Investor Presentaiton

Appendix C Recent IFRIC agenda decisions Meeting date March 2022 February 2022 Issue discussed by the Committee IAS 7 - Demand deposits with restrictions on use arising from a contract with a third party: Should an entity include demand deposits with restrictions on use as part of cash and cash equivalents in its statement of cash flows and statement of financial position? IFRS 9 & IAS 20 - ECB's TLTRO III transactions: . Do the TLTRO III tranches represent loans with a below- market interest rate? If so, is the bank required to apply IFRS 9 or IAS 20 to account for that benefit? If IAS 20 is applied, then how would the bank determine period(s) in which it recognises that benefit? Where is the benefit presented? How does the bank calculate the applicable effective interest rate? How does the bank account for changes in estimated cash flows resulting from revised assessments of whether conditions attached to the liability have been met? How does the bank account for changes in cash flows related to the prior period that result from the bank's lending behaviour or from changes the ECB makes to the TLTRO III conditions? * TLTRO - targeted longer-term refinancing operations ECB European Central Bank Summary of the Committee's conclusion on the issue The Committee concluded that, in the fact pattern described, the restrictions on the use of the deposit imposed by a contract with a third party do not change the nature of the deposit in such a way that would make the deposit no longer a demand deposit. Therefore, the demand deposit meets the definition of "cash" in paragraph 6 of IAS 7, and is included as part of cash and cash equivalents in the statement of cash flows and the statement of financial position. When relevant to an understanding of its financial position, the entity disaggregates the "cash and cash equivalents" line item and presents the demand deposit subject to contractual restrictions on use separately in an additional line item in accordance with paragraph 55 of IAS 1. An entity that presents assets as current or non-current classifies the demand deposit as current applying paragraph 66(d) of IAS 1, unless the demand deposit is "restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period". In addition, the entity needs to consider whether to provide disclosures about liquidity risk arising from this cash balance and how it manages that risk in the context of the requirements in IFRS 7, and other relevant additional information to enable users of the financial statements to understand the impact on the entity's financial position in accordance with paragraph 31 of IAS 1. The TLTROS link the amount a participating bank can borrow and the interest rate the bank pays on each tranche of the operation to the volume and amount of loans it makes to non-financial corporations and households. The Committee observed that IFRS 9 is the starting point for the bank to decide how to account for TLTRO III transactions, as each liability arising from the bank's participation in a tranche is a financial liability. The bank would assess whether it would separate any embedded derivatives from the host contract and, for a financial liability not measured at fair value through profit or loss, initially recognise and measure the financial liability at fair value plus or minus transaction costs, accounting for any difference between fair value and transaction price and applying the effective interest method. Applying paragraph B5.1.1 of IFRS 9, if the initial fair value differs from the transaction price, the bank determines whether a part of the consideration received is for something other than the financial liability - e.g. the difference may represent the benefit of a government loan at a below- market rate of interest. The Committee noted that the bank should use judgement to decide whether TLTROS contain a benefit of a government loan at a below-market rate of interest or a forgivable loan in the scope of IAS 20, and apply IAS 20 to the difference accordingly. This difference is only assessed at initial recognition. The bank applies IFRS 9 to account for the financial liability, both on initial recognition and subsequently. The Committee observed that the question arises as to how to reflect the uncertainty that arises from conditionality related to the contractual interest rate in the estimates of expected future cash flows when applying the effective interest method and that this affects both initial and subsequent measurement. However, it concluded that this is a broader matter that is also relevant for fact patterns other than that described in the request, which should be considered by the IASB as part of the IFRS 9's Post- implementation Review. C7 [End of Table C] © 2023 KPMG, a Hong Kong partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited ("KPMG International"), a private English company limited by guarantee. All rights reserved.

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