18 in accordance with IFRS.
For the year 2018/19 also BoA has implemented IFRS 9: Financial Instruments, which replaces the
earlier version of IAS 39: Financial Instruments Recognition and Measurement. As IFRS in general
and IFRS 9 in particular is a new financial reporting standard to the Country as well as to the
Banking Industry, BoA has faced multiple challenges mainly due to lack of adequate and organized
data and record keeping; which is common experience to other similar institutions.
However, having these challenges, the Bank has successfully implemented IFRS 9 and produced its
2018/19 FY financial statements in accordance with IFRS 9. With the lessons in the process, BoA is
further working on necessary adjustments and requirements. In this regard, it is with pleasure that
the Bank’s Management present its financial statement using IFRS.
21
5. Future Plan
BoA has been operating actively in the industry and contributed its share towards economic and
social stability and growth of the economy through playing the key roles of deposit mobilization and
credit creation. The Bank is also ready to discharge such responsibilities and key role in a better way
in the upcoming fiscal year.
With a view to enhance its growth and sustainable profitability, the Bank has drawn up a new
five-year strategy after assessing external and internal environment in which the Bank operates.
In this strategy the Bank put adequate focus on growth operational excellence and digitalization
for realizing the strategy objectives. The Bank shall invest more time and energy to strengthen
the sustainable growth of resource mobilization and optimal allocation of the resources. To realize
this, the Bank shall work on various digital banking technology platforms and IT infrastructure
developments in the course of implementing the new strategy emphasizing operational efficiency
and digital capability. In this connection, branch expansion will go hand in hand with the digital
presence so as to reach various segments of the population by enabling customers receive seamless
experience across service points. In addition, the Bank shall expand the IFB services further through
introduction of variety of IFB products and service offerings, including by establishing dedicated
service giving outlets to bring large potential customers to the service. Strategic initiatives will also
receive adequate time and resources in the coming fiscal year which would enable the Bank to
achieve its corporate strategy objectives.
For the Bank to materialize the envisioned targets and attain its aspirations, therefore, it calls for the
concerted efforts of all stakeholders of the Bank, i.e., the Board of Directors, Executive Management
and all employees towards the successful implementation of the strategic initiatives.
6. Appropriation of Retained Earnings

During the Fiscal Year 2018/19, the Bank secured a net profit of Birr 483.34 million after the
appropriate deductions were made from the gross profit of the fiscal year.
The Board of Directors, therefore, recommends that Birr 481.99 million be distributed to
shareholders, proportionate to their respective paid-up shares after deducting the share of the Board
of Directors, which is Birr 1.35 million.

7. Vote of Thanks
In the end, BoA’s Board of Directors and the Executive Management would like to seize this
opportunity to express their gratitude to the high-valued customers of the Bank, shareholders,
employees and the regulatory body for their unreserved assistance towards helping the Bank to
attain this outcome.
Members of the Board of Directors

Ato Messeret Taye Chairperson
Ato Aemero Belete Member
Ato Bahiru Mossa Member
Ato Belay Gemechu Member
Ato Berhanu Jijo Member
Ato Biruk Tesfaye Member
Dr. Getachew Teka Member
Ato Solomon Girma Member
Ato Tilaye Tegegne Member
Messeret Taye Bekalu Zeleke

Chairperson of the Board of Directors Chief Executive Officer
23

BANK OF ABYSSINIA
Financial Statements and Notes
for the year Ended 30 June 2019
1
DIRECTORS, PROFESSIONAL ADVISORS AND
REGISTERED OFFICE
Board Directors (As of June 30, 2019)

Ato Messeret Taye Board Chairperson (Appointed February 26,2018)
Ato Aemero Belete Board Director (Appointed July 15,2019)
Ato Ali Mohammed Board Director (Resigned February 26,2018)
Ato Belay Gemechu Board Director (Appointed February 26,2018)
Ato Bahiru Mossa Board Director (Appointed February 26,2018)
Ato Biranu Jijo Board Director (Appointed February 26,2018)
Ato Biruk Tesfaye Board Director (Appointed February 26,2018)
Dr Getachew Teka Board Director (Appointed February 26,2018)
Ato Solomon Girma Board Director (Appointed February 26,2018)
Ato Tilaye Tegegn Board Director (Appointed February 26,2018)
Independent Auditor
Getachew Kassaye & Co.
Chartered Certified Accountant
P.O Box 1432
Addis Ababa
Ethiopia
Corporate Office
Ras Branch
Legehar Building
Gambia Street
P.O Box 12947
Addis Ababa, Ethiopia

BANK OF ABYSSINIA
REPORT OF DIRECTORS
The directors submit the report together with the audited financial statements for the period ended
30 June 2019, in accordance with the International Financial Reporting Standards (IFRS) and in the
manner required by Accounting and Auditing Board of Ethiopia which discloses the financial perfor-
mance and state of affairs of the Bank.
Incorporation and address

Bank of Abyssinia (“the Bank”) was established in 1996 and registered as a public owned share hold-
ing company in accordance with the provision of the Licensing and Supervision of Banking Business
Proclamation No.84/94 (as amended by 592/2008) and the 1960 Commercial code of Ethiopia. The
Bank’s registered office is at:
Legehar Building
Gambia Street
P.O Box 12947
Principal activities
The Bank’s principal activity is providing commercial banking services.
Results and dividends

The Bank’s results for the year ended 30 June 2019 are set out on page 7. The profit for the year has
been transferred to retained earnings. The summarised results are presented below.
30 June 30 June
2019 2018
Birr’000 Birr’000
Revenue 2,781,129 2,217,855
Profit / (loss) before tax 1,024,037 765,708
Tax (charge) / credit (247,023) (202,908)
Profit / (loss) for the year 777,014 562,800
Other comprehensive income / (loss) net of taxes 9,149 (30,204)
Total comprehensive income / (loss) for the year 786,163 532,596
Earning Per Share 7.23 6.11
Directors
The directors who held office during the year and to the date of this report are set out on page 2.
________________________________
Ato Messeret Taye
Chairman of Board of Directors
3
BANK OF ABYSSINIA
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
In accordance with the Financial Reporting Proclamation No. 847/2014, Bank of Abyssinia is required
to prepare its financial statements in compliance with International Financial Reporting Standards
(IFRS) as issued by the International Accounting Standards Board (IASB) and in the manner required
by the Commercial Code of Ethiopia of 1960. The Directors of the Bank are responsible for the
preparation and fair presentation of these financial statements and for such internal control as
management determines is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error. The Bank is required keep such records
as are necessary to:
a) exhibit clearly and correctly the state of its affairs;
b) explain its transactions and financial position; and
c) enable the Accounting and Auditing Board of Ethiopia and other concerned organs to determine
whether the Bank had complied with the provisions of the Financial Reporting Proclamation and
regulations and directives issued for the implementation of the aforementioned Proclamation.
The Bank’s directors accept responsibility for the annual financial statements, which have been
prepared using appropriate accounting policies supported by reasonable and prudent judgements and
estimates, in conformity with International Financial Reporting Standards (IFRS) and other relevant
laws and regulations of Ethiopia.
The Directors are of the opinion that the financial statements give a true and fair view of the state of
the financial affairs of the Bank and of its profit or loss
The Directors further accept responsibility for the maintenance of accounting records that may be
relied upon in the preparation of financial statements, as well as adequate systems of internal financial
control.
Nothing has come to the attention of the Directors to indicate that the company will not remain a
going concern for at least twelve months from the date of this statement.
Signed on behalf of the Directors by:
_______________________________ _______________________________
Chairman of Board of Directors CEO
November 7, 2019 November 7, 2019

5

BANK OF ABYSSINIA
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2019
30 June 30 June
2019 2018
Notes Birr’000 Birr’000
Interest income 5 3,504,386 2,721,259
Interest expense 6 (1,507,616) (1,056,113)
Net interest income 1,996,770 1,665,146
Net Foreign exchange income 7 80,910 11,983
Service charges 435,799 360,709
Commission earned 8 169,256 145,369
Net fees and commission income 685,965 518,061
Dividend income 9 3,130 5,874
Other operating income 10 95,264 28,774
Total Other Income 98,394 34,648
Total operating income 2,781,129 2,217,855
Loan impairment charge 11 (103,732) (118,360)
Impairment losses on other assets 12 (44,737) -
Net operating income 2,632,660 2,099,495
Personnel expenses 13 (984,201) (865,210)
Amortisation of intangible assets 14 (20,111) (15,821)
Depreciation and impairment of property, plant and equip-
ment 14 (103,182) (72,669)
Depreciation on investment property 14 (2,009) (1,994)
Other operating expenses 15 (499,120) (378,093)
Profit before tax 1,024,037 765,708
Income tax expense 16 (247,023) (202,908)
Profit after tax 777,014 562,800

Other comprehensive income (OCI) net on income
tax
Items that will not be subsequently reclassified into

profit or loss:
Remeasurement gain/(loss) on retirement benefits obliga-
tions 27 (7,838) (30,204)
Remeasurement gain/(loss) on Fair valution for equity
Investment 27A 16,987
Total comprehensive income for the period 786,163 532,596
Earnings per share: 29 7.23 6.11
The notes on pages 11 to 71 are an integral part of these financial statements.
7
BANK OF ABYSSINIA
STATEMENT OF FINANCIAL POSITION
As at 30 JUNE 2019
30 June 30 June
2019 2018

ASSETS
Cash and cash equivalents 17 4,472,202 4,491,584

Loans and advances to customers 18 23,421,247 17,780,964
Investment securities; 19
- Loans and receivables 7,564,283 6,314,266
- Available for sale 271,348 90,860
Other assets 20 1,402,055 1,343,463
Property, plant and equipment 23 1,952,047 1,790,720
Investment property 21 101,068 101,238
Intangible assets 22 110,175 69,940
Total assets 39,294,425 31,983,036
LIABILITIES
Deposits from customers 25 32,146,449 25,794,540
Other liabilities 26 1,852,040 1,641,955
Current tax liabilities 16 241,293 218,382
Retirement benefits obligations 27 100,253 76,876
Deferred tax liabilities 16 4,004 5,925
Total liabilities 34,344,039 27,737,678
EQUITY
Share capital 28 2,811,564 2,563,112

Share premium 5,998 5,998
Retained earnings 30 490,877 361,646
Revalution Surplus Account 34 462,205 462,205
Legal reserve 31 998,152 803,898
Regulatory risk reserve 32 164,555 47,626
Special reserve 25,919 25,919
Other Reserve 27a (8,884) (25,046)
Total equity 4,950,386 4,245,358
Total equity and liabilities 39,294,425 31,983,036

The financial statements on pages 7 to 71 were approved and authorised for issue by the board of
directors on November 7, 2019 and were signed on its behalf by:
_______________________________ _______________________________
Chairman of Board of Directors CEO
November 7, 2019 November 7, 2019

BANK OF ABYSSINIA
STATEMENT OF CHANGES IN EQUITY
Share Share Retained Revaluation Regulatory Legal Special Other
capital Premium earnings Surplus risk reserve reserve reserve Reserve Total
Notes Birr’000 Birr’000 Birr’000 Account Birr’000 Birr’000 Birr’000 Birr’000 Birr’000
As at 1 July 2017 1,802,001 5,998 280,294 462,205 99,475 670,749 25,919 (6,738) 3,339,904
Profit for the period 30 - 562,800 - - - - 562,800
Capitalisation of shares 761,111 - - - - - 761,111
Other comprehensive income: - - - - - - - - -
Re-measurement gains on defined
- - - - - - - (18,308) (18,308)
benefit plans (net of tax)
Transfer to legal reserve 31 - (133,149) - 133,149 - - -
Transfer from regulatory risk reserve 32 - 51,849 - (51,849) - - -
Dividends paid - (400,147) - - - - - (400,147)
Total comprehensive income for
- - 562,800 - - (18,308) 905,456
the period
As at 30 June 2018 2,563,112 5,998 361,647 462,205 47,626 803,898 25,919 (25,046) 4,245,359
As at 1 July 2018 2,563,112 5,998 361,647 462,205 47,626 803,898 25,919 (25,046) 4,245,359
Profit for the period 30 - 777,014 - - - - - 777,014
Capitalisation of shares 248,452 (248,452) -
Other comprehensive income: - - - - - - 16,162 16,162
Transfer to legal reserve 31 - (194,253) 194,253 -
Transfer to regulatory risk reserve 32 - (116,929) 116,929 - - - -
Dividends Paid - (88,149) - - - - - (88,149)
Total comprehensive income for
- 777,014 - - - - - 705,027
the period
As at 30 June 2019 2,811,564 5,998 490,877 462,205 164,555 998,152 25,919 (8,884) 4,950,386
9
BANK OF ABYSSINIA
STATEMENT OF CASH FLOWS
30 June 30 June
2019 2018
Cash flows from operating activities

Cash generated from operations 33 1,911,723 2,261,028
Capital gain Tax paid -
Withholding tax (637) (392)
Income tax paid (218,382) (163,626)
Other tax paid - -
Net cash (outflow)/inflow from operating activities 1,692,704 2,097,010
Cash flows from investing activities

Purchase of investment securities 19 (1,430,877) (1,126,959)
Purchase of investment property 21 (1,838) (396)
Purchase of intangible assets 22 (60,066) (16,140)
Purchase of property, plant and equipment 23 (266,802) (276,848)
Proceeds from sale of property, plant and equipment 33 6,554
Proceed on disposal of Aquired Asset 44,941 2,170
Net cash (outflow)/inflow from investing activities (1,708,088) (1,418,173)
Cash flows from financing activities

Proceeds from issues of shares 28 248,452 761,112
Dividends paid (333,358) (400,476)
Net cash (outflow)/inflow from financing activities (84,906) 360,636
Net increase/(decrease) in cash and cash equivalents (100,291) 1,039,473
Cash and cash equivalents at the beginning of the year 17 4,491,584 3,440,128
Foreign exchange (losses)/
80,910 11,983
gains on cash and cash equivalents
Cash and cash equivalents at the end of the year 17 4,472,202 4,491,584

BANK OF ABYSSINIA
NOTES TO THE FINANCIAL STATEMENTS
1. General information
Bank of Abyssinia (“the Bank”) is a public owned share Company domiciled in Ethiopia. The Bank was
established in (1996) in accordance with the Licensing & Supervision of Banking Business Proclamation
No.84/1994 (as amended by 592/2008) and the Commercial Code of Ethiopia of 1960.
The Bank opened branches throughout the country. The Bank’s registered office is at:
Legehar Building
Gambia Street
P.O Box 12947
The Bank is principally engaged in the provision of diverse range of financial products and services to a
wholesale, retail and SME clients base in Ethiopian Market.
2. Summary of significant accounting policies

2.1 Introduction to summary of significant accounting policies
The principal accounting policies applied in the preparation of these financial statements are set out below.
These policies have been consistently applied to all the years presented, unless otherwise stated.
2.2 Basis of preparation

The financial statements for the period ended 30 June 2019 have been prepared in accordance with
International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards
Board (“IASB”). Additional information required by national regulations is included where appropriate.
The financial statements comprise the statement of profit or loss and other comprehensive income, the
statement of financial position, the statement of changes in equity, the statement of cash flows and the
notes to the financial statements.
The financial statements have been prepared in accordance with the going concern principle under the
historical cost concept, except for the following;
Buildings under property, plant and equipment – measured at fair value as deemed cost
Assets held for sale – measured at fair value less cost of disposal, and
Defined benefit pension plans – plan assets measured at fair value.
All values are rounded to the nearest thousand, except when otherwise indicated. The financial statements
are presented in thousands of Ethiopian Birr (Birr’ 000).
The preparation of 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. Changes in assumptions may have a significant impact on the financial
statements in the period the assumptions changed. Management believes that the underlying assumptions
are appropriate and that the Bank’s financial statements therefore present the financial position and results
fairly. 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 Note 4.
11
BANK OF ABYSSINIA
2.2.1 Going concern
The financial statements have been prepared on a going concern basis. The management have no doubt
that the Bank would remain in existence after 12 months.
2.2.2 Changes in accounting policies and disclosures

IFRS 9 Financial Instruments
The Bank has initially adopted IFRS 9 from 1 July2018, a number of other new standards are also effective
from 1 July 2018. Due to the transition method chosen by the Bank in applying IFRS 9, comparative
information throughout these financial statements has not generally been restated to reflect its requirements.
The effect of initially applying these standards is mainly attributed to the following:
– An increase in impairment losses recognised on financial assets (Note (4.4); and

– Additional disclosures related to IFRS 9 (see Notes 2.5and 4.4);
Except for the changes below, the Bank has consistently applied the accounting policies as set out in Note
2.5 to all periods presented in these financial statements.
IFRS 9 sets out requirements for recognising and measuring financial assets, financial liabilities and
some contracts to buy or sell non-financial items. This standard replaces IAS 39 Financial Instruments:
Recognition and Measurement. The requirements of IFRS 9 represent a significant change from IAS 39. The
new standard brings fundamental changes to the accounting for financial assets and to certain aspects of
the accounting for financial liabilities.
As a result of the adoption of IFRS 9, the Bank has adopted consequential amendments to IAS 1 Presentation
of Financial Statements, which require separate presentation in the statement of profit or loss and OCI of
interest revenue calculated using the effective interest method. Previously, the Bank disclosed this amount
in the notes to the financial statements. Additionally, the Bank has adopted consequential amendments to
IFRS 7 Financial Instruments: Disclosures that are applied to disclosures about 2018, but have not been
applied to the comparative information. The key changes to the Bank’s accounting policies resulting from its
adoption of IFRS 9 are summarised below. The full impact of adopting the standard is set out in Note 4.4.
Transition from IAS 39 to IFRS 9

Changes in accounting policies resulting from the adoption of IFRS 9 have been applied retrospectively,
except comparative periods which have generally not been restated. Differences in the carrying amounts
of financial assets and financial liabilities resulting from the adoption of IFRS 9 are recognised in retained
earnings and reserves as at 1 July 2018. Accordingly, the information presented for 2018does not reflect the
requirements of IFRS 9 and therefore is not comparable to the information presented for 2019 under IFRS
9. The Bank used the exemption not to restate comparative periods but considering that the amendments
made by IFRS 9 to IAS 1 introduced the requirement to present ‘interest income calculated using the
effective interest rate’ as a separate line item in the statement of profit or loss and OCI, the Bank changed
the description of the line item from ‘interest income’ reported in 2018to ‘interest income calculated using
the effective interest method’. The following assessments have been made on the basis of the facts and
circumstances that existed at the date of initial application;
The determination of the business model within which a financial asset is held.
The designation and revocation of previous designations of certain financial assets and financial
liabilities as measured at FVTPL.
The designation of investments in equity instruments not held for trading as at FVOCI.
If a debt security had low credit risk at the date of initial application of IFRS 9, then the Bank has
assumed that credit risk on the asset had not increased significantly since its initial recognition.

BANK OF ABYSSINIA
New Standards, amendments, interpretations issued but not yet effective.
A number of new standards and amendments to standards and interpretations are effective for annual
periods beginning after 30 June 2019, and have not been applied in preparing these financial statements.
None of these is expected to have a significant effect on the financial statements of the Bank, except the
following set out below:
IFRS 16 - Leases
This standard was issued in January 2016 (Effective on after 1 January 2019) . It sets out the principles
for the recognition, measurement, presentation and disclosure of leases. The objective is to ensure that
lessees and lessors provide relevant information in a manner that faithfully represents those transactions.
The standard introduces a single lessee accounting model and requires a lessee to recognise assets and
liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A
lessee is required to recognise a right-of-use asset representing its right to use the underlying leased asset
and a lease liability representing its obligation to make lease payments. it also substantially carries forward
the lessor accounting requirements in IAS 17. The Bank is partially assess the expected impact of this
standard but not implemented in this accounting period.
IFRIC 23 Uncertainity over Income Tax Treatments

IFRIC 23 ‘Uncertainty over Income Tax Treatments’ This interpretation clarifies how to apply the recognition
and measurement requirements in IAS 12 when there is uncertainty over income tax treatments. In such
circumstances, an entity shall recognise and measure its current or deferred tax asset or liability applying the
requirements in IAS 12 based on taxable profit (tax loss), tax bases, unused tax losses, unused tax credits
and tax rates determined applying this Interpretation. This interpretation addresses: whether an entity
considers uncertain tax treatments separately; the assumptions an entity makes about the examination
of tax treatments by taxation authorities; how an entity determines taxable profit (tax loss), tax bases,
unused tax losses, unused tax credits and tax rates; and how an entity considers changes in facts and
circumstances. The IFRIC will be applied retrospectively. The impact on the annual financial statements
has not yet been fully determined. The new interpretation is effective on after 1 January 2019 and earlier
application is permitted. The Bank is currently assessing the impact of this IFRIC.
IFRIC Interpretation 22 - Foreign Currency Transactions and Advance Consideration

The interpretation clarifies that in determining the spot exchange rate to use on initial recognition of
the related asset, expense or income (or part of it) on the derecognition of a non-monetary asset or
non-monetary liability relating to advance consideration, the date of the transaction is the date on
which an entity initially recognises the nonmonetary asset or non-monetary liability arising from
the advance consideration. If there are multiple payments or receipts in advance, then the entity
must determine a date of the transactions for each payment or receipt of advance consideration.
Entities may apply the amendments on a fully retrospective basis. Alternatively, an entity may apply the
interpretation prospectively to all assets, expenses and income in its scope that are initially recognised on
or after:
(i) The beginning of the reporting period in which the entity first applies the interpretation or;
(ii) The beginning of a prior reporting period presented as comparative information in the financial
statements of the reporting period in which the entity first applies the interpretation.
2.3 Foreign currency translation
a) Functional and presentation currency

Items included in the financial statements are measured using the currency of the primary economic
environment in which the Bank operates (‘the functional currency’). The functional currency and presentation
currency of the Bank is the Ethiopian Birr (Birr).
13
BANK OF ABYSSINIA
b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing
at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of
foreign currency transactions and from the translation at exchange rates of monetary assets and liabilities
denominated in currencies other than the Bank’s functional currency are recognised in profit or loss within
other (loss)/income. Monetary items denominated in foreign currency are translated using the closing rate
as at the reporting date.
Changes in the fair value of monetary securities denominated in foreign currency classified as available for sale are
analysed between translation differences resulting from changes in the amortised cost of the security and other
changes in the carrying amount of the security. Translation differences related to changes in amortised cost are
recognised in profit or loss, and other changes in carrying amount are recognised in other comprehensive income.
Translation differences on non-monetary financial assets and liabilities such as equities held at fair value
through profit or loss are recognised in profit or loss as part of the fair value gain or loss. Translation
differences on non-monetary financial assets measure at fair value, such as equities classified as available
for sale, are included in other comprehensive income.
2.4 Recognition of income and expenses

Revenue is recognised to the extent that it is probable that the economic benefits will flow
to the Bank and the revenue can be reliably measured, regardless of when the payment is
being made. Revenue is measured at the fair value of the consideration received or receivable,
taking into account contractually defined terms of payment and excluding taxes or duty.
The Bank, earns income from interest on loans given for domestic trade and services, building and
construction, manufacturing, agriculture and personal loans. Other incomes includes margins on letter of
credits and performance guarantees.
2.4.1 Interest and similar income and expense

For all the government bills measured at amortised cost and interest bearing financial assets classified as
available– for–sale interest income or expense is recorded using the Effective Interest Rate (EIR), which
is the rate that exactly discounts estimated future cash payments or receipts through the expected life of
the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial
asset or financial liability. The calculation takes into account all contractual terms of the financial instrument
(for example, prepayment options) and includes any fees or incremental costs that are directly attributable
to the instrument and are an integral part of the Effective Interest Rate (EIR), but not future credit losses.
The carrying amount of the financial asset or financial liability is adjusted if the Bank revises its estimates of
payments or receipts. The adjusted carrying amount is calculated based on the original EIR and the change
in carrying amount is recorded as ‘Interest and similar income’ for financial assets and Interest and similar
expense for financial liabilities.
Once the recorded value of a financial asset or a group of similar financial assets has been reduced due to
an impairment loss, interest income continues to be recognised using the rate of interest used to discount
the future cash flows for the purpose of measuring the impairment loss.
2.4.2 Fees and commission

Fees and commission income and expenses that are integral to the effective interest rate on a financial
asset - government bills or liability are included in the measurement of the effective interest rate. Other
fees and commission income; money transfer, letter of credit, payment orders, uncleared effects, ATM and
POS transactions etc are recognised as the related services are performed.

BANK OF ABYSSINIA
When a loan commitment is not expected to result in the draw-down of a loan, loan commitment fees are
recognised on a straight-line basis over the commitment period.
Other fees and commission expenses relates mainly to transaction and service fees are expensed as the
services are received.
2.4.3 Dividend income

This is recognised when the Bank’s right to receive the payment is established, which is generally when the
shareholders approve and declare the dividend.
2.4.4 Foreign exchange revaluation gains or losses

These are gains and losses arising on settlement and translation of monetary assets and liabilities denominated
in foreign currencies at the functional currency’s spot rate of exchange at the reporting date. This amount
is recognised in the income statement and it is further broken down into realised and unrealised portion.
The monetary assets and liabilities include financial assets within the foreign currencies deposits received
and held on behalf of third parties etc.
2.5 Financial assets and financial liabilities
2.5.1 Policy applicable from 1 July 2018

a. Recognition and initial measurement
The Bank shall initially recognise loans and advances, deposits, debt securities issued and subordinated
liabilities on the date on which they are originated. All other financial instruments (including regular-way
purchases and sales of financial assets) shall be recognised on the trade date, which is the date on which
the Bank becomes a party to the contractual provisions of the instrument.
A financial asset or financial liability shall be measured initially at fair value plus, for an item not at fair value
through profit or loss (FVTPL), transaction costs that are directly attributable to its acquisition or issue.
b. Classification and subsequent measurement

i) Financial assets
On initial recognition, a financial asset shall be classified either as measured at either amortised cost, fair
value through other comprehensive income (FVOCI) or fair value through profit or loss (FVTPL).
The Bank shall measure a financial asset at amortised cost if it meets both of the following conditions and
is not designated at FVTPL:
The asset is held within a business model whose objective is to hold assets to collect contractual cash
flows; and
The contractual terms of the financial asset give rise on specified dates to cash flows that are solely
payments of principal and interest (SPPI). `
A debt instrument shall be measured at FVOCI only if it meets both of the following conditions and is
not designated at FVTPL:
The asset is held within a business model whose objective is achieved by both collecting contractual cash
flows and selling financial assets; and
The contractual terms of the financial asset give rise on specified dates to cash flows that are SPPI.
On initial recognition, an equity investment that is held for trading shall be classified at FVTPL. However,
for equity investment that is not held for trading, the Bank may irrevocably elect to present subsequent
changes in fair value in other comprehensive income (OCI). This election is made on an investment-by-
investment basis.
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BANK OF ABYSSINIA
All other financial assets that do not meet the classification criteria at amortised cost or FVOCI, above, shall
be classified as measured at FVTPL.
In addition, on initial recognition, the Bank may irrevocably designate a financial asset that otherwise
meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates
or significantly reduces an accounting mismatch that would otherwise arise (see 1.8).
Business model assessment

The Bank shall make an assessment of the objective of a business model in which an asset is held at
a portfolio levelbecause this best reflects the way the business is managed and information is provided to
management. The information considered includes:
The stated policies and objectives for the portfolio and the operation of those policies in practice. In
particular, whether management’s strategy focuses on earning contractual interest revenue, maintaining a
particular interest rate profile, matching the duration of the financial assets to the duration of the liabilities
that are funding those assets or realising cash flows through the sale of the assets;
How the performance of the portfolio is evaluated and reported to the Bank’s management;
The risks that affect the performance of the business model (and the financial assets held within that
business model) and its strategy for how those risks are managed;
How managers of the business are compensated (e.g. whether compensation is based on the fair value
of the assets managed or the contractual cash flows collected); and
The frequency, volume and timing of sales in prior periods, the reasons for such sales and its expectations
about future sales activity. However, information about sales activity is not considered in isolation, but
as part of an overall assessment of how the Bank’s stated objective for managing the financial assets is
achieved and how cash flows are realised.
Financial assets shall not be reclassified subsequent to their initial recognition, except in the period after
the Bank changes its business model for managing financial assets.
Assessment of whether contractual cash flows are solely payments of principal and interest
For the purposes of this assessment, ‘principal’ shall be defined as the fair value of the financial asset on
initial recognition. ‘Interest’ shall be defined as the consideration for the time value of money and for the
credit risk associated with the principal amount outstanding during a particular period of time and for other
basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as profit margin.
In assessing whether the contractual cash flows are SPPI, the Bank considers the contractual terms of
the instrument. This includes assessing whether the financial asset contains a contractual term that could
change the timing or amount of contractual cash flows such that it would not meet this condition. In making
the assessment, the Bank considers:
Contingent events that would change the amount and timing of cash flows;
leverage features;
Prepayment and extension terms;
Terms that limit the Bank’s claim to cash flows from specified assets (e.g. non-recourse loans); and
Features that modify consideration of the time value of money (e.g. periodical reset of interest rates).
ii) Financial liabilities

The Bank shall classify its financial liabilities, other than financial guarantees and loan commitments, as
measured at amortised cost or FVTPL.

BANK OF ABYSSINIA
A financial guarantee is an undertaking/commitment that requires the issuer to make specified payments
to reimburse the holder for a loss it incurs because a specified party fails to meet its obligation when due
in accordance with the contractual terms.
Financial guarantees issued by the Bank are initially measured at their fair values and, if not designated as
at FVTPL,are subsequently measured at the higher of: the amount of the obligation under the guarantee,
as determined in accordance with IAS 37 Provisions, ContingentLiabilities and Contingent Assets; and the
amount initially recognised less, where appropriate, cumulative amortisation recognised in accordance
withthe revenue recognition policies.
c. Impairment
At each reporting date, the Bank shall assess whether there is objective evidence that financial assets
(except equity investments), other than those carried at FVTPL, are impaired.
The Bank shall recognise loss allowances for expected credit losses (ECL) on the following financial
instruments that are not measured at FVTPL:
Financial assets that are debt instruments;

lease receivables;
Financial guarantee contracts issued; and
loan commitments issued.
No impairment loss shall be recognised on equity investments.
The Bank shall measure loss allowances at an amount equal to lifetime ECL, except for the following, which
are measured as 12-month ECL:
Debt investment securities that are determined to have low credit risk at the reporting date; and
Other financial instruments (other than lease receivables) on which credit risk has not increased
significantly since their initial recognition.
Loss allowances for lease receivables shall always be measured at an amount equal to lifetime ECL. 12-month
ECL is the portion of ECL that result from default events on a financial instrument that are possible within
the 12 months after the reporting date. Financial instruments for which a 12-month ECL is recognised are
referred to as ‘Stage 1 financial instruments’.
Life-time ECL is the ECL that result from all possible default events over the expected life of the financial
instrument. Financial instruments for which a lifetime ECL is recognised but which are not credit-impaired
are referred to as ‘Stage 2 financial instruments’.
i) Measurement of ECL
ECL is a probability-weighted estimate of credit losses. It shall be measured as follows:
For financial assets that are not credit-impaired at the reporting date (stage 1 and 2):as the present
value of all cash shortfalls (i.e. the difference between the cash flows due to the Bank in accordance with
the contract and the cash flows that the Bank expects to receive);
For financial assets that are credit-impaired at the reporting date (stage 3): as the difference between
the gross carrying amount and the present value of estimated future cash flows;
For undrawn loan commitments: as the present value of the difference between the contractual cash
flows that are due to the Bank if the commitment is drawn down and the cash flows that the Bank expects
to receive; and
For financial guarantee contracts: as the expected payments to reimburse the holder less any amounts
that the Bank expects to recover.
17
BANK OF ABYSSINIA
ii) Restructured financial assets
Where the terms of a financial asset are renegotiated or modified or an existing financial asset is replaced
with a new one due to financial difficulties of the borrower, then the Bank shall assess whether the financial
asset should be derecognised and ECL are measured as follows:
If the expected restructuring will not result in derecognition of the existing asset, then the expected
cash flows arising from the modified financial asset are included in calculating the cash shortfalls from the
existing asset
If the expected restructuring will result in derecognition of the existing asset, then the expected fair
value of the new asset is treated as the final cash flow from the existing financial asset at the time of its
derecognition. This amount is included in calculating the cash shortfalls from the existing financial asset
that are discounted from the expected date of derecognition to the reporting date using the original
effective interest rate of the existing financial asset.
iii) Credit-impaired financial assets

At each reporting date, the Bank shall assess whether financial assets carried at amortised cost, debt
financial assets carried at FVOCI, and finance lease receivables are credit-impaired (referred to as ‘Stage 3
financial assets’).
A financial asset shall be considered ‘credit-impaired’ when one or more events that have a detrimental
impact on the estimated future cash flows of the financial asset have occurred.
Evidence that a financial asset is credit-impaired includes the following observable data:
Significant financial difficulty of the borrower or issuer;
A breach of contract such as a default or past due event;
The restructuring of a loan or advance by the Bank on terms that the Bank would not consider otherwise;
It is becoming probable that the borrower will enter bankruptcy or other financial reorganisation; or
The disappearance of an active market for a security because of financial difficulties.
A loan that has been renegotiated due to a deterioration in the borrower’s condition shall be considered
to be credit-impair unless there is evidence that the risk of not receiving contractual cash flows has reduced
significantly and there are no other indicators of impairment. In addition, a retail loan that is overdue for 90
days or more shall be considered credit-impaired even when the regulatory definition of default is different.
iv) Presentation of allowance for ECL in the statement of financial position

Loss allowances for ECL shall be presented in the statement of financial position as follows:
For financial assets measured at amortised cost: as a deduction from the gross carrying amount of the
assets;
For loan commitments and financial guarantee contracts: generally, as a provision;
Where a financial instrument includes both a drawn and an undrawn component, and the Bank cannot
identify the ECL on the loan commitment component separately from those on the drawn component: the
Bank presents a combined loss allowance for both components. The combined amount is presented as a
deduction from the gross carrying amount of the drawn component. Any excess of the loss allowance over
the gross amount of the drawn component is presented as a provision; and
For debt instruments measured at FVOCI: no loss allowance is recognised in the statement of financial
position because the carrying amount of these assets is their fair value. However, the loss allowance shall
be disclosed and is recognised in the fair value reserve.
v) Write-off
Loans and debt securities shall be written off (either partially or in full) when there is no reasonable

BANK OF ABYSSINIA
expectation of recovering the amount in its entirety or a portion thereof. This is generally the case when
the Bank determines that the borrower does not have assets or sources of income that could generate
sufficient cash flows to repay the amounts subject to the write-off. This assessment shall be carried out at
the individual asset level.
Recoveries of amounts previously written off shall be included in ‘impairment losses on financial instruments’
in the statement of profit or loss and OCI.
Financial assets that are written off could still be subject to enforcement activities in order to comply with
the Bank’s procedures for recovery of amounts due.
vi) Non-integral financial guarantee contracts

The Bank shall assess whether a financial guarantee contract held is an integral element of a financial asset
that is accounted for as a component of that instrument or is a contract that is accounted for separately.
Where the Bank determines that the guarantee is an integral element of the financial asset, then any
premium payable in connection with the initial recognition of the financial asset shall be treated as a
transaction cost of acquiring it. The Bank shall consider the effect of the protection when measuring the
fair value of the debt instrument and when measuring ECL.
Where the Bank determines that the guarantee is not an integral element of the debt instrument, then it
shall recognise an asset representing any prepayment of guarantee premium and a right to compensation
for credit losses.
d. Derecognition
i) Financial assets
The Bank shall derecognise a financial asset when:
The contractual right to the cash flows from the financial asset expires (see also (1.4)), or
It transfers the rights to receive the contractual cash flows in a transaction in which substantially all of
the risks and rewards of ownership of the financial asset are transferred; or
Bank neither transfers nor retains substantially all of the risks and rewards of ownership and it does
not retain control of the financial asset. On derecognition of a financial asset, the difference between the
carrying amount of the asset (or the carrying amount allocated to the portion of the asset derecognised)
and the sum of (i) the consideration received (including any new asset obtained less any new liability
assumed) and (ii) any cumulative gain or loss that had been recognised in OCI shall be recognised in profit
or loss.
Any cumulative gain/loss recognised in OCI in respect of equity investment securities designated as at FVOCI
shall not be recognised in profit or loss on derecognition of such securities. Any interest in transferred
financial assets that qualify for derecognition that is created or retained by the Bank shall be recognised as
a separate asset or liability.

The Bank shall derecognise a financial liability when its contractual obligations are discharged or cancelled,
or expire.
e. Modifications of financial assets and financial liabilities

i) Financial assets
If the terms of a financial asset are modified, then the Bank shall evaluate whether the cash flows of the
modified asset are substantially different. If the cash flows are substantially different, then the
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BANK OF ABYSSINIA
contractual rights to cash flows from the original financial asset shall be deemed to have expired. In
this case, the original financial asset shall be derecognised (see (1.3)) and a new financial asset shall be
recognised at fair value plus any eligible transaction costs. Any fees received as part of the modification
shall be accounted for as follows:
Fees that are considered in determining the fair value of the new asset and fees that represent
reimbursement of eligible transaction costs shall be included in the initial measurement of the asset; and
Other fees are included in profit or loss as part of the gain or loss on derecognition.
If cash flows are modified when the borrower is in financial difficulties, then the objective of the
modification is usually to maximise recovery of the original contractual terms rather than to originate a new
asset with substantially different terms.
If the Bank plans to modify a financial asset in a way that would result in forgiveness of cash flows, then it
shall first consider whether a portion of the asset should be written off before the modification takes place.
Where the modification of a financial asset measured at amortised cost or FVOCI does not result in
derecognition of the financial asset, then the Bank shall first recalculate the gross carrying amount of the
financial asset using the original effective interest rate of the asset and recognises the resulting adjustment
as a modification gain or loss in profit or loss. Any costs or fees incurred and fees receivedas part of the
modification adjust the gross carrying amount of the modified financial asset and shall be amortised over
the remaining term of the modified financial asset.
Where such a modification is carried out because of financial difficulties of the borrower, then the gain or
loss shall be presented together with impairment losses. In other cases, it shall be presented as interest
income calculated using the effective interest rate method.

The Bank shall derecognise a financial liability when its terms are modified and the cash flows of the
modified liability are substantially different. In this case, a new financial liability based on the modified
terms shall be recognised at fair value. The difference between the carrying amount of the financial liability
derecognised and consideration paid is recognised in profit or loss. Consideration paid shall include non-
financial assets transferred, if any, and the assumption of liabilities, including the new modified financial
liability.
Where the modification of a financial liability is not accounted for as derecognition, then the amortised cost
of the liability shall be recalculated by discounting the modified cash flows at the original effective interest
rate and the resulting gain or loss is recognised in profit or loss.Any costs and fees incurred are recognised
as an adjustment to the carrying amount of the liability and amortised over the remaining term of the
modified financial liability by re-computing the effective interest rate on the instrument.
f. Offsetting
Financial assets and financial liabilities shall be offset and the net amount presented in the statement of
financial position when, and only when, the Bank currently has a legally enforceable right to set off the
amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability
simultaneously.
Income and expenses shall be presented on a net basis only when permitted under IFRS, or for gains and
losses arising from a group of similar transactions such as in the Bank’s trading activity.

BANK OF ABYSSINIA
g. Designation at fair value through profit or loss
i) Financial assets
At initial recognition, the Bank may designate certain financial assets as at FVTPL because this designation
eliminates or significantly reduces an accounting mismatch, which would otherwise arise.

The Bank shall designate certain financial liabilities as at FVTPL in either of the following circumstances:
The liabilities are managed, evaluated and reported internally on a fair value basis; or
The designation eliminates or significantly reduces an accounting mismatch that would otherwise arise.
2.5.2. Policy applicable before 1 July 2018

a. Recognition
The Bank initially recognises loans and advances, deposits and debt securities on the date at which they are
originated. All other financial assets and liabilities (including assets designated at fair value through profit
or loss) are initially recognised on the trade date at which the Bank becomes a party to the contractual
provision of the instrument.
A financial asset or liability is initially measured at fair value plus (for an item not subsequently measured
at fair value through profit or loss) transaction costs that are directly attributable to its acquisition or issue.
Subsequent to initial recognition, financial liabilities (deposits and debt securities) are measured at their
amortized cost using the effective interest method.
b. Classification
The Bank classifies its financial assets in the following categories: financial assets at fair value through
profit or loss; loans and receivables; held-to-maturity investments; and available-for-sale financial assets.
Management determines the classification of its investments at initial recognition.
i) Financial assets at fair value through profit or loss

This category has two sub-categories: financial assets held for trading, and those designated at fair value
through profit or loss at inception. A financial asset is classified in this category if acquired principally for
the purpose of selling in the short term or if so designated by management.
Investments held for trading are those which were either acquired for generating a profit from short-term
fluctuations in price or dealer’s margin, or are securities included in a portfolio in which a pattern of short-
term profit-taking exists. Investments held for trading are subsequently re-measured at fair value based on
quoted bid prices or dealer price quotations, without any deduction for transaction costs. All related realized
and unrealized gains and losses are included in profit or loss. Interest earned whilst holding held for trading
investments is reported as interest income.
Foreign exchange forward and spot contracts are classified as held for trading. They are marked to market
and are carried at their fair value. Fair values are obtained from discounted cash flow models which are
used in the determination of the foreign exchange forward and spot contract rates. Gains and losses on
foreign exchange forward and spot contracts are included
ii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. They arise when the Bank provides money directly to a debtor with no intention
of trading the receivable. Loans and advances are initially measured at fair value plus incremental direct
transaction costs, and subsequently measured at amortized cost using the effective interest method. Loans
and receivables compose of loans and advances and cash and cash equivalents.
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BANK OF ABYSSINIA
iii) Held to maturity

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and
fixed maturities that the Bank’s management has the positive intention and ability to hold to maturity. A
sale or reclassification of more than an insignificant amount of held to maturity investments would result in
the reclassification of the entire category as available for sale and would prevent the Bank from classifying
investment securities as held to maturity for the current and the following two financial years. Held to
maturity investments includes treasury bills and bonds. They are subsequently measured at amortized cost
using the effective interest rate method.
iv) Available-for-sale
Available-for-sale financial investments are those non-derivative financial assets that are designated as
available-for-sale or are not classified as any other category of financial assets. Available-for-sale financial
assets are recognized initially at fair value plus any directly attributable transaction costs. Subsequent
to initial recognition, they are measured at fair value and changes therein are recognized in other
comprehensive income and presented in the available-for-sale fair value reserve in equity. When an
investment is derecognized, the gain or loss accumulated in equity is re-classified to profit or loss.
c. Identification and measurement of impairment of financial assets

At each reporting date the Bank assesses whether there is objective evidence that financial assets not
carried at fair value through profit or loss are impaired. Financial assets are impaired when objective
evidence demonstrates that a loss event has occurred after the initial recognition of the asset, and that the
loss event has an impact on the future cash flows on the asset than can be estimated reliably.
The Bank considers evidence of impairment at both a specific asset and collective level. All individually
significant financial assets are assessed for specific impairment. Significant assets found not to be specifically
impaired are then collectively assessed for any impairment that may have been incurred but not yet
identified. Assets that are not individually significant are collectively assessed for impairment by grouping
together financial assets with similar risk characteristics.
Objective evidence that financial assets (including equity securities) are impaired can include default or
delinquency by a borrower, restructuring of a loan or advance by the Bank on terms that the Bank would
otherwise not consider, indications that a borrower or issuer will enter bankruptcy, the disappearance of
an active market for a security, or other observable data relating to a group of assets such as adverse
changes in the payment status of borrowers or issuers in the group, or economic conditions that correlate
with defaults in the Bank.
In assessing collective impairment the Bank uses historical trends of the probability of default, timing of
recoveries and the amount of loss incurred, adjusted for management’s judgment as to whether current
economic and credit conditions are such that the actual losses are likely to be greater or less than suggested
by historical trends. Default rate, loss rates and the expected timing of future recoveries are regularly
benchmarked against actual outcomes to ensure that they remain appropriate.
Impairment losses on assets carried at amortized cost are measured as the difference between the carrying
amount of the financial assets and the present value of estimated cash flows discounted at the assets’
original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account
against loans and receivables or held-to-maturity investment securities. Interest on the impaired asset
continues to be recognised through the unwinding of the discount.
Impairment losses on available-for-sale securities are recognised by reclassifying the losses accumulated in
the fair value reserve in equity to profit or loss. The cumulative loss that is reclassified from equity to profit
or loss is the difference between the acquisition cost, net of any principal repayment and amortisation, and
the current fair value, less any impairment loss recognised previously in profit or loss.

BANK OF ABYSSINIA
When a subsequent event causes the amount of impairment loss to decrease, the impairment loss is
reversed through profit or loss.
d. De-recognition
The Bank derecognizes a financial asset when the contractual rights to the cash flows from the financial
asset expire, or when it transfers the rights to receive the contractual cash flows on the financial asset
in a transaction in which substantially all the risks and rewards of ownership of the financial asset are
transferred. Any interest in transferred financial assets that is created or retained by the Bank is recognized
as a separate asset or liability.
The Bank derecognizes a financial liability when its contractual obligations are discharged or cancelled or
expire. On derecognition of a financial asset, the difference between the carrying amount of the asset and
the sum of (i) the consideration received and (ii) any cumulative gain or loss that had been recognised in
other comprehensive income is recognised in profit or loss.
The Bank enters into transactions whereby it transfers assets recognized on its statement of financial
position, but retains either all or substantially all of the risks and rewards of the transferred assets or
a portion of them. If all or substantially all risks and rewards are retained, then the transferred assets
are not derecognized from the statement of financial position. Transfers of assets with retention of all or
substantially all risks and rewards include repurchase transactions.
e. Offsetting of financial assets and financial liabilities

Financial assets and financial liabilities are offset and the net amount reported in the statement of financial
position when there is a legally enforceable right to offset the recognized amounts and there is an intention
to settle on a net basis, or to realize the asset and settle the liability simultaneously.
Income and expenses are presented on a net basis only when permitted under IFRSs, or for gains and
losses arising from a group of similar transactions such as in the Bank’s trading activity.
f. Fair value of financial assets and financial liabilities

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date, in the principal, or in its absence, the
most advantageous market to which the Bank has access at that date.
g. Amortized cost measurement

The amortized cost of a financial asset or liability is the amount at which the financial asset or liability is
measured at initial recognition, minus principal repayments, plus or minus the cumulative amortization
using the effective interest method of any difference between the initial amount recognized and the maturity
amount, minus any reduction for impairment.
2.6. Islamic banking

2.6.1. Murabaha
Murabaha is an Islamic financing transaction which represents an agreement whereby the Bank buys
a commodity/good and sells it to a counterparty (customer) based on a promise received from that
counterparty to buy the commodity according to specific terms and conditions. The selling price comprises
of the cost of the commodity/goods and a pre-agreed profit margin.
It is treated as financing receivables. Financing receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market.
The profit is quantifiable and contractually determined at the commencement of the contract. Murabaha
Income (profit) is recognised as it accrues over the life of the contract using the effective profit method
(EPRM) on the principal balance outstanding.
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BANK OF ABYSSINIA
These products are carried at amortised cost less impairment.
2.7. Net interest income

2.7.1. Policy applicable from 1 July 2018
a. Effective interest rate and amortised cost
Interest income and expense are recognised in profit or loss using the effective interest method. The
‘effective interest rate’ is the rate that exactly discounts estimated future cash payments or receipts through
the expected life of the financial instrument to:
The gross carrying amount of the financial asset; or
The amortised cost of the financial liability.
When calculating the effective interest rate for financial instruments other than credit-impaired assets,
the Bank estimates future cash flows considering all contractual terms of the financial instrument, but
not expected credit losses. For credit-impaired financial assets, a credit-adjusted effective interest rate is
calculated using estimated future cash flows including expected credit losses.
The calculation of the effective interest rate includes transaction costs and fees and points paid or received
that are an integral part of the effective interest rate. Transaction costs include incremental costs that are
directly attributable to the acquisition or issue of a financial asset or financial liability
b. Amortised cost and gross carrying amount

The ‘amortised cost’ of a financial asset or financial liability is the amount at which the financial asset
or financial liability is measured on initial recognition minus the principal repayments, plus or minus the
cumulative amortisation using the effective interest method of any difference between that initial amount
and the maturity amount and, for financial assets, adjusted for any expected credit loss allowance (or
impairment allowance before 1 July 2018).
The ‘gross carrying amount of a financial asset’ is the amortised cost of a financial asset before adjusting
for any expected credit loss allowance.
c. Calculation of interest income and expense

In calculating interest income and expense, the effective interest rate is applied to the gross carrying
amount of the asset (when the asset is not credit-impaired) or to the amortised cost of the liability.
However, for financial assets that have become credit-impaired subsequent to initial recognition, interest
income is calculated by applying the effective interest rate to the amortised cost of the financial asset. If
the asset is no longer credit-impaired, then the calculation of interest income reverts to the gross basis.
For financial assets that were credit-impaired on initial recognition, interest income is calculated by applying
the credit-adjusted effective interest rate to the amortised cost of the asset. The calculation of interest
income does not revert to a gross basis, even if the credit risk of the asset improves.
d. Presentation
Interest income and expense presented in the statement of profit or loss and OCI include:
Interest on financial assets and financial liabilities measured at amortised cost calculated on an effective
interest basis;
Interest on debt instruments measured at FVOCI calculated on an effective interest basis;
The effective portion of fair value changes in qualifying hedging derivatives designated in cash flow
hedges of variability in interest cash flows, in the same period as the hedged cash flows affect interest
income/expense; and
The effective portion of fair value changes in qualifying hedging derivatives designated in fair value
hedges of interest rate risk.
Interest income and expense on all trading assets and liabilities are considered to be incidental to the
Bank’s trading operations and are presented together with all other changes in the fair value of trading
assets and liabilities in net trading income.

BANK OF ABYSSINIA
Interest income and expense on other financial assets and financial liabilities at FVTPL are presented in net
income from other financial instruments at FVTPL.
2.7.2. Policy applicable before 1 July 2018
Interest income and expense on available-for-sale assets and financial assets or liabilities held at amortised
cost was recognised in profit or loss using the effective interest method.
When calculating the effective interest rate, the Bank estimated the cash flows considering all contractual
terms of the financial instrument but did not consider future credit losses. The calculation included all fees
and points paid or received, between the parties to the contract that were an integral part of the effective
interest rate, transaction costs and all other discounts and premiums. Transaction costs were incremental
costs that were directly attributable to the acquisitio, issue or disposal of a financial asset or liability.
Once a financial asset or a group of similar financial assets had been written down as a result of an
impairment loss, interest income was recognised using the rate of interest used to discount the future cash
flows for the purpose of measuring the impairment loss.
Interest income and expense on all trading assets and liabilities were considered to be incidental to the
Bank’s trading operations are presented in net interest income.
2.8 Cash and cash equivalents

Cash and cash equivalents’ include notes and coins on hand, unrestricted balances held with central Banks
and highly liquid financial assets with original maturities of three months or less from the date of acquisition
that are subject to an insignificant risk of changes in their fair value, and areused by the Bank in the
management of its short-term commitments.
Cash and cash equivalents are carried at amortised cost in the statement of financial position.
2.9 Net trading income

Net trading income’ comprises gains less losses related to trading assets and liabilities, and includes all fair
value changes, interest, dividends and foreign exchange differences.
2.10 Property, plant and Equipment

Property, plant and equipment is stated at cost, net of accumulated depreciation and accumulated impairment
losses, if any. Such cost includes the cost of replacing part of the property, plant and equipment if the recognition
criteria are met. When significant parts of property, plant and equipment are required to be replaced at
intervals, the Bank recognises such parts as individual assets with specific useful lives and depreciates
them accordingly. All other repair and maintenance costs are recognised in income statement as incurred.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to
the group and the cost of the item can be measured reliably. The carrying amount of the replaced part
is derecognised. Depreciation is calculated using the straight-line method to allocate their cost to their
residual values over their estimated useful lives, as follows:
Asset class Depreciation rate (% or years)

Useful life (years) Residual Value
Building 50 5%
Motor Vehicle 10 5%
Computer and Related items 7 1%
Intangible - Software 6 0%
Furniture and Fittings: 10 1%
Medium lived furniture and fittings 10 1%
Long lived furniture and fittings 20 1%
Equipment:
Short lived Equipment 5 1%
Medium lived Equipment 10 1%
Lift and roofing 15 1%
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BANK OF ABYSSINIA
The Bank commences depreciation when the asset is available for use. Land is not depreciated. Capital
work-in-progress is not depreciated as these assets are not yet available for use. They are disclosed when
reclassified during the year.
An item of property, plant and equipment and any significant part initially recognised is derecognised upon
disposal or when no future economic benefits are expected from its use disposal. Any gain or loss arising on
derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying
amount of the asset) is included in income statement when the asset is derecognised.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed
at each financial year end and adjusted prospectively, if appropriate.
2.11 Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition,
intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses,
if any. Internally generated intangibles, excluding capitalised development costs, are not capitalised and
the related expenditure is reflected in income statement in the period in which the expenditure is incurred .
The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with
finite lives are amortised over the useful economic life. The amortisation period and the amortisation
method for an intangible asset with a finite useful life are reviewed at least at each financial year-
end. Changes in the expected useful life, or the expected pattern of consumption of future economic
benefits embodied in the asset, are accounted for by changing the amortisation period or methodology,
as appropriate, which are then treated as changes in accounting estimates. The amortisation expenses
on intangible assets with finite lives is presented as a separate line item in the income statement.
Amortisation is calculated using the straight–line method to write down the cost of intangible assets to their
residual values over their estimated useful lives,which is 6 years.
2.12 Investment property

Property that is held for long-term rental yields or for capital appreciation or both, are classified as
investment properties.
Recognition of investment properties takes place only when it is probable that the future economic benefits
that are associated with the investment property will flow to the Bank and the cost can be reliably measured.
This is usually when all risks are transferred.
Investment properties are measured initially at cost, including transaction costs. The Bank has opted to
subsequently carry investment property at cost and disclose fair value. Fair value is based on comparative
market prices, adjusted if necessary, for any difference in the nature, location or condition of the specific
asset. If this information is not available, the Bank uses alternative valuation methods, such as recent prices
on less active markets or discounted cash flow projections. Valuations are performed as of the reporting
date by professional valuers who hold recognised and relevant professional qualifications and have recent
experience in the location and category of the investment property being valued. These valuations form the
basis for the carrying amounts in the financial statements.
The fair value of investment property reflects, the near current market conditions.

BANK OF ABYSSINIA
The fair value of investment property does not reflect future capital expenditure that will improve or enhance
the property and does not reflect the related future benefits from this future expenditure other than those a
rational market participant would take into account when determining the value of the property.
Subsequent expenditure is capitalised to the asset’s carrying amount only when it is probable that future
economic benefits associated with the expenditure will flow to the Bank and the cost of the item can be
measured reliably. All other repairs and maintenance costs are expensed when incurred. When part of an
investment property is replaced, the carrying amount of the replaced part is derecognised.
Investment properties are derecognised when they have been disposed. Where the Bank disposes of a
property at fair value in an arm’s length transaction, the carrying value immediately prior to the sale is
adjusted to the transaction price, and the adjustment is recorded in the statement of changes in net assets
available for benefit.
2.13 Non-current assets (or disposal groups) held for sale and discontinued operations
Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be
recovered principally through a sale transaction rather than through continuing use and a sale is considered
highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell,
except for assets such as deferred tax assets, assets arising from employee benefits, financial assets and
investment property that are carried at fair value and contractual rights under insurance contracts, which
are specifically exempt from this requirement.
An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to
fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell
of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognised.
A gain or loss not previously recognised by the date of the sale of the non-current asset (or disposal group)
is recognised at the date of derecognition.
Non-current assets (including those that are part of a disposal group) are not depreciated or amortised
while they are classified as held for sale. Interest and other expenses attributable to the liabilities of a
disposal group classified as held for sale continue to be recognised.
Non-current assets classified as held for sale and the assets of a disposal group classified as held for
sale are presented separately from the other assets in the balance sheet. The liabilities of a disposal
group classified as held for sale are presented separately from other liabilities in the balance sheet.
A discontinued operation is a component of the entity that has been disposed of or is classified as held
for sale and that represents a separate major line of business or geographical area of operations, is part
of a single co-ordinated plan to dispose of such a line of business or area of operations, or is a subsidiary
acquired exclusively with a view to resale. The results of discontinued operations are presented separately
in the statement of profit or loss.
2.14 Impairment of non-financial assets

The Bank assesses, at each reporting date, whether there is an indication that an asset may be impaired.
If any indication exists, or when annual impairment testing for an asset is required, the Bank estimates the
asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating
unit’s (CGU) fair value less costs of disposal and its value in use.
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BANK OF ABYSSINIA
Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are
largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU
exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the
asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no
such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated
by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.
The Bank bases its impairment calculation on detailed budgets and forecast calculations, which are prepared
separately for each of the Bank’s CGUs to which the individual assets are allocated. These budgets and
forecast calculations generally cover a period of five years. For longer periods, a long-term growth rate is
calculated and applied to project future cash flows after the fifth year.
For assets excluding goodwill, an assessment is made at each reporting date to determine whether there
is an indication that previously recognised impairment losses no longer exist or have decreased. If such
indication exists, the Bank estimates the asset’s or CGU’s recoverable amount. A previously recognised
impairment loss is reversed only if there has been a change in the assumptions used to determine the
asset’s recoverable amount since the last impairment loss was recognised. The reversal is limited so that
the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount
that would have been determined, net of depreciation, had no impairment loss been recognised for the
asset in prior years. Such reversal is recognised in the income statement.
2.15 Other assets

Other assets are generally defined as claims held against other entities for the future receipt of money. The
other assets in the Bank’s financial statements include the following:
(a) Prepayment
Prepayments are payments made in advance for services to be enjoyed in future. The amount is initially
capitalized in the reporting period in which the payment is made and subsequently amortised over the
period in which the service is to be enjoyed.
(b) Other receivables

Other receivables are recognised upon the occurrence of event or transaction as they arise and cancelled
when payment is received.
The Bank’s other receivables are rent receivables and other receivables from debtors.
2.16 Fair value measurement

The Bank measures financial instruments classified as available-for-sale at fair value at each statement
of financial position date. Fair value related disclosures for financial instruments and non-financial assets
that are measured at fair value or where fair values are disclosed are, summarised in the following notes:
• Disclosures for valuation methods, significant estimates and assumptions Notes 3 and Note 4.7.1
• Quantitative disclosures of fair value measurement hierarchy Note 4.7.2
• Financial instruments (including those carried at amortised cost) Note 4.7.3
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The fair value measurement is based
on the presumption that the transaction to sell the asset or transfer the liability takes place either:

BANK OF ABYSSINIA
• In the principal market for the asset or liability, or
• In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible to by the Bank.
The fair value of an asset or a liability is measured using the assumptions that market participants would
use when pricing the asset or liability, assuming that market participants act in their economic best interest.
The Bank uses valuation techniques that are appropriate in the circumstances and for which sufficient data
are available to measure fair value, maximising the use of relevant observable inputs and minimising the
use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are
categorised within the fair value hierarchy, described as follows, based on the lowest level input that is
significant to the fair value measurement as a whole:
• Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
• Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value
measurement is directly or indirectly observable.
• Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value
measurement is unobservable.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Bank
determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorisation
(based on the lowest level input that is significant to the fair value measurement as a whole) at the end of
each reporting period.
The Bank’s management determines the policies and procedures for both recurring fair value measurement,
such as available-for-sale financial assets.
For the purpose of fair value disclosures, the Bank has determined classes of assets and liabilities on the
basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy
as explained above.
2.17 Employee benefits

The Bank operates various post-employment schemes, including both defined benefit and defined
contribution pension plans and post employment benefits.
(a) Defined contribution plan

The Bank operates two defined contribution plans;
i) pension scheme in line with the provisions of Ethiopian pension of private organisation employees
proclamation 715/2011. Funding under the scheme is 7% and 11% by employees and the Bank
respectively;
ii) provident fund contribution, funding under this scheme is 6% and 12% by employees and the Bank
respectively; based on the employees’ salary. Employer’s contributions to this scheme are charged to
profit or loss and other comprehensive income in the period in which they relate.
(b) Defined benefit plan

The liability or asset recognised in the balance sheet in respect of defined benefit pension plans is the
present value of the defined benefit obligation at the end of the reporting period less the fair value of plan
assets. The defined benefit obligation is calculated annually by independent actuaries using the projected
unit credit method.
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BANK OF ABYSSINIA
The liability recognised in the statement of financial position in respect of defined benefit pension
plans is the present value of the defined benefit obligation at the end of the reporting period less
the fair value of plan assets. The defined benefit obligation is calculated annually by independent
actuaries using the projected unit credit method. The present value of the defined benefit obligation
is determined by discounting the estimated future cash outflows using interest rates of high-
quality corporate bonds that are denominated in the currency in which the benefits will be paid,
and that have terms to maturity approximating to the terms of the related pension obligation.
The current service cost of the defined benefit plan, recognised in the income statement in employee
benefit expense, except where included in the cost of an asset, reflects the increase in the defined benefit
obligation resulting from employee service in the current year, benefit changes curtailments and settlements.
Past-service costs are recognised immediately in income.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions
are charged or credited to equity in other comprehensive income in the period in which they arise.
(c ) Termination benefits
Termination benefits are payable to bank employees and executive directors when employment is terminated
by the Bank before the normal retirement date, or whenever an employee accepts voluntary redundancy in
exchange for these benefits. The Bank recognises termination benefits when it is demonstrably committed
to either: terminating the employment of current employees according to a detailed formal plan without
possibility of withdrawal; or providing termination benefits as a result of an offer made to encourage
voluntary redundancy.
(d ) Profit-sharing and bonus plans

The Banks recognises a liability and an expense for bonuses and profit-sharing based on a formula that
takes into consideration the profit attributable to the company’s shareholders after certain adjustments.
The Bank recognises a provision where contractually obliged or where there is a past practice that has
created a constructive obligation.
2.18 Provisions
Provisions are recognised when the bank has a present obligation (legal or constructive) as a result of
a past event, it is probable that an outflow of resources embodying economic benefits will be required
to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the
Bank expects some or all of a provision to be reimbursed, for example, under an insurance contract,
the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually
certain. The expense relating to a provision is presented in income statement net of any reimbursement.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate
that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in
the provision due to the passage of time is recognised as other operating expenses.
2.19 Share capital

Incremental costs directly attributable to the issue of new shares or options or to the acquisition of a
business are shown in equity as a deduction, net of tax, from the proceeds.
2.20 Earnings per share

The Bank presents basic earnings per share for its ordinary shares. Basic earnings per share are calculated

by dividing the profit or loss attributable to ordinary shareholders of the Bank by the weighted average
BANKof OF
number ABYSSINIA
shares outstanding during the period.
2.21 Leases
The determination of whether an arrangement is a lease, or contains a lease, is based on the substance of
the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on
the use of a specific asset or assets or whether the arrangement conveys a right to use the asset.
Bank as a lessee
Leases that do not transfer to the Bank substantially all of the risks and benefits incidental to ownership
of the leased items are operating leases. Operating lease payments are recognised as an expense in the
income statement on a straight-line basis over the lease term. Contingent rental payable is recognised as
an expense in the period in which they it is incurred.
Bank as a lessor
Leases where the Bank does not transfer substantially all of the risk and benefits of ownership of the asset
are classified as operating leases. Rental income is recorded as earned based on the contractual terms of
the lease in Other operating income. Initial direct costs incurred in negotiating operating leases are added
to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental
income. Contingent rents are recognised as revenue in the period in which they are earned.
2.22 Income taxation

(a) Current income tax
The income tax expense or credit for the period is the tax payable on the current period’s taxable
income based on the applicable income tax rate for each jurisdiction adjusted by changes in
deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted
at the end of the reporting period in Ethiopia. Management periodically evaluates positions taken in
tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It
establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
(b) Deferred tax

Deferred tax is recognised on temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the financial statements. However, deferred tax liabilities
are not recognised if they arise from the initial recognition of goodwill; deferred tax is not accounted
for if it arises from initial recognition of an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither accounting nor taxable profit or loss.
Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted by
the balance sheet date and are expected to apply when the related deferred tax asset is realised or the
deferred tax liability is settled.
Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be
available against which the temporary differences can be utilised.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax
assets against current tax liabilities and when the deferred taxes assets and liabilities relate to income taxes
levied by the same taxation authority on either the same taxable entity or different taxable entities where
there is an intention to settle the balances on a net basis.
Deferred tax assets and liabilities are only offset when they arise in the same tax reporting group and where
there is both the legal right and the intention to settle on a net basis or to realise the asset and settle the
liability simultaneously.
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BANK OF ABYSSINIA
3. Significant accounting judgements, estimates and assumptions

The preparation of the Bank’s financial statements requires management to make judgements,
estimates and assumptions that affect the reported amount of revenues, expenses, assets and
liabilities, and the accompanying disclosures, as well as the disclosure of contingent liabilities.
Uncertainty about these assumptions and estimates could result in outcomes that require a
material adjustment to the carrying amount of assets or liabilities affected in future periods.
Other disclosures relating to the Bank’s exposure to risks and uncertainties includes:
Capital management Note 4.6

Financial risk management and policies Note 4.1
Sensitivity analyses disclosures Note 4.5.2
3.1 Judgements
In the process of applying the Bank’s accounting policies, management has made the following judgements,
which have the most significant effect on the amounts recognised in the financial statements:
Operating lease commitments - Bank as lessee

The Bank has entered into commercial property leases. The Bank has determined, based on an evaluation
of the terms and conditions of the arrangements, such as the lease term not constituting a substantial
portion of the economic life of the commercial property, that it does not retain all the significant risks and
rewards of ownership of these properties and accounts for the contracts as operating leases.
3.2 Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation at the reporting date, that
have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial year, are described below. The Bank based its assumptions and estimates on
parameters available when the financial statements were prepared. Existing circumstances and assumptions
about future developments, however, may change due to market changes or circumstances beyond the
control of the Bank. Such changes are reflected in the assumptions when they occur.
Defined benefit plans

The cost of the defined benefit pension plan, long service awards, gratuity scheme and post-employment
medical benefits and the present value of these defined benefit obligations are determined using actuarial
valuations. An actuarial valuation involves making various assumptions that may differ from actual
developments in the future. These include the determination of the discount rate, future salary increases,
mortality rates and future pension increases. Due to the complexities involved in the valuation and its
long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All
assumptions are reviewed at each reporting date.
Depreciation and carrying value of property, plant and equipment

The estimation of the useful lives of assets is based on management’s judgement. Any material adjustment
to the estimated useful lives of items of property and equipment will have an impact on the carrying value
of these items.
Impairment of non-financial assets

Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable
amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less
costs of disposal calculation is based on available data from binding sales transactions, conducted at arm’s
length, for similar assets or observable market prices less incremental costs for disposing of the asset. The
value in use calculation is based on a DCF model. The cash flows are derived from the budget for the next
five years and do not include restructuring activities that the Bank is not yet

BANK OF ABYSSINIA
committed to or significant future investments that will enhance the asset’s performance of the CGU being
tested. The recoverable amount is sensitive to the discount rate used for the discounted cash flow model as
well as the expected future cash-inflows and the growth rate used for extrapolation purposes.
Taxes
Uncertainties exist with respect to the interpretation of complex tax regulations, changes in tax
laws, and the amount and timing of future taxable income. Given the wide range of international
business relationships and the long-term nature and complexity of existing contractual agreements,
differences arising between the actual results and the assumptions made, or future changes to such
assumptions, could necessitate future adjustments to tax income and expense already recorded. The
amount of such provisions is based on various factors, such as experience of previous tax audits and
differing interpretations of tax regulations by the taxable entity and the responsible tax authority.
Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable profit
will be available against which the losses can be utilised. Significant management judgement is required to
determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the
level of future taxable profits together with future tax planning strategies.
Development cost
The Bank capitalises development costs for a project in accordance with the accounting policy.
Initial capitalisation of costs is based on management’s judgement that technological and economic
feasibility is confirmed, usually when a product development project has reached a defined milestone
according to an established project management model. In determining the amounts to be capitalised,
management makes assumptions regarding the expected future cash generation of the project,
discount rates to be applied and the expected period of benefits. The development costs that
were capitalised by the Bank relates to those arising from the development of computer software.
33
BANK OF ABYSSINIA
4 Financial risk management
4.1 Introduction
Risk is inherent in the Bank’s activities, but is managed through a process of ongoing identification,
measurement and monitoring, subject to risk limits and other controls. This process of risk management is
critical to the Bank’s continuing profitability and each individual within the Bank is accountable for the risk
exposures relating to his or her responsibilities. The Bank is exposed to credit risk, liquidity risk and market
risk. It is also subject to country risk and various operating risks.
The independent risk control process does not include business risks such as changes in the environment,
technology and industry. The Bank’s policy is to monitor those business risks through the Bank’s strategic
planning process.
4.1.1 Risk management structure

The Asset-Liability Management Committee, is responsible for the overall risk management approach and
for approving the risk management strategies and principles. It also has the responsibility to monitor the
overall risk process within the Bank.
The Asset-Liability Management Committee has the overall responsibility for the development of the risk
strategy and implementing principles, frameworks, policies and limits. It is also responsible for managing
risk decisions and monitoring risk levels and reports on a monthly basis to the Board risk committee.
The Credit Risk Management Committee is responsible for implementing and maintaining risk related
procedures to ensure an independent control process is maintained. The unit works closely with the
Management Risk Committee to ensure that procedures are compliant with the overall framework.
The Risk Management Unit is responsible for monitoring compliance with risk principles, policies and
limits across the Bank. It carries out an assessment of risk on an ad hoc basis to monitor the Bank’s
independent control of risks, including monitoring the risk of exposures against limits and the assessment
of risks of new products and structured transactions. This unit also ensures the complete capture of the
risks in risk measurement and reporting systems. Exceptions are reported, where necessary, to the Risk
Management Committee, and further to the Board Risk Committee and the relevant actions are taken to
address exceptions and any areas of weakness.
Bank Treasury operation is responsible for managing the Bank’s financial assets, financial liabilities and the
overall financial structure. It is also primarily responsible for the funding and liquidity risks of the Bank.
The Bank’s policy is that risk management processes throughout the Bank are audited annually by the
Internal Audit function, which examines both the adequacy of the procedures and the Bank’s compliance
with the procedures. Internal Audit Function discusses the results of all assessments with management,
and reports its findings and recommendations to the Board Audit Committee.
4.1.2 Risk measurement and reporting systems

The Bank’s risks are measured using a method that reflects both the expected loss likely to arise in normal
circumstances and unexpected losses, which are an estimate of the ultimate actual loss based on statistical
models. The models make use of probabilities derived from historical experience, adjusted to reflect the
economic environment. The Bank also runs worst-case scenarios that would arise in the event that extreme
events which are unlikely to occur do, in fact, occur.
Monitoring and controlling risks is primarily performed based on limits established by the Bank. These
limits reflect the business strategy and market environment of the Bank as well as the level of risk that the
Bank is willing to accept, with additional emphasis on selected regions. In addition, the Bank’s policy is to
measure and monitor the overall risk bearing capacity in relation to the aggregate risk exposure across all
risk types and activities.

BANK OF ABYSSINIA
4.1.3 Risk mitigation
Risk controls and mitigants, identified and approved for the Bank, are documented for existing and new
processes and systems.
The adequacy of these mitigants is tested on a periodic basis through administration of control self-
assessment questionnaires, using an operational risk management tool which requires risk owners to
confirm the effectiveness of established controls. These are subsequently audited as part of the review
process.
4.2 Financial instruments by category

The Bank’s financial assets are classified into the following measurement categories: available-for-sale and
loans and receivables and the financial liabilities are classified into other liabilities at amortised cost.
Financial instruments are classified in the statement of financial position in accordance with their legal form
and substance.
The Bank’s classification of its financial assets is summarised in the table below:
Available- Loans and
Notes Total
For-Sale receivables
30 June 2019 Birr'000 Birr'000 Birr'000
Cash and cash equivalents 17 - 4,472,202 4,472,202

Investement securities; 19 -
- Loans and receivables - 7,564,283 7,564,283
- Available for sale 271,348 - 271,348
Loans and advances to customers 18 - 23,421,247 23,421,247
Other assets 20 - 1,402,055 1,402,055
Total financial assets 271,348.00 36,859,787 37,131,135
Available- Loans and
Notes Total
For-Sale receivables
Cash and cash equivalents 17 - 4,491,584 4,491,584

Investement securities; 19 -
- Loans and receivables - 6,314,266 6,314,266
- Available for sale 90,860 - 90,860
Loans and advances to customers 18 - 17,780,964 17,780,964
Other assets 19 - 1,343,463 1,343,463
Total financial assets 90,860 29,930,277 30,021,137
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BANK OF ABYSSINIA
4.3.Credit risk
Credit risk is the risk of financial loss to the Bank if a customer or counterparty to a financial instrument fails
to meet its contractual obligations, and arises principally from the Bank’s loans and advances to customers
and other banks and other financial assets.
Exposure to credit risk is managed through periodic analysis of the ability of borrowers and potential
borrowers to determine their capacity to meet principal and interest thereon, and restructuring such limits
as appropriate. Exposure to credit risk is also mitigated, in part, by obtaining collateral, commercial and
personal guarantees.
The Bank structures the levels of credit risk it undertakes by placing limits on the amount of risk accepted
in relation to one borrower, or groups of borrowers, and to term of the financial instrument and economic
sectors.
The National Bank of Ethiopia (NBE) sets credit risk limit for a single borrower, one related party and
all related parties to not exceed 25%, 15% and 35% of Bank’s total capital amount as of the reporting
quarterly period respectively.
Credit management is conducted as per the risk management policy and guideline approved by the board
of directors and the Risk Management Committees. Such policies are reviewed and modified periodically
based on changes and expectations of the markets where the Bank operates, regulations, and other factors.
4.3.1.Credit quality analysis

The following table sets out information about the credit quality of financial assets measured at amortised
cost, FVOCI debt investments (2019) and available-for-sale debt assets (2018). Unless specifically indicated,
for financial assets, the amounts in the table represent gross carrying amounts.
The loss allowance for loans and advances to customers also includes the loss allowances for loan com-
mitments and financial guarantee contracts.
Explanation of the terms ‘Stage 1’, ‘Stage 2’ and ‘Stage 3’ is included in Note 2.5.1. (c), (1)
2019 2018
In millions of ETB Stage 1 Stage 2 Stage 3 Total Total
Loans and advances to customers at amortised cost
Stage 1 – Pass 21,763,932 - - 21,763,932 17,427,028

Stage 2 – Special mention - 819,424 - 819,424 329,383
Stage 3 - Non performing - - 826,238 826,238 234,578
Total gross exposure 21,763,932 819,424 826,238 23,409,593 17,990,989
Loss allowance (146,897) (12,837) (154,025) (313,758) (210,026)
Net carrying amount 21,617,035 806,587 672,213 23,095,835 17,780,963
In millions of ETB 2019

Other financial assets (debt instruments) Gross exposure Loss allowance Net carrying
amount
Cash and balances with banks 12 Month ECL 2,238,206 (112) 2,238,094
Investment securities (debt instruments) 12 Month ECL 7,966,917 (372) 7,966,519
Other receivables and financial assets Lifetime ECL 64,733 (29,253) 63,741
Totals - 10,269,857 (29,737) 10,268,354
In millions of ETB 2018

Other financial assets (debt instruments) Gross exposure Loss allowance Net carrying amount
Cash and cash equivalents - 4,491,584 - 4,491,584

Investment securities (debt instruments) - 6,314,266 - 6,314,266
Other receivables and financial assets - 1,375,989 (32,525) 1,343,464
Totals - 12,181,839 (32,525) 12,149,314

BANK OF ABYSSINIA
4.3.2 Collateral held
The Bank holds collateral against certain of its credit exposures. The following table sets out the princi-
pal types of collateral held against different types of financial assets.
Secured
against real Machinery Vehicles Others
estate
30 June 2019 Birr’000 Birr’000 Birr’000 Birr’000
Domestic trade and services 24,004,184 203,551 333,901 682,389

Import 2,409,011 59,827 29,839 119,147
Construction 3,968,373 51,182 88,457 8,984
Transport 465,075 54,363 1,052,869 3,550
Industry 3,256,725 8,179 675 66,733
Export 3,577,336 47,616 65,962 1,844,446
Agriculture 400,760 12,936
Consumer or personal 751,240 4,189 22,313 366,629
38,832,703 428,907 1,606,952 3,091,879
Secured
against real Machinery Vehicles Others
estate
30 June 2018 Birr’000 Birr’000 Birr’000 Birr’000
Domestic trade and services 12,913,279 309,832 373,889 1,081,156

Import 3,067,425 66,011 40,996 513,168
Construction 4,130,916 234,961 109,814 219,747
Transport 718,220 40,756 1,161,936 17,631
Industry 3,245,497 25,972 7,433 633,543
Export 4,901,655 27,000 63,887 3,626,162
Agriculture 516,061 11,970 41,027
Consumer or personal 241,754 1,150 26,463 518,570
29,734,806 705,682 1,796,388 6,651,004
i) Loans and advances to corporate customers

The general creditworthiness of a corporate customer tends to be the most relevant indicator of credit
quality of a loan extended to it. However, collateral provides additional security and the Bank gener-
ally requests that corporate borrowers provide it. The Bank may take collateral in the form of a first
charge over real estate, floating charges over all corporate assets and other liens and guarantees.
Because of the Bank’s focus on corporate customers’ creditworthiness, the Bank does not routinely
update the valuation of collateral held against all loans to corporate customers. Valuation of collateral
is updated when the loan is put on a watch list and the loan is monitored more closely. For credit-
impaired loans, the Bank obtains appraisals of collateral because it provides input into determining
the management credit risk actions.
ii) Investment securities designated as at FVTPL
At 30 June 2019, the Bank had no exposure to credit risk of the investment securities designated as
at FVTPL
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BANK OF ABYSSINIA
4.3.3. Amounts arising from ECL
i) Inputs, assumptions and techniques used for estimating impairment

See accounting policy in Note 2.5.1.(c)
ii) Significant increase in credit risk

When determining whether the risk of default on a financial instrument has increased significantly since
initial recognition, the Bank considers reasonable and supportable information that is relevant and available
without undue cost or effort. This includes both quantitative and qualitative information and analysis, based
on the Bank’s historical experience and expert credit assessment and including forward-looking information.
The objective of the assessment is to identify whether a significant increase in credit risk has occurred
for an exposure by comparing:
the remaining lifetime probability of default (PD) as at the reporting date; with
the remaining lifetime PD for this point in time that was estimated at the time of initial recognition
of the exposure (adjusted where relevant for changes in prepayment expectations).
the Bank uses three criteria for determining whether there has been a significant increase in
credit risk:
quantitative test based on movement in PD;
qualitative indicators; and
a backstop of 30 days past due,
iii) Credit risk grades
The Bank allocates each exposure to a credit risk grade based on a variety of data that is determined
to be predictive of the risk of default and applying experienced credit judgement. Credit risk grades
are defined using qualitative and quantitative factors that are indicative of risk of default. These factors
vary depending on the nature of the exposure and the type of borrower.
Credit risk grades are defined and calibrated such that the risk of default occurring increases
exponentially as the credit risk deteriorates so, for example, the difference in risk of default between
credit risk grades 1 and 2 is smaller than the difference between credit risk grades 2 and 3.Each
exposure is allocated to a credit risk grade on initial recognition based on available information about
the borrower. Exposures are subject to ongoing monitoring, which may result in an exposure being
moved to a different credit risk grade. The monitoring typically involves use of the following data;
a. Term loan exposures

Information obtained during periodic review of customer files – e.g. audited financial statements,
management accounts, budgets and projections. Examples of areas of particular focus are: gross
profit margins, financial leverage ratios, debt service coverage, compliance
Data from credit reference agencies, press articles, changes in external credit ratings
Actual and expected significant changes in the political, regulatory and technological environment
of the borrower or in its business activities
Internally collected data on customer behaviour – e.g. utilisation of credit card facilities
Affordability metrics
b. Overdraft exposures
Payment record – this includes overdue status as well as a range of variables about payment ratios
Utilisation of the granted limit
Requests for and granting of forbearance
Existing and forecast changes in business, financial and economic conditions

BANK OF ABYSSINIA
iv) Generating the term structure of PD
Credit risk grades are a primary input into the determination of the term structure of PD for exposures.
The Bank collects performance and default information about its credit risk exposures analysed by type
of product and borrower as well as by credit risk grading. The Bank employs statistical models to analyse
the data collected and generate estimates of the remaining lifetime PD of exposures and how these are
expected to change as a result of the passage of time.
v) Determining whether credit risk has increased significantly

The Bank assesses whether credit risk has increased significantly since initial recognition at each reporting
date. Determining whether an increase in credit risk is significant depends on the characteristics of the
financial instrument and the borrower. What isconsidered significant differs for different types of lending.
The credit risk may also be deemed to have increased significantly since initial recognition based on
qualitative factors linked to the Bank’s credit risk management processes that may not otherwise be fully
reflected in its quantitative analysis on a timely basis. This will be the case for exposures that meet certain
heightened risk criteria, such as placement on a watch list. Such qualitative factors are based on its expert
judgment and relevant historical experiences.
As a backstop, the Bank considers that a significant increase in credit risk occurs no later than when an
asset is more than 30 days past due. Days past due are determined by counting the number of days
since the earliest elapsed due date in respect of which full payment has not been received. Due dates are
determined without considering any grace period that might be available to the borrower.
If there is evidence that there is no longer a significant increase in credit risk relative to initial recognition,
then the loss allowance on an instrument returns to being measured as 12-month ECL. Some qualitative
indicators of an increase in credit risk, such as delinquency or forbearance, may be indicative of an increased
risk of default that persists after the indicator itself has ceased to exist. In these cases, the Bank determines
a probation period during which the financial asset is required to demonstrate good behaviour to provide
evidence that its credit risk has declined sufficiently. When contractual terms of a loan have been modified,
evidence that the criteria for recognising lifetime ECL are no longer met includes a history of up-to-date
payment performance against the modified contractual terms.
The Bank monitors the effectiveness of the criteria used to identify significant increases in credit risk by
regular reviews to confirm that:
the criteria are capable of identifying significant increases in credit risk before an exposure is in default;
the criteria do not align with the point in time when an asset becomes 30 days past due;
the average time between the identification of a significant increase in credit risk and default appears
reasonable;
exposures are not generally transferred directly from 12-month ECL measurement to credit- impaired; and
there is no unwarranted volatility in loss allowance from transfers between 12-month PD (Stage 1) and
lifetime PD (Stage 2).
vi) Definition of default

The Bank considers a financial asset to be in default when:
the borrower is unlikely to pay its credit obligations to the Bank in full, without recourse by the Bank to
actions such as realising security (if any is held);
the borrower is more than 90 days past due on any material credit obligation to the Bank.
Overdrafts are considered as being past due once the customer has breached an advised limit or been
advised of a limit smaller than the current amount outstanding; or
it is becoming probable that the borrower will restructure the asset as a result of bankruptcy due to the
borrower’s inability to pay its credit obligations.
In assessing whether a borrower is in default, the Bank considers indicators that are:
qualitative: e.g. breaches of covenant;
quantitative: e.g. overdue status and non-payment on another obligation of the same issuer to the
Bank; and
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BANK OF ABYSSINIA
based on data developed internally and obtained from external sources.
Inputs into the assessment of whether a financial instrument is in default and their significance may vary
over time to reflect changes in circumstances.

The definition of default largely aligns with that applied by the Bank for regulatory capital purposes
vii) Incorporation of forward-looking information

The Bank incorporates forward-looking information into both the assessment of whether the credit risk of
an instrument has increased significantly since its initial recognition and the measurement of ECL.
For each segment, the Bank formulates three economic scenarios: a base case, which is the median
scenario, and two less likely scenarios, one upside and one downside. For each sector, the base case is
aligned with the macroeconomic model’s information value output, a measure of the predictive power of
the model, as well as base macroeconomic projections for identified macroeconomic variables for each
sector. The upside and downside scenarios are based on a combination of a percentage error factor of
each sector model as well as simulated optimistic and pessimistic macroeconomic projections based on a
measure of historical macroeconomic volatilities.
External information considered includes economic data and forecasts published by Business Monitor
International, an external and independent macroeconomic data body. This is in addition to industry – level,
semi – annual NPL trends across statistically comparable sectors.
Periodically, the Bank carries out stress testing of more extreme shocks to calibrate its determination of the
upside and downside representative scenarios. A comprehensive review is performed at least annually on
the design of the scenarios by a panel of experts that advises the Bank’s senior management.
The Bank has identified and documented key drivers of credit risk and credit losses for each portfolio of
financial instruments and, using an analysis of historical data, has estimated relationships between macro-
economic variables and credit risk and credit losses.
The key drivers for credit risk for each of the Bank’s economic sectors is summarized below:.
Sector/Product Macroeconomic factors
GDP
INFLATION:
Agriculture and EXPENDITURE: DEBT: Government STRATIFICATION:
Consumer price EXCHANGE RATE:
Other (consumer Exports of goods domestic debt, Household
index, 2010 = ETB/USD, ave
loans) and services, USD ETBbn Spending, ETBbn
100, ave
per capita
GDP
Domestic Trade INFLATION:
EXPENDITURE:
& Services and GDP: GDP per Consumer price EXCHANGE RATE: FISCAL: Total
Imports of goods
Transport & capita, USD index, 2010 = ETB/USD, ave revenue, USDbn
and services,
Communication 100, eop
USDbn
GDP
Housing & EXPENDITURE: FISCAL: Current DEBT: Government
Construction and Exports of goods expenditure, domestic debt, - -
Industry and services, USD USDbn ETBbn
per capita
GDP GDP GDP

EXCHANGE RATE:
EXPENDITURE: EXPENDITURE: EXPENDITURE: DEBT: Total
Real effective
Export and Import Exports of goods Imports of goods Private final government debt,
exchange rate,
and services, and services, consumption, USDbn
index
ETBbn ETBbn USDbn

BANK OF ABYSSINIA
The economic scenarios used as at 30 June 2019 included the following key indicators for Ethiopia for the years
2019 to 2021
Macro-economic factor 2019 2020 2021
INFLATION: Consumer price index, 2010 = 100 317.4 349.1 384
GDP: GDP per capita, USD 836 928 1019
GDP EXPENDITURE: Exports of goods and services, USD per capita 54.9 59.8 66.6
GDP EXPENDITURE: Exports of goods and services, ETBbn 179.8 213.8 260.3
EXCHANGE RATE: ETB/USD 29.23 31.1 33.15
GDP EXPENDITURE: Imports of goods and services, USDbn 16.6 16.9 17.1
FISCAL: Current expenditure, USDbn 7.8 8.3 8.9
GDP EXPENDITURE: Imports of goods and services, ETBbn 485.3 526.5 568.4
INFLATION: Consumer price index, 2010 = 100 296.3 326 358.6
DEBT: Government domestic debt, ETBbn 642.7 752 872.3
EXCHANGE RATE: Real effective exchange rate, index 123.13 121.01 117.74
GDP EXPENDITURE: Private final consumption, USDbn 58.9 66.2 73.5
STRATIFICATION: Household Spending, ETBbn 1707.6 1926.3 2149.3
FISCAL: Total revenue, USDbn 10.5 10.9 11.4
DEBT: Total government debt, USDbn 57 65.2 75.4
Predicted relationships between the key indicators and default rates on various portfolios of financial assets have been
developed based on analysing semi – annual historical data over the past 5 years.
viii) Modified financial assets

The contractual terms of a loan may be modified for a number of reasons, including changing market
conditions, customer retention and other factors not related to a current or potential credit deterioration of
the customer. An existing loan whose terms have been modified may be derecognised and the renegotiated
loan recognised as a new loan at fair value in accordance with the accounting policy set out.
When the terms of a financial asset are modified and the modification does not result in derecognition,
the determination of whether the asset’s credit risk has increased significantly reflects comparison of: its
remaining lifetime PD at the reporting date based on the modified terms; withthe remaining lifetime PD
estimated based on data on initial recognition and the original contractual terms.
When modification results in derecognition, a new loan is recognised and allocated to Stage 1 (assuming it
is not credit-impaired at that time).
The Bank renegotiates loans to customers in financial difficulties (referred to as ‘forbearance activities’) to
maximise collection opportunities and minimise the risk of default. Under the Bank’s forbearance policy,
loan forbearance is granted on a selective basis if the debtor is currently in default on its debt or if there is
a high risk of default, there is evidence that the debtor made all reasonable efforts to pay under the original
contractual terms and the debtor is expected to be able to meet the revised terms.
The revised terms usually include extending the maturity, changing the timing of interest payments and
amending the terms of loan covenants. Both retail and corporate loans are subject to the forbearance
policy. The Bank Credit Committee regularly reviews reports on forbearance activities.
For financial assets modified as part of the Bank’s forbearance policy, the estimate of PD reflects whether
the modification has improved or restored the Bank’s ability to collect interest and principal and the Bank’s
previous experience of similar forbearance action. As part of this process, the Bank evaluates the borrower’s
payment performance against the modified contractual terms and considers various behavioural indicators.
Generally, forbearance is a qualitative indicator of a significant increase in credit risk and an expectation of
forbearance may constitute evidence that an exposure is credit-impaired. A customer needs to demonstrate
consistently good payment behaviour over a period of time before the exposure is no longer considered to
be credit-impaired/in default or the PD is considered to have decreased such that the loss allowance reverts
to being measured at an amount equal to Stage 1.
41
BANK OF ABYSSINIA
ix) Measurement of ECL
The key inputs into the measurement of ECL are the term structure of the following variables:
- probability of default (PD);
- loss given default (LGD); and

- exposure at default (EAD).
ECL for exposures in Stage 1 is calculated by multiplying the 12-month PD by LGD and EAD. Lifetime ECL
is calculated by multiplying the lifetime PD by LGD and EAD.
The methodology of estimating PDs is discussed above under the heading ‘Generating the term structure of
PD’. LGD is the magnitude of the likely loss if there is a default. The Bank estimates LGD parameters based
on the history of recovery rates of claims against defaulted counterparties. The LGD models consider the
structure, collateral, seniority of the claim, counterparty industry and recoverycosts of any collateral that is
integral to the financial asset.
EAD represents the expected exposure in the event of a default. The Bank derives the EAD from the current
exposure to the counterparty and potential changes to the current amount allowed under the contract and
arising from amortisation. The EAD of a financial asset is its gross carrying amount at the time of default. For
lending commitments, the EADs are potential future amounts that may be drawn under the contract, which
are estimated based on historical observationsand forward-looking forecasts. For financial guarantees, the
EAD represents the amount of the guaranteed exposure when the financial guarantee becomes payable.
For some financial assets, EAD is determined by modelling the range of possible exposure outcomes at
various points in time using scenario and statistical techniques.
As described above, and subject to using a maximum of a 12-month PD for Stage 1 financial assets, the
Bank measures ECL considering the risk of default over the maximum contractual period (including any
borrower’s extension options) over which it is exposed to credit risk, even if, for credit risk management
purposes, the Bank considers a longer period.
The maximum contractual period extends to the date at which the Bank has the right to require repayment
of an advance or terminate a loan commitment or guarantee.
However, for overdrafts that include both a loan and an undrawn commitment component, the Bank
measures ECL over a period longer than the maximum contractual period if the Bank’s contractual ability
to demand repayment and cancel the undrawn commitment does not limit the Bank’s exposure to credit
losses to the contractual notice period. These facilities do not have a fixed term or repayment structure and
are managed on a collective basis. The Bank can cancel them with immediate effect but this contractual
right is not enforced in the normal day-to-day management, but only when the Bank becomes aware of
an increasein credit risk at the facility level. This longer period is estimated taking into account the credit
risk management actions that the Bank expects to take, and that serve to mitigate ECL. These include a
reduction in limits, cancellation of the facility and/or turning the outstanding balance into a loan with fixed
repayment terms.
Where modelling of a parameter is carried out on a collective basis, the financial instruments are grouped
on the basis of shared risk characteristics that include:
- instrument type;
- credit risk grading;
- collateral type;
- LTV ratio for retail mortgages;
- date of initial recognition;
- remaining term to maturity;
- industry; and
- geographic location of the borrower.
The groupings are subject to regular review to ensure that exposures within a particular group remain
appropriately homogeneous.
x) Loss allowance
The following tables show reconciliations from the opening to the closing balance of the loss allowance by
class of financial instrument. Comparative amounts for 2018 represent the allowance account for credit
losses and reflect the measurement basis under IAS 39. (see note 4.3.4 for 2018 comparative)

BANK OF ABYSSINIA
2019
In millions of ETB Stage 1 Stage 2 Stage 3 Total
Loans and advances to customers at amortised cost
(on balance sheet exposures)
Balance as at 1 July 2018 182,553 4,089 23,384 210,026
Day one IFRS 9 transition adjustment (70,405) 4,340 15,720 (50,345)
Adjusted balance at 1 July 2018 112,148 8,429 39,104 159,681
Transfer to stage 1 (12 months ECL) 9,242 (3,309) (5,933) -
Transfer to stage 2 (Lifetime ECL not credit impaired) (2,557) 2,802 (246) -
Transfer to stage 3 (Lifetime ECL credit impaired) (3,729) (870) 4,598 -
Net remeasurement of loss allowance (7,320) 1,761 91,048 85,489
New financial assets originated or purchased 73,496 5,930 32,589 112,015
Financial assets derecognised (34,384) (1,907) (7,136) (43,427)
Balance as at 30 June 2019 146,896 12,837 154,024 313,758
2019
In millions of ETB Stage 1 Stage 2 Stage 3 Total
Loan commitments and financial guarantee contracts
(off balance sheet exposures)
Balance as at 1 July 2018 - - - -
Day one IFRS 9 transition adjustment 52,006 123 10 52,139
Adjusted balance at 1 July 2018 52,006 123 10 52,139
Transfer to stage 1 (12 months ECL) - - - -
Transfer to stage 2 (Lifetime ECL not credit impaired) - - - -
Transfer to stage 3 (Lifetime ECL credit impaired) - - - -
Net remeasurement of loss allowance 1,069 (10) - 1,059
New financial assets originated or purchased 2,269 558 - 2,827
Financial assets derecognised (50,597) (69) (10) (50,677)
Balance as at 30 June 2019 4,746 601 - 5,348
2019
In Birr'000 Cash and bal- Investment Other receiva- Total
ances with banks securities (debt bles and financial
instruments) assets
Other financial assets (debt instruments) - - - -
Balance as at 1 July 2018 - - - -
Day one IFRS 9 transition adjustment 119 316 29,833 30,268
Adjusted balance at 1 July 2018 119 316 2,394 2,829
Net remeasurement of loss allowance (7) 56 26,859 26,909
Balance as at 30 June 2019 112 372 29,253 29,737
The following table provides a reconciliation for 2019 between amounts shown in the above tables reconciling opening
and closing balances of loss allowance per class of financial instrument; and the ‘impairment losses on financial
instruments’ line item in the consolidated statement of profit or loss and other comprehensive income.See note 4.3.4
for 2018 comparative.
Loans and Loan

advances to commitments
customers and financial Other Total
at amortised guarantee financial charge/
In Birr'000 cost contracts assets (credit)
Net remeasurement of loss allowance 85,489.04 1,058.65 (1,325.80) 85,221.89
New financial assets originated or purchased 112,014.59 2,827.21 - 114,841.80
Financial assets derecognised (56,913.15) (50,676.68) - (107,589.83)
Amounts directly written off during the year - - - -
Recoveries of amounts previously written off - - - -
Total 140,590.48 (46,790.82) (1,325.80) 92,473.86
43
BANK OF ABYSSINIA
4.3.4 Impaired financial assets-Comparative information under IAS 39
(a) Credit quality of loans and receivables
Neither past Past due but

due nor not im- Individually
impaired paired impaired Total
30 June 2018 Birr'000 Birr'000 Birr'000 Birr'000
Domestic trade and services 5,583,331 127,891 77,031 5,788,253

Import 1,437,055 51,954 15,257 1,504,266
Construction 2,169,539 30,351 11,609 2,211,499
Transport 867,619 53,255 26,622 947,495
Industry 1,923,997 11,601 24,707 1,960,306
Export 5,018,237 23,189 77,612 5,119,038
Agriculture 130,772 30,945 - 161,717
Consumer or personal 296,478 197 1,741 298,416
Gross 17,427,028 329,383 234,579 17,990,990
Less: Impairment allowancenote (182,553) (4,089) (23,384) (210,026)
Net 17,244,475 325,294 211,195 17,780,964
(b) Loans and advances - neither past due nor impaired

The credit quality of the portfolio of loans and receivables that were neither past due nor impaired can be
assessed by reference to the customer’s ability to pay based on loss experience. Loans and receivables in
this category are short term loans past due for less than 30 (thirty) loans and medium and long term loans
past due for less than 180 (one hundred eighty) days.
30 June 2018
Birr'000
Neither past due nor impaired 17,427,028

Collective impairment (182,553)
17,244,475
(c) Loans and advances - individually impaired loans

30 June 2018
Birr'000
Substandard 56,099
Doubtful 78,695
Loss 99,784
234,579
(d) Allowance for impairment
30 June 2018
Birr'000
Specific impairment (22,257)

Collective impairment (187,769)
Total allowance for impairment (210,026)

BANK OF ABYSSINIA
Loans with renegotiated terms
Loans with renegotiated terms are defined as loans that have been restructured due to a deterioration
in the borrower’s financial position, for which the Bank has made concessions by agreeing to terms and
conditions that are more favourable for the borrower than the Bank had provided initially and that it would
not otherwise consider. A loan continues to be presented as part of loans with renegotiated terms until
maturity, early repayment or write-off.
Loans that were past due but not impaired

Loans that were ‘past due but not impaired’ are those for which contractual interest or principal payments
were past due but the Bank believed that impairment was not appropriate on the basis of the level of
security or collateral available and/or the stageof collection of amounts owed to the Bank. The amounts
disclosed exclude assets measured at FVTPL.
4.3.5. Concentrations of credit risk

The Bank monitors concentrations of credit risk by social sector. An analysis of concentrations of credit risk
at 30 June 2019 and 30 June 2018. The Bank concentrates all its financial assets in Ethiopia.
Domestic Export Housing and Others

and Trade construction
Services
Cash and cash equivalents 4,472,202

Loans and receivables 12,502,522 4,358,855 2,194,092 4,679,535
Investment securities:
- Available for sale 271,348
- Loans and receivables 7,564,283
Other assets 1,402,055
12,502,522 4,358,855 2,194,092 18,389,423
Domestic Export Housing and Others

and Trade construction
Services
Cash and cash equivalents 4,491,584

Loans and receivables 5,788,253 5,119,038 2,211,499 4,872,199
Investment securities:
- Available for sale 90,860
- Loans and receivables 6,314,266
Other assets 1,343,463
5,788,253 5,119,038 2,211,499 17,112,372
4.3.6. Offsetting financial assets and financial liabilities

The Bank does not offset financial assets against financial liabilities.
45
BANK OF ABYSSINIA
4.4. Financial assets and financial liabilities
4.4.1 Classification of financial assets and financial liabilities

The following table shows the original measurement categories and amounts in accordance with IAS 39 as
at 30 June 2018 and the new measurement categories and amounts under IFRS 9 for the Bank’s financial
assets and financial liabilities as at 1 July 2018.
Birr'000 30-Jun-18 1-Jul-18

Financial assets Original New Original Re- New carrying
classification classification carrying measurement amount under
under IAS 39 under IFRS 9 amount under IFRS 9
IAS 39
Cash and cash equivalents Loans and Amortised 4,491,584 (119) 4,491,465
receivables cost
Loans and advances to customers Loans and Amortised 17,780,963 50,345 17,831,308
receivables cost
Investment securities: Available for Available for FVOCI 9,814 (1,828) 7,986
sale sale
Investment securities: Available for Available for FVTPL 81,046 9,234 90,280
sale sale
Investment securities: Loans and Amortised 6,314,266 (316) 6,313,950
Loans and receivables receivables/ cost
Held to maturity
Other financial assets at amortised cost Loans and Amortised 1,343,464 30,131 1,373,595
receivables cost
Total financial assets - - 30,021,137 87,447 30,108,584
Financial liabilities - - - - -
Deposits from customers Amortised cost Amortised 25,794,540 - 25,794,540
cost
Other financial liabilities (including ECL Amortised cost Amortised 1,641,954 52,139 1,694,093
on loan commitments and guarantees) cost
Total financial liabilities - - 27,436,494 52,139 27,488,633
The Bank’s accounting policies on the classification of financial instruments under IFRS 9 are set out in Note
2.5. The application of these policies resulted in the reclassifications set out in the table above and explained
below.
On the adoption of IFRS 9, certain financial assets such as cash and cash equivalents, loans and advances to
customers – both interest bearing and interest free and treasury bills and bonds (NBE bills and government
bonds) were reclassified out of the loans and receivable to amortized cost. The carrying amount of those
assets wasadjusted so that their amortised cost under IFRS 9 was as if those assets were accounted for at
amortised cost from their inception.
Further equity investment securities were reclassified out available-for-sale categories to FVOCI at their
then fair values. The carrying amount of those assets was adjusted so that their amortised cost under IFRS
9 was as if those assets were accounted for at amortised cost from their inception.
On the adoption of IFRS 9, other financial assets suchaccounts receivables, uncleared effects – both
local and foreign and guarantee for overseas employment agencies were reclassified out of the loans and
receivable to amortized cost. The carrying amount of those assets was adjusted so that their amortised cost
under IFRS 9 was as if those assets were accounted for at amortised cost from their inception.

BANK OF ABYSSINIA
The following table summarises the impact of transition to IFRS 9 on the opening balance of the fair value
reserve, regulatory risk reserve and retained earnings.
In Birr'000 Impact of
adopting IFRS 9
at 1 July 2018
Fair value reserve -
Closing balance under IAS 39 (30 June 2018) -
Reclassification of investment securities (equity) measured at cost from available-for- sale to FVOCI (1,828)
Related tax 548
Adjusted opening balance under IFRS 9 (1 July 2018) (1,279)
Regulatory risk reserve (difference between IFRS and NBE provisions) -
Closing balance under IAS 39 (30 June 2018) 47,626
Recognition of expected credit losses under IFRS 9 on loans and advances to customers 50,345
(on balance sheet)
Recognition of expected credit losses under IFRS 9 on loan commitments and financial guarantee (52,139)
contracts (off balance sheet)
Adjusted opening balance under IFRS 9 (1 July 2018) 45,832
Retained earnings -
Closing balance under IAS 39 (30 June 2018) 361,647
Reclassification of investment securities (equity) measured at cost from available-for- sale to FVTPL 9,234
Recognition of expected credit losses under IFRS 9 on other financial assets such as bank balances, 29,696
receivables and investment securities
Adjusted opening balance under IFRS 9 (1 July 2018) 400,577
4.4.2 Collateral held and their financial effect

The general creditworthiness of a customer tends to be the most relevant indicator of credit quality of
a loan extended to it. However, collateral provides additional security and the Bank generally requests
that corporate borrowers provide it. Staff loans are secured to the extent of the employee’s continued
employment in the Bank.
The Bank may take collateral in the form of a first charge over real estate, liens and guarantees. The Bank
does not sell or repledge the collateral in the absence of default by the owner of the collateral. In addition
to the Bank’s focus on creditworthiness, the Bank aligns with its credit policy guide to periodically update
the validation of collaterals held against all loans to customers.
For impaired loans, the Bank obtains appraisals of collateral because the fair value of the collateral is an
input to the impairment measurement.
The fair value of the collaterals are based on the last revaluations carried out by the Bank’s in-house
engineers. The valuation technique adopted for properties is in line with the Bank’s valuation manual and
the revalued amount is similar to fair values of properties with similar size and location.
The fair value of collaterals other than properties such as share certificates, cash, NBE bills etc. as disclosed
at the carrying amount as management is of the opinion that the cost of the process of establishing the fair
value of the collateral exceeds benefits accruable from the exercise.
4.5. Liquidity risk

Liquidity risk is the risk that the Bank cannot meet its maturing obligations when they become due, at
reasonable cost and in a timely manner. Liquidity risk arises because of the possibility that the Bank might
be unable to meet its payment obligations when they fall due as a result of mismatches in the timing of the
cash flows under both normal and stress circumstances. Such scenarios could occur when funding needed
for illiquid asset positions is not available to the Bank on acceptable terms.
47
BANK OF ABYSSINIA
Liquidity risk management in the Bank is solely determined by Asset-Liability Management Committee, which
bears the overall responsibility for liquidity risk. The main objective of the Bank’s liquidity risk framework is
to maintain sufficient liquidity in order to ensure that we meet our maturing obligations.
4.5.1 Management of liquidity risk

Cash flow forecasting is performed by the finance department. The finance department monitors rolling
forecasts of liquidity requirements to ensure it has sufficient cash to meet operational needs.
The Bank has incurred indebtedness in the form of borrowings. The Bank evaluates its ability to meet its
obligations on an ongoing basis. Based on these evaluations, the Bank devises strategies to manage its
liquidity risk.
Prudent liquidity risk management implies that sufficient cash is maintained and that sufficient funding is
available to meet its liabilities when due, under both normal and stressed conditions, without incurring
unacceptable losses or risk damage to the Bank’s reputation.
4.5.2 Maturity analysis of financial liabilities

The table below analyses the Bank’s financial liabilities into relevant maturity groupings based on the
remaining period at the statement of financial position date to the contractual maturity date. The cash flows
presented are the undiscounted amounts to be settled in future.
0 - 30 days 31 - 90 days 91 - 180 days 181 - 365 days Over 1 year

30 June 2019 Birr'000 Birr'000 Birr'000 Birr'000 Birr'000
Deposits from customers 10,748,357 2,714,023 1,851,814 4,222,716 12,449,686

Debt securities issued
Borrowings
Other liabilities 1,852,040
Total financial liabilities 10,748,357 2,714,023 1,851,814 4,222,716 14,301,726


Other liabilities - - - - 1,641,954

1 July 2017 Birr'000 Birr'000 Birr'000 Birr'000 Birr'000

Other liabilities - - - - 1,505,701
4.6. Market risk

Market risk is defined as the risk of loss risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in market risk factors such as interest
rates, foreign exchange rates, equity prices, credit spreads and their volatilities. Market risk
can arise in conjunction with trading and non-trading activities of a financial institutions.
The Bank does not ordinarily engage in trading activities as there are no active markets in Ethiopia.

BANK OF ABYSSINIA
4.6.1. Management of market risk
The main objective of Market Risk Management is to manage and control market risk exposures within
acceptable parameters, while optimising the return on risk.
4.6.2.Management of market risk

Market risk is monitored by the risk management department on regularly, to identify any adverse movement
in the underlying variables.
(i) Interest rate risk

Interest rate risk is the risk that the value of a financial instrument will be affected by changes
in market interest rates. Borrowings obtained at variable rates give rise to interest rate risk.
The Bank’s exposure to the risk of changes in market interest rates relates primarily to the Bank’s obligations
and financial assets with floating interest rates. The Bank is also exposed on fixed rate financial assets and
financial liabilities. The Bank’s investment portfolio is comprised of treasury bills, loans and receivables and
cash deposits.
The table below sets out information on the exposures to fixed and variable interest instruments.
Non-interest
30 June 2019 Fixed Floating bearing Total
Birr'000 Birr'000 Birr'000 Birr'000
Assets
Cash and balances with banks 4,472,202 4,472,202
Loans and receivables 7,564,283 7,564,283
Available for sale 271,348 271,348
Total 12,307,833 - - 12,307,833
Liabilities -
Deposits from customers 31,911,443 235,005 32,146,449
Debt securities issued -
Borrowings -
Other liabilities 1,852,040 1,852,040
Total 31,911,443 - 2,087,045 33,998,489
Non-interest
30 June 2018 Fixed Floating bearing Total
Assets
Cash and balances with banks 4,491,584 - - 4,491,584
Loans and receivables 6,314,266 - - 6,314,266
Available for sale 90,860 - - 90,860
Total 10,896,710 - - 10,896,710
Liabilities
Deposits from customers 25,559,535 - 235,005 25,794,540
Other liabilities 0 - 1,641,954 1,641,954
Total 25,559,535 - 1,876,960 27,436,495
The sensitivity of the income statement is the effect of the assumed changes in saving interest rates on the profit or
loss for a year, based on the floating rate non–trading financial assets and financial liabilities held at 30 June
2019 and 30 June 2018. The total sensitivity of equity is based on the assumption that there are parallel
shifts in the yield curve.
49
BANK OF ABYSSINIA
Average "Increase Impact of Impact of

Saving interest (decrease) an increase a decrease
rate(Base in basis P/L and P/L and

point) points" equity Equity
Average cost of fund 5.28% 10%
Interest Expense 0.53% 99,539 (99,539)
Base Average saving deposit

18,837,636
Average monthly Interest Exp
82,950
Average "Increase Impact of Impact of
Saving interest (decrease) an increase a decrease
rate(Base in basis P/L and P/L and
point) points" equity Equity
Average cost of fund 4.86% 10%
Interest Expense 0.49% 68,108 (68,108)
- -
Base Average saving deposit
14,027,400
Average monthly Interest Exp
56,757
(ii) Foreign exchange risk

Foreign exchange risk is the risk that the fair value or future cash flows of a financial instrument will
fluctuate due to the changes in foreign exchange rates.
The Bank is exposed to exchange rate risks to the extent of balances and transactions denominated in a
currency other than the Ethiopian Birr. The Bank’s foreign currency bank accounts act as a natural hedge
for these transactions. Management has set up a policy to manage the Bank’s foreign exchange risk against
its functional currency.
The table below summarises the impact of increases/decreases of 10% on equity and profit
or loss arising from the Bank’s foreign denominated borrowings and cash and bank balances.
The total foreign currency denominated assets and liabilities exposed to risk as at year end was Birr 220.33
million as fcy liability (30 June 2018: Birr 55.58 million).
Foreign currency denominated balances

30 June 30 June
2019 2018
Birr'000 Birr'000
Cash and bank balances 655,119 457,105

Uncleared Effect foregine 21,492 52,938
Deposits from customers 896,942 565,623
(220,331) (55,581)

BANK OF ABYSSINIA
Sensitivity analysis for foreign exchange risk
"The sensitivity analysis for currency rate risk shows how changes in the fair value or future cash flows of
a financial instrument will fluctuate because of changes in market rates at the reporting date.
The sensitivity of the Bank's earnings to fluctuations in exchange rates is reflected by varying the exchange
rates at 10% as shown below:"
30 June 30 June 2018
2019
Birr'000 Birr'000
Impact on profit or loss (220,331) (55,581)
10% change in exchange rates (22,033) (5,558)
4.7 Capital management

The Bank’s objectives when managing capital are to comply with the capital requirements set by the
National Bank of Ethiopia, safeguard its ability to continue as a going concern, and to maintain a strong
capital base so as to maintain investor, creditor and market confidence and to sustain future development
of the business.
4.7.1. Capital adequacy ratio

The capital adequacy ratio is the quotient of the capital base of the Bank and the Bank’s risk weighted asset
base. The Bank’s capital is divided into two tiers:
- Tier 1 capital includes share capital, retained earnings and deductions for intangible assets, and
other regulatory adjustments relating to items that are included in equity but are treated differently for
capital adequacy purposes. Regulatory risk reserve is not recognised as a component of qualifying capital .
However, any balance, should be netted off against the total risk weighted assets (RWA).
- Tier 2 capital includes qualifying subordinated liabilities and certain provisions for loan losses that are
presently unidentified on an individual basis.
30 June 30 June
2019 2018
Birr'000 Birr'000
Tier 1 Capital- CET 1
Share capital 2,811,564 2,563,112
Retained earnings 490,877 361,646
Deductions:
- Intangible assets (110,175) (69,940)
- Deferred tax other than temporary differences - -
Other regulatory adjustments 1,188,626 877,443
4,380,891 3,732,260
Tier 2 Capital
Qualifying subordinated liabilities
Other liabilities
Total regulatory capital 4,380,891 3,732,260

Total risk weighted assets 29,879,702 23,889,724
Risk-weighted Capital Adequacy Ratio (CAR)
TIER 1 CAR 14.66% 15.62%
51
BANK OF ABYSSINIA
4.8 Fair value of financial assets and liabilities
IFRS 13 requires an entity to classify measured or disclosed fair values according to a hierarchy that reflects
the significance of observable inputs.
categorised within the fair value hierarchy, which comprises of three levels as described below, based on
the lowest level input that is significant to the fair value measurement as a whole.
4.8.1. Valuation models

IFRS 13 specifies a hierarchy of valuation techniques based on whether the inputs to those
valuation techniques are observable or unobservable. Observable input reflect market data
obtained from independent sources; unobservable inputs reflect the Bank’s market assumptions.
categorised within the fair value hierarchy, described as follows, based on the lowest level input that is
significant to the fair value measurement as a whole.
● Level 1: Inputs that are quoted market prices (unadjusted) in active markets for identical assets
or liabilities.
● Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset
or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices) .This category includes
instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for
identical or similar instruments in markets that are considered less than active, or other valuation technique
in which all significant inputs are directly or indirectly observable from market data.
In conclusion, this category is for valuation techniques for which the lowest level input that is significant to
the fair value measurement is directly or indirectly observable.
● Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable
inputs). This category includes all assets and liabilities for which the valuation technique includes inputs not
based on observable date and the unobservable inputs have a significant effect on the asset or liability’s
valuation. This category includes instruments that are valued based on quoted prices for similar instruments
for which significant unobservable adjustments or assumptions are required to reflect differences between
the instruments.
4.8.2. Financial instruments not measured at fair value - Fair value hierarchy
The following table summarises the carrying amounts of financial assets and liabilities at the reporting date
by the level in the fair value hierarchy into which the fair value measurement is categorised. The amounts
are based on the values recognised in the statement of financial position.
Carrying
amount Level 1 Level 2 Level 3 Total
Financial assets
Cash and balances with banks 4,472,202 4,472,202 4,472,202
Loans and receivables 7,564,283 7,564,283 7,564,283
Total 12,036,485 - - 12,036,485 12,036,485
Financial liabilities
Deposits from customers 32,146,449 32,146,449 32,146,449
Debt securities issued -
Borrowings -
Other liabilities 1,852,040 1852040 1852040
Total 33,998,489 - - 33,998,489 33,998,489

BANK OF ABYSSINIA
Carrying
amount Level 1 Level 2 Level 3 Total
Financial assets
Cash and balances with banks 4,491,584 - - 4,491,584 4,491,584
Loans and receivables 6,314,266 - - 6,314,266 6,314,266
Investment securities 90,860 - - 90,860 90,860
Total 10,896,710 - - 10,896,710 10,896,710
Financial liabilities
Deposits from customers 25,794,540 25,794,540 25,794,540
Other liabilities 1,641,954 1,641,954 1,641,954
Total 27,436,495 - - 27,436,495 27,436,495
4.8.3. Fair Value of Financial assets and liabilities

The following table shows an analysis of financial and non- financial instruments measured at fair value by
level of the fair value hierarchy:
Carrying
Level 1 Level 2 Level 3 Total
amount
Financial assets
- Available for sale
FVOCI 9,814 26,802 26,802
FVTPL 244,546 250,471 250,471
Total 244,546 - - 250,471 250,471
4.8.4. Transfers between the fair value hierarchy categories
During the reporting period covered by these annual financial statements, equity investments moved from
carrying amount or level 3 to level 2 as a result of significant inputs to the fair valuation process becoming
observable (level 2).
Carrying
Level 1 Level 2 Level 3 Total
amount
Financial assets
- Available for sale 90,860 0 -
Total 90,860 - - 0 0
4.9 Offsetting financial assets and financial liabilities

There are no offsetting arrangements. Financial assets and liabilities are settled and disclosed on a gross
basis.
30 June 30 June
2019 2018
Birr'000 Birr'000
5 Interest income
Interest on Term Loan 2,257,247 1,637,999
Interest on over draft 642,151 544,526
Interst on Import & export bills 26,907 42,155
Interest on Advance sales contract 130,462 107,299
Interest from penality 232,182 216,677
Interest on foriegn deposits - 189
Interst on NBE bills 213,600 171,358
Interest on deposit from placement 1,836 1,057
3,504,386 2,721,259
53
BANK OF ABYSSINIA
30 June 30 June
2019 2018
Birr'000 Birr'000
6 Interest expense
Interest on Saving Account (995,394) (681,079)
Interest on Time deposit (512,222) (375,034)
Interest on loans - -
(1,507,616) (1,056,113)
30 June 30 June
2019 2018
Birr'000 Birr'000
7 Net Foreign exchange income
loss on Foreign exchange (559,451) (1,068,434)
Gain on foreign exchange 640,361 1,080,417
80,910 11,983
30 June 30 June
2019 2018
Birr'000 Birr'000
8 Net fees and commission income
Fee and commission income
Letters of credit and other import/export facilities 121,692 114,979

Money and Telegraphic transfers and direct debit charges 7,153 6,318
Letters of guarantees 28,595 15,727
Other commissions 11,816 8,345
169,256 145,369
Net fees and commission income (Contd)
Fee and commission expense
- -
Net fees and commission income 169,256 145,369
9 Dividend Income 30 June 30 June

2019 2018
Birr'000 Birr'000
Dividend income from investing activities 3,130 5,874
30 June 30 June
2019 2018
Birr'000 Birr'000
10 Other operating income
Rental income 5,097 6,562

Gain on disposal of fixed assets 4,580 1,362
Gain on disposal of Aquired Asset 3,693 -
Postage and processing fees 382 108
Bad debts recovered 37,871 -
Other income 43,642 20,742
95,264 28,774

BANK OF ABYSSINIA
30 June 30 June
2019 2018
Birr'000 Birr'000
11 Loan impairment charge
Loans and receivables - charge for the year (note 18) (103,732) (118,360)
(103,732) (118,360)
30 June 30 June
2019 2018
Birr'000 Birr'000
12 Impairment losses on other assets
Other assets - charge for the year (note 20a) -44,737 -

Other assets - reversal of impairment losses (note 20a) - -
(44,737) -
30 June 30 June
2019 2018
Birr'000 Birr'000
13 Personnel expenses
Clerical Staff Salary (488,512) (427,446)

Contractual Staff Salary (56,516) (39,346)
Non-Clerical Staff Salary (50,282) (48,899)
Bonus (93,412) (70,032)
Provident Fund (64,006) (56,312)
Fuel Allowance (48,998) (59,087)
Leave Pay (17,912) (45,081)
Training Education (33,199) (27,583)
Living Allowance (30,495) (25,949)
Cash Indemnity Allowance (14,278) (12,670)
Medical (6,266) (6,426)
Staff Insurance (13,949) (12,100)
Car and representation Allowance (9,657) (8,145)
Uniforms (5,873) (3,910)
Amortazation of prepaid employee benefit (3,638) (2,658)
Other staff expenses (29,705) (19,565)
(984,201) (865,210)
14 Depreciation and Amortization 30 June 30 June

2019 2018
Birr'000 Birr'000
Depreciation of property, plant and equipment (103,182) (72,669)

Depreciation on investment property (2,009) (1,994)
Amortisation of intangible assets (20,111) (15,821)
(125,301) (90,484)
55
BANK OF ABYSSINIA
30 June 30 June
2019 2018
Birr'000 Birr'000
15 Other operating expenses
Office Rent (216,103) (183,393)

Postage, telephone, telegram , telex/fax (29,373) (19,787)
Stationery and printing (31,571) (22,327)
Advertising (44,097) (22,636)
Repair and Maintainance (20,372) (25,526)
Fuel and Lubricant (7,782) (5,149)
Insurance (11,833) (10,187)
Per diem and travel (10,906) (7,714)
Correspondnet charges (3,729) (3,577)
Swift Services (1) (5)
Utilities (2,712) (2,096)
Donations and contributions (35,977) (1,300)
Annual reception (2,850) (10,301)
Bank charges (5,255) (4,432)
Entertainment (3,230) (2,592)
Legal fees and Consultancy fee (3,231) (8,925)
Wages for non-employees (1,094) (1,287)
Transportation of Currency (3,303) (2,280)
Audit fees (518) (548)
ATM and POS card issuance fee (1) (2)
Software license fee (13,252) (7,725)
Impairment of non-current assets (1,019) (15)
Impairment of equity investments - (742)
Written- Off loan - (2,630)
Directors Fee (2,993) (2,026)
Other administration expenses (47,916) (30,892)
(499,120) (378,093)
16 Reconciliation of effective tax to statutory tax
The tax on the Bank’s profit before income tax differs from the theoretical amount that would arise using the
statutory income tax rate as follows:
30 June 30 June
2019 2018
Birr'000 Birr'000
(a) Component of tax expenses
Current tax expense 241,930 203,207

Deferred tax (16e) 5,092 (299)
247,023 202,908

BANK OF ABYSSINIA
30 June 30 June
2019 2018
Birr'000 Birr'000
(b) Current Tax
IFRS Accounting profit 1,024,037 765,708
Add : Disallowed expenses
Entertainment 3,230 2,592
Donation 5,886 1,300
Penalty 6,915 94
Depreciation for accounting purpose 105,190 74,663
Amortization for accounting purpose 20,111 15,821
Severance Payment 15,539 9,446
Being impiarment on Equity Investment - 742
Impairment of Non current asset 1,019 -
Provision for other Asset 44,737 -
Provision for loans and advances as per IFRS 103,732 118,360
Directors share of profit 1,800
Other expense 1,362 -
309,522 223,019
Less :
Depreciation for tax purpose 132,335 86,066
Interest income taxed at source-local commercial banks - 1,057
Interest income taxed at source-foreign deposits 1,836 189
Dividend income taxed at source 3,130 5,874
Interest income taxed at source-NBE Bills 213,600 171,358
Gain on fixed assets disposal on which CGT was paid - 1,325
Gain on Aquired assets disposal on which CGT was paid - 37
Provision for loans and advances as per NBE 80% 176,529 45,495
527,431 311,400
Taxable profit 806,128 677,326
241,838 203,198
Add : 5% of interest on foreign deposits 92 9
Current tax at 30% 241,930 203,207
30 June 30 June
2019 2018
(C) Statement of Financial Postion(Current income tax libility) Birr'000 Birr'000
Balance at the beginning of the year 218,382 179,193

Charge for the year:
Income tax expense 241,930 203,207
Prior year (over)/ under provision
WHT Notes utilised (637) (392)
Payment during the year (218,382) (163,626)
Balance at the end of the year 241,293 218,382
16d Deferred income tax

"Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit
will be available against which the temporary differences can be utilised. "
30 June 2019 30 June 2018
Birr'000 Birr'000
Deferred tax liability 4,004 5,925
4,004 5,925
57
BANK OF ABYSSINIA
The analysis of deferred tax assets/(liabilities) is as follows:
Deferred income tax assets and liabilities, deferred income tax charge/(credit) in profit or loss ("P/L), in equity
and other comprehensive income are attributable to the following items:

Credit/
At 1 July Credit/ (charge) to 30 June
Deferred income tax assets/(liabilities): 2018 (charge) to P/L equity 2019
Property, plant and equipment (28,988) (5,092) (34,080)
Provisions -
Unrealised exchange gain -
Tax losses charged to profit or loss -
Post employment benefit obligation 23,063 7,013 30,076
Total deferred tax assets/(liabilities) (5,925) (5,092) 7,013 (4,004)
" At 1 Credit/
Credit/ " 30 June
Deferred income tax assets/(liabilities): July (charge) to
(charge) to P/L 2018 "
2017 " equity
Property, plant and equipment (29,288) 299 (28,989)
Provisions -
Unrealised exchange gain -
Tax losses charged to profit or loss -
Post employment benefit obligation 11,168 11,895 23,063
Total deferred tax assets/(liabilities) (18,120) 299 11,895 (5,925)
16e Deferred tax Liability

30 June 30 June
2019 2018
Deferred tax (liability) asset as per GAAP - -
Deferred tax (liability) asset as per IFRS 5,925 18,120
Add: Temporary difference (1,920) (12,195)
Deferred tax Liability 4,004 5,925
Fixed asset - carrying amount 808,016 800,333

Fixed assets - tax base 694,415 703,705
113,602 96,627
Deferred tax liability - @ 30% 34,080 28,988
Severance pay - carrying amount 100,926 77,549

Severance pay - tax base 673 673
Severance pay temporary difference 100,254 76,877
Deferred tax asset - @ 30% 30,076 23,063
Deferred tax liability - @ 30% 4,004 5,925
16f Depreciation for tax Base " 30 June 2018 "

Asset type Cost Depreciation Accumulated Book Value
for the year deprecition
Premises 92,861 4,601 27,892 60,367
Motor vehicles 238,831 21,028 109,739 108,064
Office furniture & fittings 120,390 10,233 43,797 66,360
Office equipment 160,250 13,980 47,136 99,134
Computer and accessories 332,704 21,914 84,769 226,022
Intangible assets 121,680 9,185 59,798 52,698
Investment 102,531 5,125 6,346 91,061
Total 1,169,248 86,066 379,477 703,705

BANK OF ABYSSINIA
30 June 2019
Asset type Depreciation Accumulated
Cost for the year deprecition Book Value
Premises 98,181 4,740 32,493 60,949
Motor vehicles 240,723 23,471 130,768 86,485
Office equipment 229,803 30,812 61,116 137,875
Investment 104,370 5,178 11,471 87,722
Total 1,292,292 132,335 465,541 694,415
16g Depreciation based on IFRS for differed tax Compution

30 June 2018
Premises 92,861 1,305 24,630 66,926
Motor vehicles 238,831 18,310 73,416 147,105
Office equipment 160,250 15,190 42,114 102,945
Investment 102,531 1,887 3,204 97,440
Total 1,169,248 86,384 282,530 800,333
30 June 2019
Premises 98,181 1,357 25,935 70,889
Motor vehicles 240,723 21,238 85,555 133,930
Office equipment 229,803 23,974 64,125 141,703
Investment 104,370 1,942 5,092 97,336
Total 1,292,292 121,533 362,744 808,016
30 June 2019 30 June 2018

Birr'000 Birr'000
17 Cash and cash equivalents
Cash in hand 2,215,420 2,108,289
Reserve account with National Bank of Ethiopia 1,583,600 1,295,600
Other accounts with National Bank of Ethiopia 124,716 655,419
Deposits with foreign banks 548,578 432,275
Deposits with local banks - -
4,472,314 4,491,584
Less: Impairment Allowance for Bank Balance (111.91) -
4,472,202 4,491,584
Maturity analysis 30 June 2019 30 June 2018
Birr'000 Birr'000
Current 2,888,714 3,195,984
Non-Current 1,583,600 1,295,600
4,472,314 4,491,584
59
BANK OF ABYSSINIA
The reserve with National Bank of Ethiopia represents regulatory cash ratio requirements based on customer
deposits with the Bank. As at 30 June 2019, the cash ratio requirement was 5.73 % . The funds are not available
for the day to day operations of the Bank and are non interest bearing.
Amounts included in cash and cash equivalents are current. Reserves with National Bank of Ethiopia are non -
current. Cash and balances with National Bank of Ethiopia are classified as 'loans and receivables'.
30 June 2019 30 June 2018
Birr'000 Birr'000
18 Loans and Advance to Customers
Domestic trade and services 12,502,522 5,797,279

Import 1,038,868 1,505,537
Construction 2,194,092 2,216,712
Transport 719,793 949,702
Industry 1,913,419 1,962,363
Export 4,358,855 5,129,619
Agriculture 276,952 161,687
Consumer or personal 730,504 268,091
- -
Gross amount 23,735,005 17,990,990
Less: Impairment allowance (note 18a) -313,758 -210,026
23,421,247 17,780,964
Birr'000 Birr'000
Current 7,438,489 2,962,379
Non-Current 16,296,516 15,028,611
23,735,005 17,990,990
19 Investment securities
Securities held to maturity are stated at amortised cost while those classified as "Fair value through profit or loss"
and "available - for - sale" are stated at fair value.
30 June 2019 30 June 2018
Birr'000 Birr'000
Available for sale:
Equity Investments 271,348 90,860
271,348 90,860
Loans and receivables:
NBE Bills 7,564,655 6,314,266
7,564,655 6,314,266
Less Impairment allowance for NBE Bills (372) -
7,564,283 6,314,266
Maturity analysis
Held to Available for
At 30 June 2019 maturity sale Total
Less than 1 year 2,053,631 2,053,631
1 - 5 years 5,511,024 5,511,024
Over 5 years - 271,348 271,348
7,564,655 271,348 7,836,003
Held to Available for
At 30 June 2018 maturity sale Total
Less than 1 year 631,344 631,344
1 - 5 years 5,682,922 5,682,922
Over 5 years - 90,860 90,860
6,314,266 90,860 6,405,126

BANK OF ABYSSINIA
Birr'000 Birr'000
Current 2,053,631 631,344

Non-Current 5,782,372 5,773,782
7,836,003 6,405,126
The Investments comprise of:

At 30 June 2019 Number of shares Par value (Birr) Amount (Birr)
Eth Switch S.Co 9,814 1,000 9,814
Addis Africa Int. Convention & Exch. Centre 8,481 1,000 14,481
Hohete Tibeb S.Co 7,065 500 4,310
Association of Ethiopian Insurers 14,027 1,000 16,380
Abay Industry Development S.C - - 208,606
Yetebaberut Petrolem 770
254,360
At 30 June 2018 Number of shares Par value (Birr) Amount (Birr)

Eth Switch S.Co 9,814 1,000 9,814
Addis Africa Int. Convention & Exch. Centre 8,481 1,000 8,481
Hohete Tibeb S.Co 7,065 500 3,533
Association of Ethiopian Insurers 14,027 1,000 14,027
Abay Industry Development S.C 55,006
90,860
30 June 2019 30 June 2018

Birr'000 Birr'000
20 Other assets
System suspense 4,845 5,137

Operating lease prepayments - Leasehold land 24,878 21,300
Acquired collaterals 124,649 106,604
Sundry receivables 517,405 499,200
Items in course of collection from other banks 128,570 187,141
Deposit and Prepayment 580,443 476,927
Prepaid staff asset 98,041 79,680
Gross amount 1,478,832 1,375,989
Less: Specific impairment allowance (76,778) (32,525)
1,402,055 1,343,464
Out of Sundary Receivables accounts receivables balance,Birr 298,908,564 was paid to Ethiopian Roads
Authority(ERA) in relation to Advance Payment Gurantee for Road Construction contract issued by the Bank
takes counter Gurantee issued by State Bank of India(SBI) and the bank is under process of legal acion to
collect the money From the stated bank.
Birr'000 Birr'000
Current 1,402,055 1,343,465
Non-Current
1,402,055 1,343,465
61
BANK OF ABYSSINIA
20a Impairment allowance on other assets
A reconciliation of the allowance for impairment losses for other assets is as follows:
30 June 2019 30 June 2018

Birr'000 Birr'000
Balance at the beginning of the year 32,527 32,527
(Reversal)/charge for the year (note 10) 44,737 -
Balance at the end of the year 77,264 32,527

21 Investment property Total
Birr'000
Cost:
As at 1 July 2017 104,802

Acquisitions -
Transfer from property and equipment 396
As at 30 June 2018 105,198
As at 1 July 2018 105,198

Acquisitions -
Transfer from property and equipment 1,838
As at 30 June 2019 107,037
Accumulated depreciation and impairment losses
As at 1 July 2017 (1,966)

Transfer from property and equipment -
Amortisation for the year (1,994)
Impairment losses -
As at 30 June 2018 (3,960)
As at 1 July 2018 (3,960)

Amortisation for the year (2,009)
Impairment losses -
As at 30 June 2019 (5,969)
Net book value

As at 1 July 2017 102,836
As at 30 June 2018 101,238
As at 30 June 2019 101,068
The investment property comprises of the following properties:

1. Bole Road Area birr 94.70 million
2. Dila building outside addis abeba region birr 12.34 million
21a Amounts recognised in profit or loss for investment properties

30 June 30 June
2019 2018
Notes Birr'000 Birr'000
Rental income 5,097 3,480
Direct operating expenses from property that generated rental income - -
5,097 3,480
21b Fair value measurement of the Bank's Investment properties
The Bank's investment property is measured at cost. These properties include those held for rental purposes and
those in which the Bank occupies an insignificant portion. These properties are held to earn rentals and for capital
appreciation. There are currently no restrictions on the realisability of these properties.
Investment property is initially measured at cost including transaction costs and subsequently measured at
depreciated cost (less any accumulated impairment losses). Depreciation is calculated using the straight-line
method to allocate their cost to their residual values over their estimated useful lives of 50 years.

BANK OF ABYSSINIA
The fair value of investment properties has been disclosed as required.
The fair value of the Bank's Investment property as at June 30,2016 and has been arrived at by in-house engineers
qualified estate surveyors and reviewed and approved by independent valuers. These valuers have appropriate
qualifications and recent experience in the valuation of properties in the relevant locations.
The fair value was determined based on the replacement cost concept which approximates the estimated amount for
which a property should exchange on the date of valuation between knowledgeable willing parties in an arm's length
transaction after proper marketing, prudently and without compulsion.
This implies a market comparable approach that reflects the recent transaction prices for similar properties). In
estimating the fair value of the properties, the highest and best use of the properties is their current use. There has
been no change to the valuation technique during the year.
21c Fair value hierarchy

Details of the Bank's Investment properties and information about the fair value hierarchy at 30 June 2019, and
30 June 2018 respectively are as follows:
Carrying
amount Level 1 Level 2 Level 3
Investment properties 101,068 101,068
Carrying
amount Level 1 Level 2 Level 3
Investment properties 101,238 101,238
Total
Birr'000
22 Intangible Assets
Cost:
As at 1 July 2017 113,215
Acquisitions -
Internal development -
Transfer from property and equipment 8,466
WIP 7,674
As at 30 June 2018 129,354
As at 1 July 2018 129,354
Acquisitions 339
WIP 59,728
Internal development -
Transfer from property, plant and equipment -
As at 30 June 2019 189,421
Intangible Assets (Contd)
Accumulated amortisation and impairment losses
As at 1 July 2017 43,593
Transfer from property and equipment
Amortisation for the year 15,821
Impairment losses -
As at 30 June 2018 59,415
As at 1 July 2018 59,415
Impairment losses -
As at 30 June 2019 79,245
Net book value
As at 1 July 2017 69,622
As at 30 June 2018 69,940
As at 30 June 2019 110,175
63
BANK OF ABYSSINIA
23 Property and equipment
Land and Office and other Furniture & Computer & Construction in
Buildings Motor vehicles equipment fittings Related Items progress Total
Birr'000 Birr'000 Birr'000 Birr'000 Birr'000 Birr'000 Birr'000
Cost:
As at 1 July 2017 266,085 204,437 110,849 91,348 179,971 950,168 1,802,858
Additions - 35,867 49,400 29,042 152,734 9,804 276,848
Reclassifications 1,060 - - - - - 1,060
Disposals - (1,473.16) - - - - (1,473.16)
As at 30 June 2018 267,145 238,831 160,250 120,390 332,704 959,973 2,079,294
As at 1 July 2018 267,145 238,831 160,250 120,390 332,704 959,973 2,079,294
Additions 5,321 10,038 41,534 34,874 37,247 137,788 266,802
Reclassification - - 28,019 13,594 (41,614) - (0)
Disposals (8,146)
As at 30 June 2019 272,466 240,723 229,803 168,859 328,338 1,097,761 2,337,949
Accumulated depreciation
As at 1 July 2017 5,039 73,421 42,239 32,220 62,944 - 215,864
Transfer to intangible assets -
Charge for the year 5,060 19,783 15,035 9,254 23,537 - 72,669
Reclassification (0) (5) 31 35 1,453 - 1,514
Accumulated depreciation on disposals - (1,473) - - - - (1,473)

-
As at 30 June 2018 10,099 91,726 57,305 41,510 87,933 - 288,573
As at 1 July 2018 10,099 91,726 57,305 41,510 87,933 - 288,573
Charge for the year 5,098 21,238 23,974 12,472 40,717 - 103,500
Reclassification - 6,821 1,467 (8,287) - -
Accumulated depreciation on disposals - (6,172) - (6,172)
As at 30 June 2019 15,197 106,793 88,100 55,449 120,363 385,902
Net book value
As at 1 July 2017 261,046 131,016 68,610 59,128 117,027 950,168 1,586,995
As at 30 June 2018 257,046 147,105 102,945 78,880 244,771 959,973 1,790,720
As at 30 June 2019 257,269 133,930 141,703 113,410 207,975 1,097,761 1,952,047
BANK OF ABYSSINIA
24 Operating lease prepayments - Leasehold land Total
Birr'000
Cost:
As at 1 July 2017 22,456
Acquisitions -
Transfer from property and equipment
Transfer from other Asset
As at 30 June 2018 22,456
As at 1 July 2018 22,456
Acquisitions 2,422
Transfer from other Asset
As at 30 June 2019 24,878
Accumulated depreciation and impairment losses
As at 1 July 2017 (822)
Amortisation for the year (334)
Impairment losses -
As at 30 June 2018 (1,156)
As at 1 July 2018 (1,156)

Impairment losses -
As at 30 June 2019 -
Net book value

As at 1 July 2017 21,634
As at 30 June 2018 21,300
As at 30 June 2019 24,878
30 June 30 June 2018
2019
Birr'000 Birr'000
25 Deposits from customers
Private sector & Staffs 28,595,249 22,381,461
Co-operatives & Associations 1,941,429 1,457,017
Domestic banks 418,177 1,062,701
NR - Transferable Birr accounts 151,863 58,767
Public agencies & enterprises 142,788 268,972
NR - Non-transferable Birr accounts 18,127 9,192
NR- Foreign currency accounts 666,587 461,113
Residents 212,228 95,318
32,146,449 25,794,540
Customer deposits are financial instruments classified as liabilities at amortised cost.
65
BANK OF ABYSSINIA
30 June 30 June
2019 2018
Birr'000 Birr'000
26 Other liabilities
Cashiers' payment orders 420,061 364,549
MTs and TTs payable - local and foreign 660 12,164
Dividend payable 39,611 36,369
Exchange and auction payable to NBE 26,248 29,735
Accrued leave payable 84,512 70,985
Advance payment on loan 280,281 262,348
Margins held on letters of credit 592,271 642,188
Other payables 295,737 112,431
Bonus accrual 90,835 70,032
Unearned income 21,824 41,151
1,852,040 1,641,954
Gross amount 1,852,040 1,641,954
Maturity analysis 30 June 30 June
2019 2018
Birr'000 Birr'000
Current 1,852,040 1,641,954
Non-Current
1,852,040 1,641,954
30 June 30 June
2019 2018
Birr'000 Birr'000
27 Retirement benefit obligations
Defined benefits liabilities:
– Severance pay (note 27a) 100,253 76,876
– Long service awards
– Pension prize
Liability in the statement of financial position 100,253 76,876
Income statement charge included in personnel expenses:
– Pension prize
Total defined benefit expenses 19,927 10,112
Remeasurements for:
– Pension prize
` 7,838 30,204
The income statement charge included within personnel expenses includes current service cost, interest cost,
past service costs on the defined benefit schemes.
Service at exit Severance Benefit

0-3 years 30 days of salary for the first year of serivice and 10 days of salary
for each year thereafter(only if exit on death)
3-5 years 90days of salary for the first year of serivice and 10 days of salary for
each year thereafter
5-7 years 90days of salary for the first year of serivice and 15 days of salary for
More than 7 years 90days of salary for the first year of serivice and 30 days of salary for

BANK OF ABYSSINIA
Below are the details of movements and amounts recognised in the financial statements:
30 June 30 June
2019 2018
Birr'000 Birr'000
A Liability recognised in the financial position 100,253 76,876
30 June 30 June
2019 2018
B Amount recognised in the profit or loss Birr'000 Birr'000
Current service cost 7,752 4,249
Interest cost 10,733 5,863
Past Service cost 1,442
19,927 10,112
C Amount recognised in other comprehensive income:
Remeasurement (gains)/losses arising from changes in demographic assumptions (678) 5,550
Remeasurement (gains)/losses arising from changes in the financial assumptions 8,516 24,654
Tax credit /(charge) (7,013) (11,896)
Eth Switch (16,987)
-16,162 18,308
Remeasurement (loss) on retirement benefits obligations of 2019 birr 8 million and 2018 birr 30 million it's
other componet of equity(OCE) with debit balance and should be accounted to retained earnings.
The movement in the defined benefit obligation over the years is as follows:
30 June 30 June
2019 2018
Birr'000 Birr'000
At the beginning of the year 100,253 76,876
Current service cost
Interest cost
Remeasurement (gains)/ losses
Benefits paid
At the end of the year 100,253 76,876
The significant actuarial assumptions were as follows:
i) Financial Assumption Long term Average
30 June 30 June
2019 2018
Birr'000 Birr'000
Discount Rate (p.a) 12.25% 13.02%
Rate of Pension Increase(p.a) 10.00% 12.00%
Average Rate of Inflation (p.a) 12.00% 12.00%
ii) Mortality in Service
The rate of mortality assumed for employees are those according to the British A49/52 ultimate table published
by the Institute of Actuaries of England. These rates combined are approximately summarized as follows:
Age Males mortality rate Females mortality rate
0.31% 0.22%
20-25 0.30% 0.23%
25-30 0.36% 0.31%
31-35 0.41% 0.28%
36-40 0.52% 0.32%
41-45 0.45% 0.43%
45-50 0.63% 0.63%
51-55 0.98% 0.98%
56-60 1.54% 1.54%
67
BANK OF ABYSSINIA
iii) Withdrawal from Service
The withdrawal rates are believed to be reasonably representative of the Ethiopian experience. The valuation assumed a
rate of withdrawal of 10% at the youngest ages falling with increasing age to 2.5% at age 44.
The sensitivity of the overall defined benefit liability to changes in the weighted principal assumption is:
Impact on defined benefit obligation

30 June 2019 30 June 2018
Change in as- Impact of an Impact of a de- Impact of an Impact of a de-
sumption increase crease increase crease
Discount rate 0.50% 4,777 4,478 4,777
Pension Increase rate
Mortality experience
The above sensitivity analysis is based on a change in an assumption while holding all other assumptions constant. In prac-
tice, this is unlikely to occur and changes in some of the assumptions may be correlated. When calculating the sensitivity
of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit
obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when
calculating the pension liability recognised within the statement of financial position.
There was no change in the methods and assumptions used in preparing the sensitivity analysis from prior years. The aver-
age duration of the severance pay plan at the end of the reporting period is 2.78 years
30 June 30 June
2019 2018
Birr'000 Birr'000
28 Ordinary share capital

Authorised:
160,000,000 ordinary shares of Birr 25 each 4,000,000 4,000,000
Issued and fully paid:
102,524,497 ordinary shares of Birr 25 each 2,811,564 2,563,112
29 Earnings per share
Basic earnings per share (EPS) is calculated by dividing the profit after taxation by the weighted average
number of ordinary shares in issue during the year.
30 June 30 June
2019 2018
Birr'000 Birr'000
Profit after tax 786,163 532,596
Weighted average number of ordinary shares in issue 2,718,901 2,179,640
Average Number of Shares 108,756 87,186
Earnings Per Share (Per Value of Birr 25) 7.23 6.11
Earnings Per Birr 100 Shares 28.91 24.44
30 June 2019 30 June 2018

Birr'000 Birr'000
30 Retained earnings
Profit/ (Loss) for the year 777,014 562,800
Dividends paid (336,601) (400,147)
Transfer to legal reserve (194,253) (133,149)
Transfer to regulatory risk reserve (116,929) 51,849
Other comprehensive income
30 June 2019 30 June 2018
Birr'000 Birr'000
31 Legal reserve
Transfer from profit or loss 194,253 133,149

BANK OF ABYSSINIA
The NBE Directive No. SBB/4/95 states requires the Bank to transfer annually 25% of its annual net profit to its
legal reserve account until such account equals its capital. When the legal reserve account equals the capital of the
Bank, the amount to be transferred to the legal reserve account will be 10% (ten percent) of the annual net profit.
30 June 2019 30 June 2018
Birr'000 Birr'000
32 Regulatory risk reserve
Transfer (from) / to retained earnings 116,929 (51,849)

The Regulatory risk reserve is a non-distributable reserves required by the regulations of the National Bank of
Ethiopia(NBE) to be kept for impairment losses on loans and receivables in excess of IFRS charge as derived using
the incurred loss model.
Where the loan loss impairment determined using the National Bank of Ethiopia (NBE) guidelines is higher than
the loan loss impairment determined using the incurred loss model under IFRS, the difference is transferred to
regulatory risk reserve and it is non-distributable to the owners of the Bank.
Where the loan loss impairment determined using the National Bank of Ethiopia (NBE) guidelines is less than the
loan loss impairment determined using the incurred loss model under IFRS, the difference is transferred from
regulatory risk reserve to the retained earning to the extent of the non-distributable reserve previously recognised.
Where the 70% of suspended interest income kept under this regulatory reserve account until the regulatory
organs(NBE) amended the directive related with provision.
30 June 2019 30 June 2018

Notes Birr'000 Birr'000
33 Cash generated from operating activities
Profit before tax 1,024,037 765,708
Adjustments for non-cash items:

Depreciation of property, plant and equipment 23 103,182 72,669
Depreciation of investment property 21 2,009 1,994
Amortisation of intangible assets 22 20,111 15,821
Gain/(Loss) on disposal of property, plant and equipment 10 (4,580) (1,325)
Gain/(Loss) on sale of Aquared Property 10 (3,693)
Impairment loss on Bank balances (112)
Impairment on loans and receivables 18 103,732 118,360
Impairment on Non current Asset 1,019
Gain on Fair value through OCI 16,987
Severance Payment 15,539 10,112
Net Gain Foreign currency transactions and translations (80,910) (11,983)
Changes in working capital:

-Decrease/ (Increase) in loans and advances 18 (5,744,015) (3,962,850)
-Decrease/ (Increase) in other assets 20 (145,072) 124,200
-Increase/ (Decrease) in other liabilities 26 206,844 135,682
-Increase/ (Decrease) in deposits by customers 6,351,908 4,992,641
1,911,723 2,261,028
In the statement of cash flows, profit on sale of property, plant and equipment (PPE) comprise:
30 June 2019 30 June 2018
Birr'000 Birr'000
Proceeds on disposal of Acquired property 7,297 2,170

Net book value of property, plant and equipment disposed (4,955) (2,133)
Capital gain ax paid - -
Gain/(loss) on sale of property, plant and equipment 2,342 37
69
BANK OF ABYSSINIA
30 June 2019 30 June 2018
Birr'000 Birr'000
Proceeds on disposal of PPE 44,941 1,325

Net book value of property, plant and equipment disposed (41,248) -
Capital gain ax paid -
Gain/(loss) on sale of property, plant and equipment 3,693 1,325
34 Revalution Surplus Account 30 June 2019 30 June 2018 30 June 2017

Birr'000 Birr'000 Birr'000
At the beginning of the year 462,205 462,205 462,205
Revaluation From WIP - - -
Revaluation From Investment property -
Revaluation From Buildings - - -
462,205 462,205 462,205
"The revalution surplus account is a non-distributable to shareholder's and non-taxable income kept under
equity section which is the net revalued amount for building asset in order to the bank followed fair value
approch as deemed cost for first time adoption of IFRS until Tax authority recognize fair value approch
regarding with property,plant and equipment. "
35 Related party transactions

"Related parties are considered to be related if one party has the ability to control the other party or exercise
significant influence over the other party in making financial or operation decisions, or one other party controls both.
There are other companies which are related to Bank of Abyssinia through common shareholdings or common
directorships.
In the normal course of business, a number of banking transactions are entered into with related parties i.e.
staff, directors, their associates and companies associated with directors. These include loans, deposits and
foreign currency transactions. Loans and advances to customers include loans and advances to staff and to
companies associated with directors. "
A number of transactions were entered into with related parties in the normal course of business. These are
disclosed below:
35a Loans and Advances to directors
The outstanding loan balances to directors arose from the ordinary course of business and are substantially
on the same terms, including interest rates and security, as for comparable transactions with third-party
counterparties. The amounts are as follows;
30 June 2019 30 June 2018

Birr'000 Birr'000
Loans to directors and Excecutime Management 30,502 29,021
35b Key management compensation
Key management has been determined to be the members of the Board of Directors and the Executive
Management of the Bank. The compensation paid or payable to key management for is shown. There were
no sales or purchase of goods and services between the Bank and key management personnel as at 30 June
2019.
30 June 2019 30 June 2018
Birr'000 Birr'000
Salaries and other short-term employee benefits 18,808 7,381
Sitting allowance 1,478 900
Gift for former CEO 5,000
25,285 8,281
Compensation of the Bank's key management personnel includes salaries, non-cash benefits and contributions
to the post-employment defined benefits plans.

BANK OF ABYSSINIA
36 Contingent liabilities
36a Claims and litigation
The Bank is a party to numerous legal actions brought by different organizations and individuals arising from
its normal business operations. The maximum exposure of the Bank to these legal cases as at 30 June 2019
is Birr 2.2 million (30 June 2017: Birr 6.7 million). No provision has been made in the financial statements as
the Directors believe that it is not probable that the economic benefits would flow out of the Bank in respect
of these legal actions.
36b Guarantees and letters of credit
"The Bank conducts business involving performance bonds and guarantees. These instruments are given as
a security to support the performance of a customer to third parties. As the Bank will only be required to
meet these obligations in the event of the customer's default, the cash requirements of these instruments
are expected to be considerably below their nominal amounts.
The table below summarises the fair value amount of contingent liabilities for the account of customers:"
30 June 2019 30 June 2018
Birr'000 Birr'000
Financial guarantees 659,530 749,668

Loans and advances approved not disbursed 1,145,470 808,345
Unutilised overdraft and other revolving facilities 1,004,074 1,311,223
Letters of credit 900,090 1,199,672
3,709,164 4,068,908
37 Operating lease commitments - Bank as lessee

"The Bank leases various properties under non-cancellable operating lease agreements. The lease terms are
between two and five years, and majority of these lease agreements are renewable at the end of the each
lease period at market rate.
The future aggregate minimum lease payments under non-cancellable operating leases are as follows:"
30 June 2019 30 June 2018

Birr'000 Birr'000
No later than 1 year 132,039 48,224

Later than 1 year and no later than 2 years 129,205 47,189
Later than 2 years but not later than 5 years 301,822 110,233
Total 563,067 205,646
38 Events after reporting period
In the opinion of the Directors, there were no significant post balance sheet events which could have a material
effect on the state of affairs of the Bank as at 30 June 2019 and on the profit for the period ended on that date,
which have not been adequately provided for or disclosed.
71
የ፳፻፲፩ ዓ.ም. የውጭ ኦዲተሮች ሪፖርት

የትርፍና ኪሳራ እና ሌሎች ገቢዎች መግለጫ
እንዲሁም
የሀብትና ዕዳ መግለጫ

አቢሲኒያ ባንክ
የትርፍና ኪሳራ እና ሌሎች ገቢዎች መግለጫ
ሰኔ 23 ቀን 2011 ዓ.ም. ላለቀው አመት
2011 2010
ማብራሪያ ብር ብር
ከወለድ የተገኘ ገቢ 5 3,504,386 2,721,259
ሲቀነስ:-የወለድ ወጪ 6 (1,507,616) (1,056,113)
የተጣራ የወለድ ገቢ 1,996,770 1,665,146
ከውጪሀገር ገንዘብ ምንዛሬ ተመን ለውጥ የተገኘ ትርፍ 7 80,910 11,983

ከአገልግሎት ገቢ 435,799 360,709
ከኮሚሽን ገቢ 8 169,256 145,369
የተጣራ የአገልግሎትና ኮሚሽን ገቢ 685,965 518,061
ከትርፍ ክፍፍል ገቢ 9 3,130 5,874
ከልዩ ልዩ ገቢ 10 95,264 28,774
98,394 34,648
አጠቃላይ መደበኛ ገቢ 2,781,129 2,217,855
ለብድር የተያዘ መጠባበቂያ 11 (103,732) (118,360)
ለሌሎች ሀብቶች የተያዘ መጠባበቂያ 12 (44,737) -
የተጣራ መደበኛ ገቢ 2,632,660 2,099,495
ለሠራተኞች ደሞዝና ጥቅማጥቅሞች 13 (984,201) (865,210)
ሀልዎት ለሌላቸው (Intangible) ሀብት የማቋቋሚያ ወጪ 14 (20,111) (15,821)
የቋሚ ሀብት እርጅና ተቀናሽ 14 (103,182) (72,669)
የኢንቨስትመንት ሀብት እርጅና ተቀናሽ 14 (2,009) (1,994)
ሌሎች መደበኛ ወጪዎች 15 (499,120) (378,093)
ትርፍ - ከትርፍ ግብር በፊት
1,024,037 765,708
ሲቀነስ:-የትርፍ ግብር መጠባበቂያ 16 (247,023) (202,908)
ትርፍ - ከትርፍ ግብር በኋላ 777,014 562,800
ሌሎች ገቢዎች ከትርፍ ግብር በኋላ
በትርፍና ኪሳራ መዝገብ የማይካተቱ ገቢዎች/ወጪዎች/
በጡረታ ጊዜ ለሰራተኞች ሊከፈል የሚችል ጥቅማጥቅም 27 (7,838) (30,204)
ወደፊት ሊከፈል የሚችል የትርፍ ግብር 27-ሀ 16,987 -
የአመቱ አጠቃላይ የተጣራ ገቢ 786,163 532,596
እያንዳንዱ አክሲዮን ያስገኘው ትርፍ 29 7.23 6.11
______________________________ ______________________________
መሠረት ታዬ በቃሉ ዘለቀ
የዲሬክተሮች ቦርድ ሊቀመንበር ዋና ሥራ አስፈፃሚ
73
አቢሲንያ ባንክ
የሀብትና ዕዳ መግለጫ
ሰኔ 23 ቀን 2011 ዓ.ም
2011 2010
ማብራሪያ ብር ብር
ሀብት
ጥሬ ገንዘብ እና ጥሬ ገንዘብ አከል ሀብት 17 4,472,202 4,491,584

ለደንበኞች የተሰጡ ብድሮች 18 23,421,247 17,780,964
ኢንቨስትመንት 19
የብሔራዊ ባንክ ሰነድ ግዢ 7,564,283 6,314,266
በተለያዩ አ.ማህበራት የተደረገ ኢንቨስትመንት 271,348 90,860
ሌሎች ሀብቶች 20 1,402,055 1,343,463
ቋሚ ሀብት 23 1,952,047 1,790,720
የኢንቨስትመንት ሀብት 21 101,068 101,238
ሀልዎት የሌላቸው (Intangible) ሀብት 22 110,175 69,940
አጠቃላይ ሀብት 39,294,425 31,983,036
የዕዳሚዛን
የደንበኞች ተቀማጭ ገንዘብ 25 32,146,449 25,794,540

ሌሎች ዕዳዎች 26 1,852,040 1,641,955
ተከፋይ የትርፍ ግብር 16 241,293 218,382
በጡረታ ጊዜ ለሰራተኞች የሚከፈል ጥቅማጥቅም 27 100,253 76,876
ወደፊት የሚከፈል የትርፍ ግብር 16 4,004 5,925
አጠቃላይ የዕዳ ሚዛን 34,344,039 27,737,678
የካፒታልና መጠባበቂያ ሒሳቦች

የተከፈለ ካፒታል 28 2,811,564 2,563,112
በአክሲዮን ሽያጭ ዋጋ ብልጫ የተከፈለ 5,998 5,998
ያልተከፈለ ትርፍ 30 490,877 361,647
ለህንፃዎች ወቅታዊ ግምት በልዩነት የተያዘ 34 462,205 462,205
ሕጋዊ የመጠባበቂያ ሒሳብ 31 998,152 803,898
በብሔራዊ ባንክ መመሪያ መሰረት ለብድር የተያዘ ተጨማሪ መጠባበቂያ 32 164,555 47,626
ልዩ የመጠባበቂያ ሒሳብ 25,919 25,919
ሌሎች የመጠባበቂያ ሒሳቦች 27-ሀ (8,884) (25,046)
አጠቃላይ ካፒታልና የመጠባበቂያ ሒሳቦች ሚዛን 4,950,386 4,245,359
አጠቃላይ ዕዳዎች፣ካፒታልና የመጠባበቂያ ሒሳብ ሚዛን 39,294,425 31,983,036
______________________________ ___________________________
መሠረት ታዬ በቃሉ ዘለቀ
የዲሬክተሮች ቦርድ ሊቀመንበር ዋና ሥራ አስፈፃሚ


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Annual

To provide excellent financial services through competent,

Message of the Board Chairperson 8

Statement of the CEO 10

Report of Board of Director 12

Bank of Abyssinia Report and Financial Statements

Report of the Directors 3

Statement of Director's Responsibilities 4

Independent Auditor's Report 5-6

Statement of Profit or Loss and Other 7

Statement of Changes in Equity 9

Statement of Cash Flows 10

Notes to the Financial Statements 11 - 71

8 | Bank of Abyssinia S.C Annual Report 2018/19

Bank of Abyssinia recognizes that it is operating in a rapidly changing banking environment, a

Dear Esteemed Shareholders,

10 | Bank of Abyssinia S.C Annual Report 2018/19

Thank you all!!

Fig. 1: Deposits Mobilized

Fig. 2: Percentage Share of Deposits

12 | Bank of Abyssinia S.C Annual Report 2018/19

Fig. 3: Outstanding Loans and Advances

Fig. 4: Percentage Share of Loans and Advances

Table 1: Loans and Advances by Economic Sector

14 | Bank of Abyssinia S.C Annual Report 2018/19

1.3 International Banking Services

Fig. 6: Income by Major Categories

16 | Bank of Abyssinia S.C Annual Report 2018/19

Fig. 7: Expense by Major Categories

Fig. 8: Comparison of Income, Expense and Gross Proﬁt

Table 2: Equity of the Bank

Revaluation Surplus Account 462.21 9% 462.21 10.89% 0.00 0.00

18 | Bank of Abyssinia S.C Annual Report 2018/19

3.2 Expansion of Branches

Table 3: New Branches and Sub-Branches Opened in 2018/19

Atikilt Tera Athlet Beshale Kidist

Weserbi Arsi Robe Yabelo Ghinnir

3.4 Information Systems

20 | Bank of Abyssinia S.C Annual Report 2018/19

6. Appropriation of Retained Earnings

22 | Bank of Abyssinia S.C Annual Report 2018/19

Members of the Board of Directors

Ato Aemero Belete Member

Ato Bahiru Mossa Member

Ato Belay Gemechu Member

Ato Berhanu Jijo Member

Ato Biruk Tesfaye Member

Dr. Getachew Teka Member

Ato Solomon Girma Member

Ato Tilaye Tegegne Member

Messeret Taye Bekalu Zeleke

24 | Bank of Abyssinia S.C Annual Report 2018/19

Board Directors (As of June 30, 2019)

Ato Messeret Taye Board Chairperson (Appointed February 26,2018)

Ato Aemero Belete Board Director (Appointed July 15,2019)

Ato Ali Mohammed Board Director (Resigned February 26,2018)

Ato Belay Gemechu Board Director (Appointed February 26,2018)

Ato Bahiru Mossa Board Director (Appointed February 26,2018)

Ato Biranu Jijo Board Director (Appointed February 26,2018)