CNB's surplus of income over expenditures allocated in accordance with legislation

Published: 31/7/2009

Moved by media reports and inquiries as regards the suggestion put forward by the Independent Trade Unions of Croatia, saying that the CNB Council should adopt a new decision to allocate a larger amount of the CNB's 2008 surplus of income over expenditures to the state budget of the Republic of Croatia, we feel it necessary to inform the Croatian public that the adoption of such a decision would be contrary to the legislation in force. Pursuant to Article 57, paragraph (2) of the Act on the Croatian National Bank general reserves for the current financial year may neither be lower than the net profit from the value adjustment of balance sheet items to changes in the exchange rate (unrealised net gains from the exchange rate) or market prices (unrealised net gains from fair value), nor higher than 20% of the accumulated surplus of income over expenditures. As at 31 December 2008, the surplus of income over expenditures realised by the Croatian National Bank totalled HRK 3,387,020,368.47, while unrealised net gains from the exchange rate and fair value exceeded 20% of the amount of the surplus of income over expenditures.

Considering that 20% of the realised surplus of income over expenditures, which totalled HRK 677,404,073.69, was lower than the unrealised net gains from the exchange rate and fair value, which totalled HRK 2,044,525,153.79, the amount of HRK 2,044,525,153.79 was allocated to general reserves. The difference to the realised surplus of income, remaining after allocation to general reserves, which totalled HRK 1,342,495,214.68 was credited to the state budget of the Republic of Croatia.

The financial statements of the Croatian National Bank for 2008 have been audited by an independent auditor, Ernst&Young d.o.o. from Zagreb, who expressed an unqualified opinion thereon.

ALLOCATION OF THE 2008 SURPLUS OF INCOME OVER EXPENDITURES
No. DESCRIPTION AMOUNT IN HRK BASIS
1. Surplus of income over expenditures of the CNB for 2008 3,387,020,368.47 Article 56 of the Act on the Croatian National Bank - Calculation of the surplus of income over expenditures or shortfall between income and expenditures of the Croatian National Bank
2. General reserves of the Croatian National Bank 2,044,525,153.79* Article 57(2) of the Act on the Croatian National bank - Allocation of the surplus of income over expenditures and coverage of the shortfall between income and expenditures ("General reserves for the current financial year may neither be lower than net profit from the value adjustment of balance sheet items to changes in the exchange rate or market prices.").

2.1.

Total unrealised net gains (2.1.1.+2.1.2.) 2,044,525,153.79  

2.1.1.

Net gains from the value adjustment of balance sheet items to changes in the exchange rate 445,020,967.26 IAS-21 - The Effects of Changes in Foreign Exchange Rates: net profit from the value adjustment of balance sheet items to changes in the exchange rate shall be recognised in profit or loss;

2.1.2.

Net gains from the value adjustment of balance sheet items to changes in market prices 1,599,504,186.53 IAS 39 - Financial Instruments: Recognition and Measurement; net profit from value adjustment of balance sheet items to changes in the exchange rate or market prices shall be recognised in profit or loss.
3. State budget revenue (1.-2.) 1,342,495,214.68 Article 57(3) of the Act on the Croatian National Bank -Allocation of the surplus of income over expenditures and coverage of the shortfall between income and expenditures ("The surplus of income over expenditures remaining after the allocation to general reserves shall constitute extraordinary revenue to the state budget.").
* 20% of the accumulated surplus of income over expenditures 677,404,073.69 Article 57(2) of the Act on the Croatian National Bank - Allocation of the surplus of income over expenditures and coverage of the shortfall between income and expenditures ("General reserves for the current financial year may neither be lower than net profit from the value adjustment of balance sheet items to changes in the exchange rate or market prices, nor higher than 20% of the accumulated surplus of income over expenditures."). Since the amount of HRK 2,044,525,153.79 (unrealised net gains) exceeds HRK 677,404,073.69 (20% of the accumulated surplus of income over expenditures) HRK 2,044,525,153.79 is allocated to general reserves.