Report of Foreign Issuer (6-k)

Date : 09/14/2018 @ 12:00PM
Source : Edgar (US Regulatory)
Stock : Grupo Supervielle S.A. American Depositary Shares Each Representing Five Class B Shares (SUPV)
Quote : 9.34  0.34 (3.78%) @ 7:55PM
GRUPO SUPERVIELLE S.A. share price Chart

Report of Foreign Issuer (6-k)


UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 6-K


Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
under the Securities Exchange Act of 1934

For the month of September, 2018

Commission File Number: 001-37777


GRUPO SUPERVIELLE S.A.
(Exact name of registrant as specified in its charter)
SUPERVIELLE GROUP S.A.
(Translation of registrant’s name into English)


Bartolomé Mitre 434, 5th Floor

C1036AAH Buenos Aires
Republic of Argentina

(Address of principal executive offices)


Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. 

Form 20-F  ☒  Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Yes ☐  No ☒

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Yes ☐  No ☒

 


 

 

 

  GRUPO SUPERVIELLE S.A.

TABLE OF CONTENTS

     

      Item     

 

   
1.  

Unaudited Interim Consolidated Condensed Financial Statements for the six-month period ended on June 30, 2018, presented on comparative basis.

 

 

 

 

 

 

 

 

 

 

 

 

(GRAPHIC)

 

Unaudited Interim Consolidated Condensed Financial Statements

 

For the six-month period ended on  

June 30, 2018, presented on comparative basis

 

 

 

 

(GRAPHIC)

 

Contents  
   
Unaudited Consolidated Condensed Statement of Financial Position 2
Unaudited Consolidated Condensed Statement of Comprehensive Income 4
Unaudited Consolidated Condensed Statement of Changes in Shareholders’ Equity 8
Unaudited Consolidated Condensed Statement of Cash Flows 6
Notes to Unaudited Interim Consolidated Condensed Financial Statements 9
Unaudited Separate Condensed Statement of Financial Position 81
Unaudited Separate Condensed Statement of Comprehensive Income  82
Unaudited Separate Condensed Statement of Changes in Shareholders’ Equity  83
Unaudited Separate Condensed Statement of Cash Flows  84
Notes to Unaudited Separate Interim Condensed Financial Statements  85
Additional Information pursuant to Art. 12, Chapter III, Title IV of standards issued by the National Securities Commission  113
Informative Review 115

 

 

 

 

(GRAPHIC)

 

Unaudited Interim Consolidated Condensed Financial Statements

 

For the six-month period ended on  

June 30, 2018, presented on comparative basis.

 

 

  1

GRUPO SUPERVIELLE S.A.

 

Name: Grupo Supervielle S.A.
Fiscal Year: N° 40 started on January 1, 2018
Legal Address:

Bartolomé Mitre 434, piso 5 

Ciudad Autónoma de Buenos Aires

Core Business: Carry out, on its own account or third parties’ or related to third parties, in the country or abroad, financing activities through cash or instrument contributions to already-existing or to-be-set-up corporations, whether controlling such corporations or not, as well as the purchase and sale of securities, shares, debentures and any kind of property values, granting of fines and/or guarantees, set up or transfer of loans as guarantee, including real, or without it not including operations set forth by the Financial Entities Law and any other requiring public bidding.
Registration Number at the IGP: 212,617
Date of Registration at IGP: October 15, 1980
Amendment of by-laws (last): April 24, 2018 (Registration in progress)
Expiration date of the Company’s By-Laws: October 15, 2079
Corporations Article 33 Law N° 19,550 Note 9 to Interim Separate Condensed Financial Statements

 

Composition of Capital Stock as of June 30, 2018  

(Note 11 as per Interim Separate Condensed Financial Statements)

 

Shares Capital Stock  
Quantity Class N.V. $ Votes per
share
Subscribed
in thousands
of $
Integrated
in thousands
of $
 
 
126,738,188 A: Non endorsable, common shares of a nominal value 1 5 126,738 126,738  
329,984,134 B: Non endorsable, common shares of a nominal value 1 1 329,984 329,984  
456,722,322       456,722 456,722  

 

 

  2

GRUPO SUPERVIELLE S.A.

 

Unaudited Consolidated Condensed Statement of Financial Position  

As of June 30, 2018, December 31, 2017 and January 1, 2017 

(Expressed in thousands of pesos)

 

  ASSETS 06/30/2018 12/31/2017 01/01/2017
  Cash and due from banks 19,692,684 11,097,803 8,029,992
  Cash 3,265,007 3,039,001 1,879,885
  Financial institutions and correspondents 16,392,698 8,008,678 6,130,700
  Argentine Central Bank 14,039,975 7,049,798 5,621,780
  Other local financial institutions 2,352,723 958,880 508,920
  Foreign 34,979 50,124 19,407
  Debt Securities at fair value through profit or loss (Note 6 and 24) 13,654,688 11,404,286 424,708
  Derivatives (Note 6) 23,360 26,916 28,304
  Repo transactions 66,220 3,349,822
  Other financial assets (Note 6) 2,118,375 1,702,708 1,980,059
  Loans and other financing (Note 26) 74,526,672 60,426,730 38,738,545
  To the non-financial public sector 30,597 32,607 4,306
  To other financial entities 425,221 326,011 385,768
  To the Non-Financial Private Sector and Foreign residents 74,070,854 60,068,112 38,348,471
  Other debt securities (Note 6 and 24) 3,201,309 359,197 2,063,848
  Financial assets in guarantee (Note 6) 2,646,864 1,301,237 1,465,029
  Current income tax assets 347,686
  Investments in equity instruments (Note 25) 8,318 45,919 2,629
  Investment in subsidiaries, associates and joint ventures 734 3,501
  Property, plant and equipment (Note 8) 1,375,406 1,174,057 786,194
  Intangible assets (Note 9) 1,762,752 190,638 122,387
  Deferred income tax assets 366,489 489,175 347,800
  Other non-financial assets 998,155 633,187 678,606
  TOTAL ASSETS 120,788,978 92,202,409 54,671,602

 

The accompanying Notes are an integral part of the Unaudited Interim Consolidated Condensed Financial Statements.

 

 

  3

GRUPO SUPERVIELLE S.A.

 

Unaudited Consolidated Condensed Statement of Financial Position  

As of June 30, 2018, December 31, 2017 and January 1, 2017 

(Expressed in thousands of pesos)

 

    06/30/2018 12/31/2017 01/01/2017
  LIABILITIES      
  Deposits 75,672,650 56,408,685 35,860,974
  Non-financial public sector 8,538,602 6,171,661 2,587,253
  Financial sector 23,657 15,702 11,344
  Non-financial private sector and foreign residents 67,110,391 50,221,322 33,262,377
  Derivatives (Note 6) 191,701
  Repo transactions 5,097 590,891
  Other financial assets (Note 6) 4,647,794 3,899,874 2,756,039
  Financing received from the Argentine Central Bank and other financial institutions (Note 6) 7,962,821 3,524,267 1,715,670
  Negotiable obligations issued (Note 20) 10,786,374 8,588,970 2,049,074
  Current income tax liabilities (Note 5) 417,970 692,144 571,893
  Subordinated negotiable obligations (Note 20) 1,055,365 685,873 1,378,758
  Provisions 87,762 80,163 63,624
  Other non-financial liabilities 11
  TOTAL LIABILITIES 4,460,224 3,802,265 2,545,574
    105,287,769 77,682,241 47,532,497
  SHAREHOLDERS’ EQUITY      
  Capital stock 456,722 456,722 363,777
  Paid in capital 8,996,587 8,997,178 3,248,435
  Reserves 5,447,192 3,253,839 2,008,035
  Retained earnings (911,607) (294,390) (294,390)
  Other comprehensive income 363,184 136,384 77,797
  Result of period/year 993,349 1,819,842 1,311,304
  Shareholders’ Equity attributable to parent company 15,345,427 14,369,575 6,714,958
  Shareholders’ Equity attributable to non-controlling interest 155,782 150,593 424,147
  TOTAL SHAREHOLDERS’ EQUITY 15,501,209 14,520,168 7,139,105
  TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 120,788,978 92,202,409 54,671,602

 

The accompanying Notes are an integral part of the Unaudited Interim Consolidated Condensed Financial Statements.

 

 

  4

GRUPO SUPERVIELLE S.A.

 

Unaudited Consolidated Condensed Statement of Comprehensive Income 

For the six and three month period ended on June 30, 2018 and 2017  

(Expressed in thousands of pesos)

 

    For six-month period
ended on
For three-month period
ended on
    06/30/2018 06/30/2017 06/30/2018 06/30/2017
  Interest income (Note 10.1) 10,185,739 6,217,764 5,568,929 3,172,732
  Interest expenses (Note 10.2) (4,469,399) (2,341,043) (2,670,694) (1,222,503)
  Net interest income 5,716,340 3,876,721 2,898,235 1,950,229
  Commissions income (Note 10.4) 2,428,604 1,807,247 1,269,510 901,682
  Commissions expenses (Note 10.5) (525,579) (228,860) (257,467) (63,395)
  Income from insurance activity (Note 14) 294,029 222,751 145,282 112,767
  Net commission income 2,197,054 1,801,138 1,157,325 951,054
  Subtotal 7,913,394 5,677,859 4,055,560 2,901,283
  Net income from financial instruments at fair value through profit or loss (Note 10.3) 147,243 886,746 (509,279) 548,042
  Exchange rate difference on gold and foreign currency 1,374,995 48,598 1,226,062 50,366
  Other operating income (Note 10.6) 746,360 626,727 435,231 363,897
  Loan loss provisions (1,715,355) (803,636) (989,229) (442,788)
  Net operating income 8,466,637 6,436,294 4,218,345 3,420,800
  Employee benefits 3,105,523 2,487,727 1,585,226 1,240,022
  Administration expenses (Note 10.8) 2,101,809 1,507,567 1,175,636 820,120
  Depreciations and impairment of assets 144,750 139,842 76,314 68,106
  Other operating expenses (Note 10.7) 1,638,086 1,179,123 925,149 626,562
  Operating income 1,476,469 1,122,035 456,020 665,990
  Results before taxes from continuing operations 1,476,469 1,122,035 456,020 665,990
  Income tax from continuing operations (Note 5) 438,229 314,898 155,563 155,459
  Net income from continuing operations 1,038,240 807,137 300,457 510,531
  Net income of the period 1,038,240 807,137 300,457 510,531
  Net income of period attributable to parent company 993,349 796,082 270,715 504,276
  Net income of period attributable to non-controlling interest 44,891 11,055 29,742 6,255

 

The accompanying Notes are an integral part of the Unaudited Interim Consolidated Condensed Financial Statements..

 

 

  5

GRUPO SUPERVIELLE S.A.

 

Unaudited Consolidated Condensed Statement of Comprehensive Income 

For the six and three month period ended on June 30, 2018 and 2017  

(Expressed in thousands of pesos)

 

 

For six-month period  

ended on  

For three-month period
ended on
  06/30/2018 06/30/2017 06/30/2018 06/30/2017
Net income of the period 1,038,240 807,137 300,457 510,531
         
Components of Other Comprehensive Income not to be reclassified at the income of the period 282,404 54,854 245,431 43,128
Period revaluations of property, plant and equipment and intangibles (70,601) (17,377) (59,509) (13,273)
Income tax (Note 5) 211,803 37,477 185,922 29,855
Revaluation of property, plant and equipment and intangibles 381 4,664 809
Income of the period from equity instrument at fair value through other comprehensive income (114) (1,632) (283)
Income tax (Note 5) 267 3,032 526
Earnings and losses by equity instrument at fair value through other comprehensive income 212,070 40,509 185,922 30,381
Total Other Comprehensive Income not to be reclassified at the income of the period        
         
Components of Other Comprehensive Income to be reclassified at the income of the period        
Income of the period from financial instrument at fair value through other comprehensive income 16.897 12.827 22.526 (2.670)
Income tax (Note 5) (1.939) (4.488) (3.627) 936
Earnings and losses by financial instrument at fair value through other comprehensive income 14.958 8.339 18.899 (1.734)
Total Other Comprehensive Income to be reclassified at the income of the period 14.958 8.339 18.899 (1.734)
         
Total Other Comprehensive Income 227.028 48.848 204.821 28.647
Other comprehensive income attributable to parent company 226.800 48.819 204.629 28.641
Other comprehensive income attributable to non-controlling interest 228 29 192 6
         
Total Comprehensive Income 1.265.268 855.985 505.278 539.178
Total comprehensive income attributable to parent company 1.220.149 844.901 475.344 532.917
Total comprehensive income attributable to non-controlling interest 45.119 11.084 29.934 6.261

 

The accompanying notes are an integral part of the Unaudited Interim Consolidated Condensed Financial Statements.

 

 

  6

GRUPO SUPERVIELLE S.A.

 

Unaudited Consolidated Condensed Statement of Cash Flow 

For the six month period ended on June 30, 2018 and 2017  

 (Expressed in thousands of pesos)

 

 

  06/30/2018 06/30/2017
CASH FLOW FROM OPERATING ACTIVITIES    
     
Income of the period before Income Tax 1,476,469 1,122,035
     
Adjustments to obtain flows from operating activities:    
Amortizations and devaluations 144,750 139,842
Loan loss provisions 1,715,355 803,636
Exchange rate difference on gold and foreign currency (1,374,995) (48,598)
     
Net Increases / (decreases) from operating activities:    
Debt securities at fair value through profit or loss 1,030,194 (1,130,188)
Derivatives 3,556  28,304
Repo transactions 3,283,602
Loans and other financing    
 To the non-financial public sector 2,010 (21,675)
 To the other financial entities (99,210)  1,222
 To the non-financial sector and foreign residents (15,718,097) (6,672,426)
Other debt securities (2,842,112) (1,640,935)
Financial assets in guarantee (1,345,627) (1,316,133)
Investments in equity instruments 37,601 (2,739)
Other assets 534,928 (389,257)
     
Net increases / (decreases) from operating liabilities:    
Deposits    
Non-financial public sector 2,366,941  3,782,188
Financial sector 7,955 (3,408)
Private non-financial sector and foreign residents 16,889,069  3,177,228
Derivatives 191,701  5,061
Repo operations 5,097  885,185
Other liabilities 1,657,184 1,309,307
     
Payments from Income Tax (937,392) (373,421)
     
TOTAL OF OPERATING ACTIVITIES (A) 7,028,979 (344,772)
     
CASH FLOWS FROM INVESTMENT ACTIVITIES    
     
Payments:    
Purchase of PPE, intangible assets and other assets (1,918,213) (205,060)
Purchase of liabilities and equity instruments issued by other entities (38,968) (304,574)
Purchase of investments in subsidiaries (1,315,563)
     
TOTAL INVESTMENT ACTIVITIES (B) (3,272,744) (427,025)
     

 

 

  7

GRUPO SUPERVIELLE S.A.

 

Unaudited Consolidated Condensed Statement of Cash Flow 

For the six month period ended on June 30, 2018 and 2017  

 (Expressed in thousands of pesos)

 

CASH FLOWS FROM FINANCING ACTIVITIES    
     
Payments:    
Changes in investments in subsidiaries that do not result in control loss (591)
Financing received from Argentine Financial Institutions (351,489)
Payed Dividends (243,706) (65,500)
     
Collections:    
Unsubordinated negotiable obligations 2,197,404 4,886,659
Financing received from Argentine Financial Institutions 4,438,554
Subordinated obligations 369,492 67,992
Irrevocable contributions received 99,450
     
TOTAL FINANCING ACTIVITIES (C) 6,761,153 4,637,112
     
EFFECT OF CHANGES IN THE EXCHANGE RATE (D) 1,646,847 1,017,995
     
TOTAL CHANGES IN CASH FLOWS    
NET INCREASE IN CASH AND CASH EQUIVALENTS (A+B+C+D) 12,164,235 4,883,310
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF FISCAL YEAR 21,511,098 9,552,414
CASH AND CASH EQUIVALENTS AT PERIOD CLOSING 33,675,333 14,435,724

 

The accompanying notes are an integral part of the Unaudited Interim Consolidated Condensed Financial Statements.

 

 

  8

GRUPO SUPERVIELLE S.A.

 

Unaudited Consolidated Condensed Statement of Changes in Shareholders´ Equity

For the six-month period ended on June 30, 2018 and 2017

(Expressed in thousands of pesos)

 

Items Capital stock Paid in capital Irrevocable capital contributions Legal reserve Other reserves Retained earnings Other comprehensive income

Total 

Shareholders´ equity attributable to parent company

Total 

Shareholders´ equity attributable to non-controlling interest

Total shareholders´ equity
Balances at December 31, 2016 under Argentine Central Bank 363,777 3,248,435 49,794 1,958,241 1,311,304 6,931,551 6,931,551
IFRS Adjustments (294,390) 77,797 (216,593) 424,147 207,554
Balances at December 31, 2016 under IFRS 363,777 3,248,435 49,794 1,958,241 1,016,914 77,797 6,714,958 424,147 7,139,105
Other movements (77,224) (77,224)
Irrevocable capital contributions 99,450 99,450 (99,450)
Profit distribution as approved by general shareholders’ meeting dated April 27, 2017:                    
 - Reserve constitution 22,961 1,222,843 (1,245,804)
 - Dividend distribution (65,500) (65,500) (65,500)
Income of the period 796,082 796,082 11,055 807,137
Other comprehensive income of the period 48,819 48,819 29 48,848
Balances at June 30, 2017 363,777 3,248,435 99,450 72,755 3,181,084 501,692 126,616 7,593,809 258,557 7,852,366

 

Items Capital stock Paid in capital Legal reserve Other reserves Retained earnings Other comprehensive income

Total 

Shareholders´ equity attributable to parent company

Total 

Shareholders´ equity attributable to non-controlling interest

Total shareholders´ equity
Balances at December 31, 2017 under Argentine Central Bank 456,722 8,997,178  72,755  3,181,084 2,437,059 15,144,798 15,144,798
IFRS Adjustments (911,607) 136,384 (775,223) 150,593 (624,630)
Balances at December 31, 2017 under IFRS 456,722 8,997,178  72,755  3,181,084 1,525,452 136,384 14,369,575 150,593 14,520,168
Other movements (39,820) (39,820)
Profit distribution as approved by general shareholders’ meeting dated April 24, 2018:                  
 - Reserve constitution (Note 11) 18,589 2,174,764 (2,193,353)
 - Dividend distribution (Note 11) (243,706) (243,706) (243,706)
Purchase of subsidiaries ‘shares (591) (591) (110) (701)
Income of the period 993,349 993,349 44,891 1,038,240
Other comprehensive income of the period 226,800 226,800 228 227,028
Balances at June 30, 2018 456,722 8,996,587 91,344 5,355,848 81,742 363,184 15,345,427 155,782 15,501,209
                   

 

 

  9

GRUPO SUPERVIELLE S.A.

 

Notes to Unaudited Interim Consolidated Condensed Financial Statements

As of June 30, 2018 presented in comparative format

(Expressed in thousands of pesos)

 

1. ACCOUNTING STANDARDS AND BASIS OF PREPARATION

 

Grupo Supervielle S.A. (hereinafter, “the Group”), is a company whose main activity is the investment in other companies. Its main income is given by the distribution of dividends of such companies and the raising of earnings of other financial assets.

 

Grupo Supervielle S.A.´s Unaudited Interim Consolidated condensed Financial Statements have been consolidated, line by line with the Financial Statements of Banco Supervielle S.A., Cordial Compañía Financiera S.A., Sofital S.A. F. e I.I., Tarjeta Automática S.A., Supervielle Asset Management S.A., Espacio Cordial de Servicios S.A., Supervielle Seguros S.A., InvertirOnline S.A., InvertirOnline.Com Argentina S.A. and Micro Lending S.A.

 

The main investment of the Company accounts for the stake in Banco Supervielle S.A., a financial entity governed pursuant to Law N° 21,526 of Financial Statements and subject to provisions issued by the Argentine Central Bank, in virtue of which the entity has adopted valuation and disclosure guidelines (see Note 1.1) pursuant to provisions included in Title IV, chapter I, Section I, article 2 of the Amended Text 2013 issued by the National Securities Commissions.

 

These Unaudited Interim Consolidated condensed Financial Statements was passed by the Board of the Company over the course of its meeting held on August 23, 2018.

 

1.1. Adoption of IFRS

 

The Central Bank of the Argentine Republic (B.C.R.A.), through Communications “A” 5541 and amendments, has established the convergence plan towards the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and the interpretations issued by the IFRS Interpretations Committee for the entities under its supervision, except the application of section 5.5 (impairment) of IFRS 9 “Financial Instruments”, for the fiscal years as from January 1, 2018. Moreover, such entities shall prepare their opening Financial Statements as of January 1, 2017, which will be deemed the comparative basis of the fiscal year to begin on January 1, 2018. The first interim Financial Statements to be reported under these standards are those as of March 31, 2018.

 

The Argentine Central Bank also published Communication “A” 6430 dated January 12, 2018, by which it is established that Financial Entities shall begin to apply the provisions regarding Impairment of Financial Assets contained in section 5.5 of IFRS 9 for the fiscal years as of January 1, 2020. Such model of impairment of financial assets sets forth a scheme of three stages based on the change of the credit quality of the financial assets from its in initial recognition. The assets move through the three stages depending on the changes on credit risk and the stages dictate how an entity measures losses due to deterioration and applies the effective interest method.

 

Stage 1 includes financial instruments that have not had a significant increase in the credit risk since its initial recognition, or that have a low credit risk at the reporting date. For these instruments, expected credit losses (ECL) are recognized for 12 months and interest income is calculated based on the gross book value of the asset (that is, with no deduction of the impairment allowance). The 12-month ECL result from default events that are possible within the 12 months after the reporting date.

 

Stage 2 includes the financial instruments that have had a significant increase in the credit risk since its initial recognition (unless they have a low risk since its reporting date) but that do not show objective evidence of impairment. For these items, lifetime expected credit losses are recognized, but interest income is still calculated on the gross book value of the asset. Lifetime expected credit losses represent the present value of losses that would arise as a result of a default that occurred at any moment of the entire life of the instrument. It is the weighted average of losses that would occur in case of default, using the risk of default as the weights.

 

Stage 3 includes financial assets with objective evidence of impairment at the reporting date. For these items, lifetime expected credit losses are recognized and interest income is calculated on the net book value (that is, net value of the impairment allowance).

 

 

  10

GRUPO SUPERVIELLE S.A.

 

Notes to Unaudited Interim Consolidated Condensed Financial Statements

As of June 30, 2018 presented in comparative format

(Expressed in thousands of pesos)

 

These Unaudited Interim Consolidated condensed Financial Statements of the Group for the six-month period ended on June 30, 2018, have been prepared pursuant to IAS 34 “Interim Financial Reporting” and IFRS 1 “First-time Adoption of International Financial Reporting Standards”. The Unaudited Interim Consolidated condensed Financial Statements have been prepared according to the policies the Entity expects to adopt in its consolidated annual Financial Statements as of December 31, 2018.

 

The comparative figures and the ones from the transition date (January 1, 2017) have been modified in order to reflect the adjustments with the previous accounting framework.

 

In note 2.3 there is a reconciliation between the figures of the statements of financial position, comprehensive income statement and other comprehensive income statements included in the Unaudited Interim Consolidated condensed Financial Statements issued in accordance with the previous Accounting Framework and the figures reported in accordance with the Accounting Framework established by the Argentine Central Bank in these interim consolidated condensed Financial Statements, as of the transition date (January 1, 2017), the adoption date (December 31, 2017) and the closing date (June 30, 2017).

 

These Unaudited Interim Consolidated condensed Financial Statements should be read together with the annual Financial Statements of the Bank as of December 31, 2017, which have been prepared according to the previous accounting framework. Additionally, Note 17, included in these interim consolidated condensed Financial Statements, presents information under IFRS as of December 31, 2017 that is necessary for the understanding of these interim consolidated condensed Financial Statements.

 

The Group’s senior management has concluded that the Unaudited Interim Consolidated condensed Financial Statements reasonably represent the financial position, financial income and cash flow.

 

1.2. Basis of preparation

 

These Unaudited Interim Consolidated condensed Financial Statements have been prepared according to the Accounting Framework established by the Argentine Central Bank described in Note 1.1.

 

The preparation of these Unaudited Interim Consolidated condensed Financial Statements requires estimates and evaluations that affect the amount of registered assets and liabilities, and contingent assets and liabilities disclosed as of the issuing date of these interim consolidated condensed Financial Statements, as well as registered income and expenses.

 

The Group makes estimates in order to calculate, among others, loan loss allowances, lifespan of property, plant and equipment, depreciations and amortizations, recoverable value of assets, income tax charge, other charges and labor liabilities and allowances for contingencies, labor, civil and commercial lawsuits. The future real results may differ from the estimates and evaluations made at the preparation date of these unaudited interim consolidated condensed Financial Statements.

 

The areas that involve a greater degree of judgment or complexity or areas in which assumptions and estimates are significant to the Unaudited Interim Consolidated Condensed Financial Statements are described in Note 3.

 

(a)       Going concern

 

As of the date of these Unaudited Interim Consolidated condensed Financial Statements there are no uncertainties with respect to events or conditions that may raise doubts regarding the possibility that the Group continues to operate normally as a going concern.

 

(b)       Unit of measure

 

The Unaudited Interim Consolidated condensed Financial Statements of the Entity are expressed in Argentine pesos which is the functional currency of the Bank and its controlling Grupo Supervielle.

 

IAS 29 Financial Reporting in Hyperinflationary Economies requires that financial statements for any entity whose functional currency is the currency of a hyperinflationary economy, whether they are based on the historical cost approach or the current cost approach, must be stated in units of the functional currency current at the end of the reporting period. To this end, in general terms, the inflation rate must be computed in the non-monetary items from

 

 

  11

GRUPO SUPERVIELLE S.A.

 

Notes to Unaudited Interim Consolidated Condensed Financial Statements

As of June 30, 2018 presented in comparative format

(Expressed in thousands of pesos)

 

the date of acquisition or the revaluation date, as applicable. These requirements also include the comparative information of the financial statements.

 

For IAS 29, Hyperinflation is indicated by factors such as prices, interest and wages linked to a price index, and cumulative inflation rate over the last three years of around 100 per cent or more.

 

On July 24, 2018 the Argentine Federation of Professional Councils in Economic Sciences (FACPCE), issued a communication stating that the adjustment for inflation should be applied for accounting periods ending after July 1, 2018. However, at the time of issuance of these financial statements, Decree PEN 664/03, which does not allow the presentation of restated financial statements before the National Securities Commission (CNV) is in force. To date neither the Professional Council of Economic Sciences of the Autonomous City of Buenos Aires, nor the Central Bank of the Argentine Republic have pronounced on this matter, so the present financial statements have not been restated.

 

However, in the evaluation and interpretation of the financial position and results of the Entity, the relevant fluctuations that certain macroeconomic variables have suffered in recent years must be considered.

 

(c)       Changes in accounting policies/new accounting standards

 

The new published standards, modifications and interpretations are listed below, which still have not entered into force for fiscal years starting as of January 1, 2018, and have not been adopted in advance.

 

IFRS 16 “Leases” : In January 2016, the IASB issued IFRS 16 “Leases” which sets forth the new model of registration of leasing operations. Under IFRS 16, a contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for a consideration. IFRS 16 requires that the lessee recognize the lease liability which reflects future payments of leases, except for certain short-term lease agreements and leases of low-value assets. The lessors accounting is kept as provided in IFRS 17; however, it is expected that the new accounting model for lessees have an impact on the negotiations between lessors and lessees. This standard is effective for annual periods starting on or from January 1, 2019. The Entity is evaluating the accounting impact that the application of said standard will cause.

 

IFRS 17 “Insurance contracts” : In January 18, 2017, the IASB issued IFRS 17 “Insurance contracts” which provides a comprehensive framework based on principles for measurement and presentation of all insurance contracts. The new rule will supersede IFRS 4 Insurance contracts and requires that insurance contracts be measured using cash flows of existing enforcement and that income be recognized as the service is rendered during the coverage period. The standard will come into force for the fiscal years beginning as from November 1, 2021. The Entity is evaluating the impact of the adoption of this new standard.

 

IFRIC 23 “Uncertainty over income tax treatments” : Such interpretation clarifies how the recognition and measurement requirements of IAS 12 Income tax are applied when there is uncertainty over income tax treatments. This standard was published in June 2017 and will come into force for the fiscal years beginning as from January 1, 2019.

 

There are no other IFRS or IFRIC interpretations not yet effective and which are expected to have a significant impact on the Group.

 

1.3. Consolidation

 

A subsidiary is an entity (or subsidiary), including structured entities, in which the Bank has control because it (i) has the power to manage relevant activities of the subsidiary, which significantly affect its yield, (ii) has exposition, or rights, to variable yields for its participation in the subsidiary, and (iii) has the ability to use its power over the subsidiary in order to affect the investor’s yield amount. The existence and the effect of the substantive rights, including substantive rights of potential vote, are considered when evaluating whether the bank has power over the other entity. For a right to be substantive, the right holder must have the practical competence to exercise such right whenever it is necessary to make decisions on the direction of the entity’s relevant activities. The Bank can have control over an entity, even when it has less voting powers than those required for the majority.

 

Accordingly, the protecting rights of other investors, as well as those related to substantive changes in the subsidiary´ activities or applicable only in unusual circumstances, do not prevent the Bank from having power over a subsidiary. The subsidiaries are consolidated as from the date on which control is transferred to the Bank, ceasing its consolidation as from the date on which control ceases.

 

 

  12

GRUPO SUPERVIELLE S.A.

 

Notes to Unaudited Interim Consolidated Condensed Financial Statements

As of June 30, 2018 presented in comparative format

(Expressed in thousands of pesos) 

 

The following chart provides the subsidiaries which are object to consolidation:

 

Company Condition Legal Address Main Activity Percentage of direct or indirect
investment in capital stock
06/30/2018 12/31/2017 01/01/2017
Banco Supervielle S.A. Controlled Bartolomé Mitre 434, C.A.B.A., Argentina Commercial Bank 99.89% (1) 99.88% (1) 98.23% (1)
Cordial Compañía Financiera S.A. Controlled Reconquista 320, C.A.B.A., Argentina Financial Company 99.90% 99.89% 98.32%
Tarjeta Automática S.A. Controlled Bartolomé Mitre 434, C.A.B.A., Argentina Credit Card 99.99% 99.99% 99.78%
Supervielle Asset Management S.A. Controlled Bartolomé Mitre 434, C.A.B.A., Argentina Managing Company of MF 100.00% 100.00% 100.00%
Sofital S.A.F. e I.I. Controlled Bartolomé Mitre 434, C.A.B.A., Argentina Financial operations and administration of securities 100.00% 100.00% 100.00%
Espacio Cordial de Servicios S.A. Controlled San Martín 719/731, 1° Piso, Ciudad de Mendoza, Argentina Trading of products and services 100.00% 100.00% 100.00%
Supervielle Seguros S.A. Controlled Reconquista 320, 1° Piso. C.A.B.A., Argentina Insurance Company 100.00% 100.00% 100.00%
Micro Lending S.A. Controlled Guido 1926 1° piso- C.A.B.A., Argentina Financing investments 100.00%
Invertir Online S.A. Controlled San Martin 323, 11° Piso. C.A.B.A, Argentina Settlement and Clearing Agent 100.00%
InvertirOnline.Com Argentina S.A. Controlled San Martin 323, 11° Piso. C.A.B.A, Argentina Representations 100.00%
(1) Grupo Supervielle S.A.’s direct and indirect interest in Banco Supervielle S.A votes amounts to 99.86%, 98.86% and 98.21% as of 06/30/18, 12/31/17 and al 01/01/17 respectively.

 

It should be noted that the Group has begun to recognize InvertirOnline S.A., InvertirOnline.Com Argentina S.A. and Micro Lending S.A. in its Interim Consolidated Condensed Financial Statements as of the date of acquisition (See Note 24).

 

In virtue of the consolidation, the following Financial Statements were utilized as of June 30, 2018: Financial Statements of Banco Supervielle S.A., Cordial Compañía Financiera S.A., Supervielle Seguros S.A, Sofital S.A. F. e I.I., Supervielle Asset Management S.A., Tarjeta Automática S.A. and Espacio Cordial de Servicios S.A., which cover the same period of time regarding the Group´s Financial Statements. Financial Statements of Banco Supevielle S.A. and Cordial Compañía Financiera S.A. have been prepared based on the accounting framework set by the Argentine Central Bank (See Note 1.2).

 

Financial Statements of Supervielle Seguros S.A: have been prepared pursuant to accounting standards issued by the National Insurance Superintendence, which differ on closing date of the fiscal year, that is, June 30 of each year and in certain adjustments of the accounting framework issued by the Argentine Central Bank.

 

Financial Statements of Tarjeta Automática S.A., Supervielle Asset Management S.A., Supervielle Seguros S.A, Sofital S.A. F. e I.I., Espacio Cordial de Servicios S.A., InvertirOnline S.A., InvertirOnline.Com Argentina S.A. and Micro Lending S.A, have been adjusted so that such Financial Statements include criteria similar to those applied by the Group in the preparation of Interim Consolidated Condensed Financial Statements.

 

Assets and liabilities and income from operations among members of the Group that were not transferred to third parties have been removed from the Interim Consolidated Condensed Financial Statements.

 

Non-controlling investment accounts for that portion of net income and shareholders´ equity of a subsidiary attributable to interest which is not owned, directly or indirectly, by the Group. Non-controlling investments are included in a separate item of the shareholders´ equity of the Group.

 

 

  13

GRUPO SUPERVIELLE S.A.

 

Notes to Unaudited Interim Consolidated Condensed Financial Statements

As of June 30, 2018 presented in comparative format

(Expressed in thousands of pesos)

 

Pursuant to IFRS 3, the acquisition method shall be utilized to record the acquisition of a subsidiary. Identifiable acquired assets and contingent assets and liabilities assumed in a combination of businesses are valuated at fair value on the acquisition date.

 

The goodwill is valuated as the difference between the net amounts as of acquisition date of identifiable assets, assumed liabilities, transferred earning, the amount of the non-controlling interest in the acquired entity and the fair value of the interest in the acquired entity prior to the acquisition date.

 

The transferred earning in a combination of businesses is valuated at fair value of assets transferred by the acquirer, liabilities incurred by the company with previous owners and interest in the shareholders´ equity issued by the acquirer. Transaction costs are recognized as expenses in periods in which expenses were incurred and services rendered, except from transaction costs incurred for the issuance of equity instruments which are deducted from shareholders´ equity and transaction costs incurred for the issuance of debt which is deducted at book value.

 

As mentioned in Note 2.2. the Company has decided not to apply IFRS 3 retroactively for those business combinations incurred prior to the transition date.

 

1.4. Consolidated Structured Entities

 

Banco Supervielle S.A., Cordial Compañía Financiera S.A. and Micro Lending S.A have securitized certain financial instruments, mainly consumer loans, through the transfer of said financial instruments to financial trusts that issue several classes of debt securities and participation certificates.

 

The following are financial trusts where Banco Supervielle S.A. serves as trustee:

 

Financial Trust Set-up on Securitized Amount Issued Securities
Type Amount Type Amount
Series 94 12/19/2016 $ 250,000 VDF TV A FV$ 200,000 CP FV $ 50,000
Mat: 05/21/18 Mat: 06/21/21
Series 95 06/16/2017 $ 500,000 VDF TV A FV $ 450,000 CP FV $ 50,000
Mat: 03/20/19 Mat: 01/20/22
Series 96 09/19/2017 $ 236,867 VDF TV A FV $ 220,285 CP FV $ 16,581
Mat: 06/20/19 Mat: 04/20/22
Series 97 03/02/2018 $ 750,000 VDF TV A FV $ 712,500 CP FV $ 37,500
Mat: 01/20/20 Mat: 03/20/20

 

The following are financial trusts where Cordial Compañía Financiera S.A serves as trustee:

 

Financial Trust Set-up on Securitized Amount Issued Securities
Type Amount Type Amount
XIV 10/04/2016 $ 266,322 VDF TV A FV $ 207,731 CP FV $ 58,591
Mat: 12/15/17 Mat: 08/16/21
XV 03/07/2017 $ 400,000 VDF TV A FV $ 316,000 CP FV $ 84,000
Mat: 06/15/18 Mat: 11/15/19
XVI 04/07/2017 $ 398,000 VDF TV A FV $ 314,420 CP FV $ 83,580
Mat: 06/15/18 Mat: 02/17/20
XVII 05/17/2017 $ 499,100 VDF TV A FV $ 394,289 CP FV $ 104,811
Mat: 08/15/18 Mat: 05/15/20
XVIII 06/13/2017 $ 500,000 VDF TV A FV $ 395,000 CP FV $ 105,000
Mat: 10/15/18 Mat: 04/15/20

 

 

  14

GRUPO SUPERVIELLE S.A.

 

Notes to Unaudited Interim Consolidated Condensed Financial Statements

As of June 30, 2018 presented in comparative format

(Expressed in thousands of pesos)

 

The following are financial trusts where Micro Lending S.A serves as trustee:

 

Financial Trust Set-up on Securitized Amount Issued Securities
Type Amount   Amount Type Amount
III 06/08/2011 $ 39,779 VDF TV A VN$ 31,823 VDF B VN $ 6,364 CP VN $ 1,592
Vto: 03/12/13 Vto: 11/12/13 Vto: 10/12/16
IV 09/01/2011 $ 40,652 VDF TV A VN$ 32,522 VDF B VN $ 6,504 CP VN $ 1,626
Vto: 06/20/13 Vto: 10/20/13 Vto: 01/20/17
V 08/21/2014 $ 42,258 VDF TV A VN$ 33,807 VDF B VN $ 6,761 CP VN $ 1,690
Vto: 09/20/15 Vto: 02/20/16 Vto: 05/20/18
VI 12/02/2014 $ 40,375 VDF TV A VN$ 32,300 VDF TV B VN $ 6,460 CP VN $ 1,615
Vto: 12/20/15 Vto: 07/20/16 Vto: 07/20/18
VII 04/01/2015 $ 40,062 VDF TV A VN$ 32,851 VDF TV B VN $ 4,006 CP VN $ 3,205
Vto: 08/20/16 Vto: 12/20/18 Vto: 07/20/18
VIII 07/24/2015 $ 59,173 VDF TV A VN $ 48,522 VDF TV B VN $ 8,284 CP VN $ 2,367
Vto: 11/15/16 Vto: 05/15/17 Vto: 07/16/18
IX 05/18/2015 $ 58,606 VDF TV A VN $ 48,057 VDF TV B VN $ 7,033 CP VN $ 3,516
Vto: 03/15/17 Vto: 10/16/17 Vto: 07/16/20
X 08/24/2015 $ 56,357 VDF TV A VN $ 46,213 VDF TV B VN $ 7,890 CP VN $ 2,254
Vto: 07/20/17 Vto: 01/20/18 Vto: 10/20/20
XI 10/30/2015 $ 67,310 VDF TV A VN $ 55,194 VDF TV B VN $ 9,423 CP VN $ 2,693
Vto: 09/15/17 Vto: 02/15/18 Vto: 01/15/21
XII 01/14/2016 $ 64,843 VDF TV A VN $ 58,358 VDF TV B VN $ 3,891 CP VN $ 2,594
Vto: 11/15/17 Vto: 01/15/18 Vto: 05/17/21
XIII 05/13/2016 $ 69,988 VDF TV A VN $ 63,689 VDF TV B VN $ 3,499 CP VN $ 2,800
Vto: 06/15/18 Vto: 08/15/18 Vto: 09/15/21
XIV 09/01/2016 $ 69,144 VDF TV A VN $ 62,230 VDF TV B VN $ 4,149 CP VN $ 2,766
Vto: 06/15/18 Vto: 08/15/18 Vto: 11/15/21
XV 10/27/2016 $ 79,342 VDF TV A VN $ 67,758 VDF TV B VN $ 8,093 CP VN $ 3,491
Vto: 10/15/18 Vto: 02/15/19 Vto: 01/15/22
XVI 01/10/2017 $ 88,354 VDF TV A VN $ 76,868 VDF TV B VN $ 7,598 CP VN $ 3,888
Vto: 11/15/18 Vto: 02/15/19 Vto: 03/15/22
XVII 08/23/2017 $ 129,952 VDF TV A VN $ 97,464 VDF TV B VN $ 7,940 CP VN $ 24,548
Vto: 01/15/19 Vto: 04/15/19 Vto: 07/22/22
XVIII 12/01/2017 $ 173,261 VDF TV A VN $ 89,501 VDF TV B VN $ 7,291 CP VN $ 22,543
Vto: 05/15/19 Vto: 08/15/19 Vto: 10/15/22

 

The Group controls a structured entity when it is exposed to, or holds the right to, variable returns and has the capacity to allocate returns through its power to run the activities of the entity. Structured entities are consolidated as from the date on which the control is transferred to the Group. The consolidation of such entities are cancelled on the date on which such control is terminated.

 

As for financial trusts, the Company has evaluated the following:

 

• The object and design of its interest 

• Spotting of main activities 

• Decision-making processes regarding such activities 

• Whether the investor´s rights result in the capacity to run relevant activities 

• Whether the investor is exposed to, or has the right on, variable returns of its interest in the subsidiary 

• Whether the investor has the capacity to utilize its power on the Company to affect the investor´s return.

 

In accordance with the aforementioned, the Group has decided that it holds control om such financial trusts and, therefore, such structured entities have been consolidated.

 

The following chart provides the book value and classification of assets and liabilities of Structured Entities that have been consolidated as of June 30, 2018, December 31, 2017 and January 1, 2017:

 

 

  15

GRUPO SUPERVIELLE S.A.

 

Notes to Unaudited Interim Consolidated Condensed Financial Statements

As of June 30, 2018 presented in comparative format

(Expressed in thousands of pesos)

 

06/30/2018 12/31/2017 01/01/2017
Assets      
Loans 1,596,012 1,348,654 1,447,783
Financial assets 243,108 139,639 172,077
Other assets 18,342 18,895 35,404
Total Assets 1,857,462 1,507,188 1,655,264
Liabilities      
Financial liabilities 1,336,846 810,862 953,678
Other liabilities 62,275 89,112 84,724
Total Liabilities 1,399,120 899,974 1,038,402

 

1.5. Transactions with non-controlling interest

 

The Group applies a policy aimed at treating non-controlling interest transaction as if such transactions were carried out with shareholders of the Group. As for non-controlling interest acquisitions, the difference between any paid compensation and the relevant interest at book value of net assets acquired by the subsidiary is recognized in the shareholder´s equity. Earnings and losses for the sale of interest, as long as control is held, are also recognized in the shareholders´ equity.

 

1.6. Information by segment

 

An operating segment accounts for an item of an entity that (a) develops business activities from which the Group may raise income or incur in expenses (including income and expenses related to transactions with other items of the same entity), (b) which operating income is reviewed on a regular basis by the Senior Management with the purpose of taking decisions regarding the resources that must be assigned to such segment and evaluate the performance of such items and (c) for whom the confidential financial information is available.

 

The information by segments is provided in a consistent manner with those internal reports delivered to:

 

(i) Key personnel of the senior management who account for the main authority in operating decision-making processes and is responsible for the assignment of resources and the evaluation of operating segments; and

 

(ii) The Board, who is in charge of taking strategic decisions of the Group.

 

1.7. Foreign currency conversion

 

(a)       Functional currency and reporting currency

 

Figures included in the Unaudited Interim Consolidated condensed Financial Statements as per each entity of the Group are expressed in the functional currency, that is, in the currency of the main economic setting where it operates. Interim consolidated condensed Financial Statements are expressed in Argentine pesos, which is the functional currency and the reporting currency of the Group.

 

(b)       Transactions and balances

 

Transactions in foreign currency are converted in the functional currency at the reference Exchange rate released by the Argentine Central Bank and those carried out in other currencies, at the repo rate in US dollars for the reference Exchange rate released by the Argentine Central Bank. Earnings and losses in foreign currency that result in the liquidation of such transactions and the conversion of monetary assets and liabilities denominated in foreign currency at closing exchange rates, are recognized in the integral income statement, under “Difference of exchange rate in gold and foreign currency”, except when such items are deferred in the shareholders’ equity for transactions classified as cash flow hedging, when applicable.

 

1.8. Cash and deposits in banks

 

Cash and deposits in Banks item includes available cash and available deposits in Banks.

 

Assets recorded in cash and due from Banks are recorded at amortized cost which is close to its fair value.

 

 

  16

GRUPO SUPERVIELLE S.A.

 

Notes to Unaudited Interim Consolidated Condensed Financial Statements

As of June 30, 2018 presented in comparative format

(Expressed in thousands of pesos)

 

Cash equivalents are made up by highly liquid short-term securities with three-month or shorter initial maturities, with fair value rating.

 

Item 06/30/2018 12/31/2017 06/30/2017 12/31/2016
Cash and due from banks 19,692,684 11,097,803 9,445,548 8,029,992
Listed Bills and Notes of the Argentine Central Bank for the Bank’s own portfolio 13,160,269 9,732,430 3,819,528 336,785
Mutual Funds 822,380 680,865 1,170,648 1,185,637
Cash and equivalents 33,675,333 21,511,098 14,435,724 9,552,414

 

In turn, the following includes reconciliations between balances of those items considered as cash equivalents in the Statement of Cash Flow and those included in the Financial Statements as of period closing:

 

Items 06/30/2018
Cash and due from Banks  
As per Statement of Financial Position 19,692,684
As per Statement of Cash Flows 19,692,684
Debt securities at fair value through profit or loss  
 As per Statement of Financial Position 13,654,688
 Securities not considered as cash equivalents (494,419)
 As per Statement of Cash Flows 13,160,269
Mutual Funds  
As per Statement of Financial Position – Other financial assets 2,118,375
Other assets (1,295,995)
 As per Statement of Cash Flow 822,380

 

1.9. Financial Instruments

 

Initial Recognition

 

El The Bank recognizes financial assets or liabilities in its Interim Condensed Financial Statements, as applicable, when it is established in the contract clauses of the financial instrument in question. Purchases and sales of financial instruments that require delivery of assets within the period generally established by market regulations or conditions are recognized at the trade date of the transaction by which the Group undertakes to the purchase or sale of the asset.

 

In the initial recognition, the Group measures financial assets or liabilities at their fair value. Instruments that are not recognized at fair value through profit or loss are recorded at the fair value adjusted by the transaction costs that are directly attributed to its acquisition or issuance, such as fees and commissions.

 

When fair value differs from the cost of the initial recognition, the Group will recognize the difference as follows:

 

- When fair value is consistent with the market value of the financial asset or liability or is based on a valuation technique that only uses market values, the difference will be recognized as profit or loss, as applicable.

 

- In other situations, the difference is deferred and recognition at the time of the profit or loss is determined individually. The difference is amortized through the life of the instrument until fair value can be measured on market values.

 

 

  17

GRUPO SUPERVIELLE S.A.

 

Notes to Unaudited Interim Consolidated Condensed Financial Statements

As of June 30, 2018 presented in comparative format

(Expressed in thousands of pesos)

 

Financial Assets

 

a – Debt Instruments

 

The Group consider debt instruments as those regarded as financial liabilities for the issuer, such as loans, public and private securities, debt securities and accounts receivable from clients under agreements with no resources.

 

Classification

 

Pursuant to IFRS 9, the Entity classifies financial assets depending on whether these are subsequently measured at amortized cost, fair value through other comprehensive income or fair value through profit or loss, on the basis of:

 

a) the Group’s business model for managing financial assets, and;

b) the contractual cash-flows characteristics of the financial asset

 

Business Model

 

The business model refers to the way in which the Group manages a group of financial assets in order to achieve a concrete business objective. It represents the form in which instruments are held for generating funds.

 

Business models the Group may adopt are the following:

 

- to hold instruments until maturity;

- to hold instruments in portfolio for cash flow collection and, in turn, sell them in case it is convenient; or

- to hold instruments for trading.

 

The business model of the Group does not depend on the management’s intentions for an individual instrument. Consequently, such business model is not assessed instrument by instrument, but at a higher aggregated level.

 

The Group reclassifies an instrument only when the business model for the administration of assets is modified.

 

Cash Flow Characteristics

 

The Group evaluates the contractual terms of its financial instruments to identify if the cash flow return of these grouped financial assets is not significantly different from the contribution that it would receive only from interests, otherwise these shall be measured at fair value through profit or loss.

 

Based on the aforementioned, there are three different categories of Financial Assets:

 

i)        Financial assets at amortize cost.

 

Financial assets shall be measured at amortized cost if

 

(a) the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows and

 

(b) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

 

These financial instruments shall be measured at its fair value plus incremental, directly attributable, transaction costs, and subsequently measured at amortized cost.

 

A financial asset’s amortized cost is the amount at which it is acquired minus the cumulative amortization plus accrued interests (using the effective interest method), net of any impairment loss.

 

ii)        Financial assets at fair value through other comprehensive income:

 

Financial assets shall be measured at fair value through other comprehensive income when:

 

 

  18

GRUPO SUPERVIELLE S.A.

 

Notes to Unaudited Interim Consolidated Condensed Financial Statements

As of June 30, 2018 presented in comparative format

(Expressed in thousands of pesos)

 

(a) the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and

 

(b) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

 

These instruments shall be initially recognized at fair value plus incremental, directly attributable, transaction costs, and subsequently measured at fair value through other comprehensive income. Gains and losses arising out of changes in fair value shall be included in other comprehensive income within a separate component of equity. Impairment losses or reversal, interest revenue and foreign exchange rate gains and losses shall be recognized in profit or loss.

 

iii)        Financial assets at fair value through profit or loss:

 

Financial assets at fair value through profit or loss comprise:

 

- Instruments held for trading

- Instruments specifically designated at fair value through profit or loss

- Instruments with contractual terms that do not represent contractual cash flows that are solely payments of principal and interest on the principal amount outstanding

 

These financial instruments shall be initially recognized at fair value and any gain or loss shall be recognized in profit or loss upon effectiveness.

 

The Group classifies a financial instrument as held for trading if it is acquired or incurred with an intention to sell or repurchase them in the short term, or it is part of a portfolio of financial instruments that are managed together and for which there is evidence of a recent pattern of short-term profit-taking or it is a derivative which is not embedded in a qualifying hedging relationship. Derivatives and instruments held for trading shall be classified as held for trading and are recognized at fair value.

 

b – Equity Instruments

 

Equity instruments are those recognized as such by the issuer, that is, instruments that do not imply any payable contractual obligation and that record a residual interest over the asset of the issuer after deducting its total liabilities.

 

Such instruments are valued at fair value through profit and loss, except in those cases in which the senior management has utilized, upon initial recognition, the irrevocable option of measuring such instruments at fair value through other comprehensive income. This method is applicable when instruments are not held to negotiate and results are recorded in OCI with no reclassification option, even when effective. Receivable dividends that result from such instrument would be recognized only under the right to receive such payment.

 

Write-off of Financial Assets

 

The Group recognizes the write-off of financial assets only when any of the following conditions is met:

 

1. The rights on the financial asset cash flows have expired; or

 

2. The financial asset is transferred pursuant to the requirements in 3.2.4 of IFRS 9.

 

The Group derecognizes financial assets that have been transferred only when the following characteristics are met:

 

1. The contractual rights on receiving fund flows from future funds have been transferred

 

 

  19

GRUPO SUPERVIELLE S.A.

 

Notes to Unaudited Interim Consolidated Condensed Financial Statements

As of June 30, 2018 presented in comparative format

(Expressed in thousands of pesos)

 

2. The Entity holds the contractual rights to receive fund flows but assumes a re-purchasing obligation when the following requirements are met:

 

a.       The Group is not obliged to pay any amount before receiving the cash flow for the asset transfer;

 

b.       The Group is banned from selling the financial asset;

 

c.       The Group has to refer the fund flows to which it has committed

 

Financial Liabilities

 

Classification

 

The Group classifies its financial liabilities at amortized cost utilizing the effective rate method except for:

 

- Financial liabilities valued at fair value through profit or loss

- Liabilities that arise from financial assets transfers

- Financial guarantee contracts

- Agreements on granting loans below market rates

 

Financial Liabilities valued at fair value through profit or loss : The Group can choose to use, at the beginning, the irrevocable option to designate a liability at fair value through profit or loss if and only if by doing so, it reflects more appropriately the financial information because:

 

- The Group removes or reduces significantly the inconsistencies of measurements or recognition which, otherwise, would be presented in the valuation;

- Whether the assets and financial liabilities are managed and their performances evaluated on a fair value basis pursuant to an investment strategy or a documented risk management; or

- A principal contract has one or more embedded derivatives.

 

Financial guarantee contract : A guarantee contract is a contract which requires the issuer to make specific payments to reimburse the holder for the loss incurred when a specific debtor default on his debt as they fall due, according to the conditions, either original or amended, of a debt instrument.

 

Financial guarantee contracts and agreements on granting loans below market rate are valued at fair value, in the first instance; so later, a comparison between the higher value of the commission to be accrued at the fiscal year closing and the applicable allowance.

 

Write-off of financial liabilities

 

The Entity derecognizes financial liabilities only when they have expired; this is, when they have been settled, paid or the contract expired.

 

1.10       Derivatives

 

Derivatives, including currency contracts, interest rate futures, term contracts, interest rate and currency swaps, and options over currency and interest rates are registered at their fair value.

 

All derivative instruments are recorded as assets when their fair value is positive, and as liabilities when their fair value is negative, related to the agreed price. Any change in the fair value of derivative instruments is included in the fiscal year income.

 

1.11        Repo Operations

 

The sale and repurchase agreements (“repo liability operations”), which effectively provide the lender’s return to the counterparty, are treated as guaranteed financing transactions. Securities sold under those sale and repurchase agreements are not withdrawn from accounts. The securities are not reclassified in the statement of financial position unless the assignee has the right by contract or sale to sell or replace them. In such case, securities are reclassified as

 

 

  20

GRUPO SUPERVIELLE S.A.

 

Notes to Unaudited Interim Consolidated Condensed Financial Statements

As of June 30, 2018 presented in comparative format

(Expressed in thousands of pesos)

 

recoverable accounts by repurchase. Appropriate liabilities are presented within Financings received from Argentine Central Bank and other Financial Institutions item.

 

The securities purchased pursuant to the resale agreements (“repo asset transactions”), which effectively provide the lender’s return to the Entity, are registered as debts within Financings received from Argentine Central Bank and other Financial Institutions item.

 

The difference between the sale price and the repurchase price or the purchase price and the resale price, adjusted by interest and dividends received by the counterparty or by the Group, as appropriate, constitute the premium of the operation. Such premium is treated as interest income or expenses, which are accrued during the effectiveness of the agreements.

 

Securities lent to counterparties as fixed commission is held in the consolidated condensed Financial Statements in their original category unless one of the parties holds the contract or customary right to sell or replace securities: In such cases, such securities are reclassified and presented individually. Securities borrowed as fixed commission are not recorded in the consolidated condensed Financial Statements, unless sold to third parties. In, such cases, the purchase or sale are recorded as the year income within earnings minus losses resulting from negotiable securities. The obligation to return securities is recorded at fair value in other funds delivered as loans.

 

1.12. Uncolletibility risk provisions

 

As regards uncollectibility risk provisions, the standards on “Minimum uncollectibility risk provisions” in Section 8 of LISOL (by its Spanish acronym) are still effective and described as follows:

 

Over the total of clients’ debt, the following minimum uncollectibility guidelines must be applied:

 

Commercial Portfolio Loan portfolio or similar to loan With preferred guarantees Without preferred guarantees
Normal situation Normal situation 1% 1%
Under observation Low risk 3% 5%
Under bargaining process or with refinancing agreements

N/A

 

6% 12%
With problems Medium risk 12% 25%
High risk of insolvency High risk 25% 50%
Irrecoverable Irrecoverable 50% 100%
Irrecoverable under technical ruling Irrecoverable under technical ruling 100% 100%

 

In turn, the situation assigned to each debtor of the commercial and consumer portfolio is defined in accordance with the client´s repayment capacity and, only at a second stage, in accordance with the liquidation of assets; whereas, as for consumer portfolio, the situation assigned for each debtor is defined in accordance with delinquency days recorded by each debtor.

 

The Group has chosen to interrupt the accrual of interest of those clients who report delays longer than 90 days instead of setting aside allowances for their 100%.

 

1.13        Financial Lease / Leasing

 

Financial leases

 

They have been registered at the current value of unearned amounts, calculated according to agreed conditions in their respective contracts, depending on the interest rate embedded in them.

 

Initial measurement

 

The Group utilizes the interest rate embedded in the lease to measure the net investment, which is defined in such a way that the income initial direct costs are automatically included in the net investment of the lease.

 

 

  21

GRUPO SUPERVIELLE S.A.

 

Notes to Unaudited Interim Consolidated Condensed Financial Statements

As of June 30, 2018 presented in comparative format

(Expressed in thousands of pesos)

 

The initial direct costs, which are different from those incurred by the manufacturer or retailers, are included in the initial measurement of the lease net investment and decrease the amount of income recognized during the lease term. The interest rate embedded in the lease is defined in such a way that the initial direct costs are included automatically into the lease net investment; there is no need to add them separately.

 

The difference between the receivable gross amount and the current value is represented in the financial income that is recognized during the lease term. The lease financial income is booked within the fiscal year income. Impairment losses are recorded within the income of the period.

 

The Bank utilizes the criteria described in Note 1.12 to determine whether there is objective evidence that there was an impairment loss as regards loans at amortized cost.

 

1.14      Property, plant and equipment

 

Valued at acquisition or construction cost, net of accrued depreciations and/or accrued devaluation losses, if any; except from real state, in virtue of which, the Group adopted the revaluation method. The cost includes expenses directly attributable to the acquisition or building of these items.

 

The subsequent costs are included in the active value or are recognized as a separate asset, as appropriate, if and only if it is probable that they generate future economic benefits for the Group, and their costs can be fairly measured. The book value of the asset that is being replaced is withdrawn, thus the new asset is amortized by the number of years of useful life left at the moment of the improve.

 

The maintenance and reparations expenses are recognized in the consolidated income statement of the fiscal year in which they are incurred.

 

The depreciation is calculated utilizing the straight-line method, applying annual rates sufficient to extinguish the values of assets at the end of their estimated useful life. In those cases in which an asset includes significant components with different useful lives, such components are recognized and depreciated as separate items.

 

The following chart presents the useful life for each of the items forming part of the item property, plant and equipment:

 

Property, plant and equipment Estimated useful life
Buildings 50 Years
Furniture and plant 10 Years
Machines and equipment 5 Years
Vehicles 5 Years
Others 5 Years

 

The residual value of the property, plant and equipment, useful lives and depreciation methods are reviewed and adjusted if necessary, at each fiscal year closing or when there are devaluation signs.

 

The book value of the property, plant and equipment is immediately reduced at its recoverable amount when the book amount is greater than the estimated recoverable amount.

 

In the case of real state, the highest revaluation value includes other comprehensive income, within the consolidated comprehensive income statement. If the revaluation is lower than the net historical cost of accrued depreciations, the resulting loss is included in the net result of the period/year.

 

The property, plant and equipment income is calculated comparing the obtained income with the book value of the respective good. The return or loss arising therefrom is registered in the consolidated comprehensive income statement.

 

1.15       Investment property

 

Measurement basis utilized

 

The investment property is composed of real property (lots and building or part of a building or both) held for obtaining a rent or for capital appreciation or both, but is never occupied by the Entity.

 

 

  22

GRUPO SUPERVIELLE S.A.

 

Notes to Unaudited Interim Consolidated Condensed Financial Statements

As of June 30, 2018 presented in comparative format

(Expressed in thousands of pesos)

 

Investment property is booked at its fair value, and any changes in it are directly represented in the period income. Investment property is never depreciated. The fair value is based on appraisals made by independent appraisers.

 

Figures included in the period income for Investment Property. NIC 40 (75) (f)

 

  06/30/2018 06/30/2017
Income from rents (collected rents) 3,979 14,732
Direct real-state expenses that produced income from rents 1,527  2,353
Result from fair value  97,402 11,769

 

The book value of investment property is reduced immediately to its recoverable amount when the book amount is higher than the estimated recoverable amount.

 

Earnings and losses from the sale of investment property are calculated comparing the obtained income with the book value of the respective good. The return or loss arising therefrom is registered in the consolidated comprehensive income statement.

 

1.16        Intangible Assets

 

(a) Goodwill

 

The Goodwill resulting from the acquisition of subsidiaries, associates or joint ventures account for the excess between:

 

(i) the acquisition cost, measured as the addition of the transferred amount, valued at fair value as of acquisition date plus the amount of non-controlling interest; and

 

(ii) the fair value of acquired identifiable assets and liabilities assumed of the acquired item.

 

Goodwill is included in the intangible assets item in the consolidated financial statement.

 

Goodwill is not amortized. The Group evaluates, on an annual basis, or upon devaluation signs, the goodwill recoverability based on future flows of funds discounted plus additional information as of the preparation of the consolidated Financial Statements. Devaluation losses are not reverted once recorded. Earnings and losses from the sale of an entity include the goodwill balance related to the sold entity.

 

Goodwill is assigned to cash-generating units so as to run recoverability tests. The assignment is carried out among those cash-generating units (or groups of units), which are identified in accordance to the operating segment criterion and benefit from the combination of businesses from which such goodwill stemmed.

 

As for goodwill resulting from the combination of previous businesses as of IFRS transition date, the Group has chosen option IFRS 1 “First-time Adoption of IFRS”, regarding the non- retroactive application of IFRS 3 “Business Combination”

 

(b) Software

 

Costs related to software maintenance are recognized as expenses when incurred. Development, acquisition or implementation costs which are directly attributable to identifiable and single software design and tests controlled by the Group are recognized as assets.

 

Development, acquisition or implementation costs recognized initially as period expenses, are not recognized as intangible asset cost. Costs incurred in the development, acquisition or implementation of software, recognized as intangible assets are amortized through the application of straight-line method doting their estimated useful lives, over a term not exceeding five years.

 

 

  23

GRUPO SUPERVIELLE S.A.

 

Notes to Unaudited Interim Consolidated Condensed Financial Statements

As of June 30, 2018 presented in comparative format

(Expressed in thousands of pesos)

 

1.17        Devaluation of non-financial assets

 

Assets with an unidentified useful life are not subject to amortizations but are subject to annual devaluation tests. Unlike the previous paragraph, those assets eligible for amortization are subject to devaluation tests upon events or facts that show that book value may not be recovered at least annually.

 

Devaluation losses are recognized when the goodwill is higher than its recoverable value. The recoverable value of assets is the highest amount between the net amount that would have been raised from the sale or its value under use. In virtue of devaluation tests, assets are gathered at the lower level in which they generate identifiable cash flows (cash-generating units). The book value of non-financial assets unlike those goodwill value over which such devaluation was recorded, is revised at each reporting date with the purpose of checking on potential devaluation reversals.

 

1.18        Trust Assets

 

Assets held by the Group in its Trustee role, are not included in the Consolidated Financial Statements. Commissions received from trust activities are included in Income from Commissions.

 

1.19         Compensation

 

Financial assets and liabilities are set off through the inclusion of the net amount in the consolidated financial statement only upon the existence of both a legally eligible right to compensate recognized amounts and the intention to liquidate in net terms or make the assets effective and liquidate the responsibility simultaneously.

 

1.20        Financing received from the Argentine Central Bank and other Financial Institutions

 

Debts with other financial entities are recorded when the capital is paid in advance to the economic group by the banking entity. Non-derivative financial liabilities are measured at amortized cost. If the group repurchases its own debt, such debt will be removed from the Unaudited Interim Consolidated condensed Financial Statements and the difference between the residual value of the financial liabilities and the amount paid is recognized as financial income or expenses.

 

1.21         Provisions / Contingencies

 

Pursuant to Accounting Standards adopted by the Argentine Central Bank, an Entity shall hold provisions in the following cases:

 

a- It holds a current obligation (legal or implicit) as a result of past event;

b- The Entity is likely to get rid of resources that provide future economic benefits with the purpose of serving an obligation; and

c- A reliable forecast of the obligation amount is made available.

 

An Entity will be considered to hold an implicit obligation if (a) as a result of previous economic or public policies practices, the group has taken over certain responsibilities and (b) therefore, expectations regarding the compliance of such obligations have been produced.

 

The Group recognizes the following provisions:

 

For labor, civil and commercial lawsuits: provisions are defined based on both reports provided by lawyers regarding any lawsuit status and the forecast resulting from potential losses to be afforded by the Group, and past experience on this type of claims.

 

For miscellaneous risks: provisions are aimed at affording contingent situations that may result in obligations for the Group. The calculation of amounts includes the effectiveness likelihood based on the opinion provided by legal advisors and other professionals of the Group.

 

Provisions are measured at current value of disbursements expected to be required for the settlement of an obligation through the utilization of an interest rate before taxes that account for current market conditions over the money value and specific risks for such obligation. Provision increases resulting from time elapsing is recognized in other net financial Income items of the consolidated income statement.

 

 

  24

GRUPO SUPERVIELLE S.A.

 

Notes to Unaudited Interim Consolidated Condensed Financial Statements

As of June 30, 2018 presented in comparative format

(Expressed in thousands of pesos)

 

The Group does not record positive contingencies, except from deferred tax positive contingencies and those contingencies of virtually secure effectiveness.

 

As of the issuance of these Unaudited Interim Consolidated Condensed Financial Statements, the Group´s Board considers that there have been no elements that show the existence of other contingencies that may become effective and produce a negative impact on these Unaudited Interim Consolidated Condensed Financial Statements other than those defined in Note 12.

 

1.22        Other non-financial liabilities

 

Non-financial payable accounts are accrued once the counterparty has served its obligations pursuant to the contract and are valued at amortized cost.

 

1.23         Negotiable Obligations Issued

 

Subordinated and Unsubordinated Negotiable Obligation

 

Negotiable Obligations issued by the Group are measured at Amortized Cost. If the Group purchases own negotiable obligations, such obligations are removed from the Unaudited Interim Consolidated Condensed Financial Statements and the difference between the residual value of the financial liabilities and the relevant payment is included in the Statement of Comprehensive Income as income from advance settlement of a debt.

 

1.24        Capital Stock and Capital Adjustments

 

Accounts included in this item are expressed in the currency that has not considered changes in price indexes as from February 2003, except from the item “Capital Stock”, which has been held at nominal value.

 

Ordinary shares are classified in the shareholders´ equity and are held at nominal value. When any subsidiary of the Group purchases shares of the Bank (own shares in portfolio), the effective payment, including any other cost directly attributable to the transaction (net of tax), is deducted from the shareholders´ equity until such shares are settled or sold

 

1.25        Reserves and Distribution of Dividends

 

Pursuant to provisions set by the Argentine Central Bank, the 20% of net earnings of the fiscal year of relevant adjustments for previous fiscal years must be applied to legal reserve, when applicable. Notwithstanding the aforementioned, for distribution of earnings and pursuant to Amended Text on Distribution of Income issued by the Argentine Central Bank ( last amendment of Communication “A” 6464 issued on March 9, 2013), Financial Entities shall be previously authorized by the Superintendence of Financial and Exchange Entities, and shall meet all requirements set out in Note 21.

 

1.26       Recognition of Income

 

Financial income and expenses are recorded for any debt instrument in accordance with the effective rate method; for which ends all positive and negative results included as an integral part of the effective rate of the operation.

 

Results included in the effective rate include expenses and income related to the setting-up or acquisition of financial assets or liabilities, such as compensations received from the assessment of the client´s financial condition, negotiation of the terms of an instrument, the preparation and processing of necessary documents for the effectiveness of the transaction and compensations received from the granting of loans to be utilized by the client. The Group records its non-derivative financial liabilities at amortized cost.

 

It is worth to be mentioned that the commissions the Group receives from syndicated loans are not part of the effective rate of the product. Therefore, such commissions are recognized in the Income Statement upon effectiveness of the service, as long as the group does not withhold part of it or such commissions are held under the same conditions as other participants. Furthermore, commissions received by the Group from negotiations in third parties´ transactions are not part of the effective rate. Therefore, such commissions are recognized upon such negotiations effectiveness.

 

The Group´s Service Income is recognized in the Income Statement in accordance with the compliance of performance obligation, hence the difference from those income related to client loyalty plans, which are provisioned at fair value

 

 

  25

GRUPO SUPERVIELLE S.A.

 

Notes to Unaudited Interim Consolidated Condensed Financial Statements

As of June 30, 2018 presented in comparative format

(Expressed in thousands of pesos)

 

and at redemption rate until such amount of exchanged by the client and recognized in the income statement of the period.

 

Income from real state rent is recognized in the consolidated comprehensive income statement in accordance with the straight-line method during the lease term.

 

1.27       Income tax and presumed minimum earning

 

Income Tax

 

Income tax of the fiscal year includes both the current and deferred tax. The tax is recognized in the consolidated income statement, except from cases that entail items that must be recognized directly in other comprehensive income. In such case, the income tax related to such items is also recognized in such statement.

 

The current income tax is calculated pursuant to tax law passed or substantially passed as of the financial statement date in countries where the Group operates and generates taxable earnings. On a regular basis, the Group evaluates the position assumed in affidavits regarding situations in which tax laws are under interpretation. In turn, when applicable, the Group sets provisions on amounts payable to tax authorities.

 

The deferred income tax is defined as a whole through the liabilities method over temporary differences resulting from assets and liabilities tax basis and any relevant accounting values. However, the deferred tax resulting from the initial recognition of assets or liabilities in a transaction that does not apply to business combination and that, at the moment of the transaction, does not accounting or taxable earnings or losses, is not recorded. The deferred tax is defined through the utilization of tax rates (and legislation) which were passed at the general balance sheet date and are expected to be applicable when assets from deferred tax is made effective or liabilities from deferred tax are settled.

 

Assets from deferred tax are only recognized upon future tax benefits against which temporary differences can be utilized.

 

Deferred income tax balances of assets and liabilities are set off upon the existence of a legal right to set off current assets taxes with current liabilities taxes provided such balances are related with the same tax authority of the Group or the different subsidiaries where there is intention or likelihood to liquidate tax balances over clear basis.

 

2. TRANSITION TOWARDS IFRS

 

2.1 Requirements of transitions towards IFRS

 

The following sets out a reconciliation between shareholders’ equity and income figures as well as other comprehensive income figures as per Interim Separate Condensed Financial Statements issued pursuant to the Accounting Framework as of transition date (January 1, 2017), adoption date (December 31, 2017) and comparative period closing date (June 30, 2017) and figures expressed pursuant to IFRS in these Unaudited Interim Consolidated Condensed Financial Statements as well as the effects of adjustments in cash and cash equivalents balances in cash flows.

 

2.2 IFRS optative exemptions

 

IFRS 1 allows first-time adopters to consider certain only-once exemptions. Likewise, IFRS requires the application of certain mandatory exemptions. Such exemptions have been provided by IASB to simplify the first application of certain IFRS, thus removing the obligatory nature of their retroactive application.

 

The following are exemptions and exemptions that are applicable considering IFRS 1 and were used by the Group in converting the accounting standards in force in Argentina to IFRS:

 

1.       IFRS optative exemptions

 

The following are optative exemptions applicable to the Group under IFRS 1:

 

1.1.       Exemption of business combinations

 

 

  26

GRUPO SUPERVIELLE S.A.

 

Notes to Unaudited Interim Consolidated Condensed Financial Statements

As of June 30, 2018 presented in comparative format

(Expressed in thousands of pesos)

 

IFRS 1 presents the option of applying IFRS 3 “Business Combinations” prospectively from the date of transition or from a specific date prior to the date of transition. This allows non-retroactive application that would require restatement of all business combinations prior to the transition date. The Group elected to apply IFRS 3 prospectively to business combinations occurring after the date of transition. Business combinations that occurred prior to the transition date have not been restated.

 

1.2.       Exemption of investments in subsidiaries, joint ventures and associates

 

When an entity prepares Separate Financial Statements, IAS 27 requires it to account for its investments in subsidiaries, joint ventures and associates either: (a) at cost; (b) in accordance with IFRS 9; or (c) using the equity method as described in IAS 28. If a first-time adopter measures such an investment using the process of the participation method, the entity applying the exemption above mentioned.

 

1.3.       Exemption of designation of previously recognized financial instruments

 

According to IFRS 1, an entity can designate an equity investment as a financial measured at fair value through profit or loss, in accordance with paragraph 5.7.5 of IFRS 9 on the basis of the facts and circumstances that exist at the date of transition to IFRSs.

 

The Group has not made use of the other optional exemptions available in IFRS 1.

 

2.       IFRS mandatory exemptions

 

The following are obligatory exemptions applicable to the Company under IFRS 1:

 

2.1.       Estimates exemption

 

The Company´s estimations in accordance with IFRSs at January 1, 2017 are consistent with estimations made with Argentine GAAP. Therefore, the company´s estimations were not review by application of IFRS, except if necessary to reflect any difference in accounting policies.

 

2.2.       Non-controlling interest exemption

 

According to IFRS 1 a first-time adopter shall apply the requirements of IFRS 10 “Consolidated Financial Statements” prospectively for accounting the shareholders changes in a subsidiary without resulting a loss of control. The Group records non-controlling acquisitions that do not result in control changes at book value, recognizing any difference between received payments and book value in non-controlling interest will account in fiscal year results. The Company has not restated those acquisitions or dispositions prior to the date of transition.

 

2.3.       Exemption of withdrawals in financial assets and liabilities accounts

 

IFRS 1 requires that a first-time adopter apply the requirements for derecognition of financial assets and liabilities set by IFRS 9 “Financial Instruments” prospectively, for the transactions after January 1, 2017.

 

2.4.       Exemption of classification and rating of financial assets

 

IFRS 1 requires that an entity shall assess whether a financial asset meets the conditions to be measured at amortized cost or at fair value with changes in other comprehensive results based on the facts and circumstances that exist at January 1, 2017

 

The other obligatory exemptions in IFRS 1 have not been applied because they are not material to the Company.

 

2.3   Required reconciliations

 

The items and amounts included in the reconciliation are subject to changes and will be considered as final when preparing the Financial Statements as of December 31, 2018, for the fiscal year in which IFRSs are applied at first.

 

 

  27

GRUPO SUPERVIELLE S.A.

 

Notes to Unaudited Interim Consolidated Condensed Financial Statements 

As of June 30, 2018 presented in comparative format  

(Expressed in thousands of pesos) 

 

2.3.1. Shareholders´ equity reconciliation at December 31, 2017 and January 1, 2017

 

  Ref. 12/31/2017 Reclassification

IFRS 

Adjustments 

12/31/2017
  Argentine
Central Bank
IFRS
ASSETS          
Cash and due from banks n. 11,129,475 (37,947) 6,275 11,097,803
Government and corporate securities i. 15,346,036 (15,346,036)
Debt securities at fair value through profit or loss c. 11,343,588 60,698 11,404,286
Derivatives   26,916 26,916
Repo operations i. 3,349,822 3,349,822
Other financial assets n. 1,633,308 69,400 1,702,708
Loans and other financing a., b., g.,
m., n.
59,091,488 1,335,242 60,426,730
Loan   54,954,373 (54,954,373)
Other receivables from financial intermediation   6,561,396 (6,561,396)
Financial lease i. 2,519,201 (2,519,201)
Other debt securities   359,197 359,197
Financial assets in guarantee   1,301,237 1,301,237
Investments in equity instruments d. 38,703 7,216 45,919
Investments in subsidiaries, associates and joint ventures   734 734
Investments in other companies   734 (734)
Miscellaneous receivables   1,776,944 (1,776,944)
Premises and equipment   694,431 (694,431)
Property, plant and equipment e. 1,026,501 147,556 1,174,057
Miscellaneous assets   612,264 (610,671) (1,593)
Intangible assets   324,501 (324,501)
Intangible assets f., k. 179,365 11,273 190,638
Assets from deferred income tax j., n. 49,099 440,076 489,175
Other non-financial assets e. 554,515 78,672 633,187
Items pending of allocation   51,923 (51,923)
TOTAL ASSETS   93,971,278 (3,923,684) 2,154,815 92,202,409
           
LIABILITIES          
Deposits   56,487,027 (78,342) 56,408,685
Other obligations from financial intermediation i. 18,443,354 (18,443,354)
Other financial liabilities g., m., n. 2,044,245 1,855,629 3,899,874
Financing received from the Argentine Central Bank and others   3,524,267 3,524,267
Negotiable obligations issued   8,588,970 8,588,970
Liabilities from current income tax   692,144 692,144
Subordinated negotiable obligations   685,873 685,873
Provisions   80,163 80,163
Other non-financial liabilities h., l., n. 2,868,031 934,234 3,802,265
Miscellaneous obligations   3,058,053 (3,058,053)
Provisions (Liabilities)   80,163 (80,163)
Subordinated negotiable obligations   685,873 (685,873)
Items pending of allocation   60,513 (60,513)
Investments of third parties in consolidated entities o. 11,497 (7,690) (3,807)
TOTAL LIABILITIES   78,826,480 (3,930,295) 2,786,056 77,682,241
           
SHAREHOLDERS´EQUITY          
 Capital stock, contributions and reserve   12,707,739   12,707,739
 Other accrued comprehensive income  d., e., j. 136,384 136,384
 Retained earnings   2,437,059 (11,273) (900,334) 1,525,452
 Shareholders ‘equity attributable to non-controlling interest  o. 17,884 132,709 150,593
TOTAL SHAREHOLDERS´EQUITY   15,144,798 6,611 (631,241) 14,520,168
TOTAL LIABILITIES PLUS SHAREHOLDERS´EQUITY   93,971,278 (3,923,684) 2,154,815 92,202,409

  

 

28  

GRUPO SUPERVIELLE S.A.

 

Notes to Unaudited Interim Consolidated Condensed Financial Statements 

As of June 30, 2018 presented in comparative format  

(Expressed in thousands of pesos)

 

  Ref. 01/01/2017
Argentine
Central Bank
Reclassifications

IFRS 

Adjustments 

01/01/2017
IFRS
ASSETS          
Cash and due from banks n. 8,166,132 (151,228) 15,088 8,029,992
Government and corporate securities i. 2,360,044 (2,360,044)
Debt securities at fair value through profit or loss c. 362,338 62,370 424,708
Derivatives   28,304 28,304
Other financial assets n. 1,878,946 101,113 1,980,059
Loans and other financing a., b., g.,
m., n.
37,405,549 1,332,996 38,738,545
Loan   34,896,509 (34,896,509)
Other receivables from financial intermediation   3,772,736 (3,772,736)
Financial lease i. 1,527,855 (1,527,855)
Other debt securities   2,302,305 (238,457) 2,063,848
Financial assets in guarantee   1,465,029 1,465,029
Investments in equity instruments d. 2,629 2,629
Investments in subsidiaries, associates and joint ventures   3,501 3,501
Investments in other companies   3,501 (3,501)
Miscellaneous receivables   1,110,316 (1,110,316)
Premises and equipment   621,575 (621,575)
Property, plant and equipment e. 685,369 100,825 786,194
Miscellaneous assets   425,501 (425,501)
Intangible assets   285,462 (285,462)
Intangible assets f., k. 170,660 (48,273) 122,387
Assets from deferred income tax j., n. 7,442 340,358 347,800
Other non-financial assets e. 529,253 149,353 678,606
Items pending of allocation   36,411 (36,411)
TOTAL ASSETS   53,206,042 (349,813) 1,815,373 54,671,602
           
LIABILITIES          
Deposits   35,897,864 (35,734) (1,156) 35,860,974
Other obligations from financial intermediation i. 6,514,834 (6,514,834)
Repo operations   590,891 590,891
Other financial liabilities g., m., n. 1,388,452 1,367,587 2,756,039
Financing received from the Argentine Central Bank and others   1,715,670 1,715,670
Negotiable obligations issued   2,049,074 2,049,074
Liabilities from current income tax   571,893 571,893
Subordinated negotiable obligations   1,378,758 1,378,758
Provisions   63,624 63,624
Other non-financial liabilities h., l., n. 1,961,924 583,650 2,545,574
Miscellaneous obligations   2,182,228 (2,182,228)
Provisions   63,252 (63,252)
Subordinated negotiable obligations   1,378,758 (1,378,758)
Items pending of allocation   134,158 (134,158)
Investments of third parties in consolidated entities o. 103,397 (103,397)
TOTAL LIABILITIES   46,274,491 (692,075) 1,950,081 47,532,497
           
           
SHAREHOLDERS´ EQUITY          
 Capital stock, contributions and reserve   5,620,247 5,620,247
 Other accrued comprehensive income  d., e., j. 77,797 77,797
 Retained earnings   1,311,304 (294,390) 1,016,914
 Shareholders ‘equity attributable to non-controlling interest  o.   336,357 87,790 424,147
TOTAL SHAREHOLDERS´ EQUITY   6,931,551 336,357 (128,803) 7,139,105
TOTAL LIABILITIES PLUS SHAREHOLDERS´EQUITY   53,206,042 (355,718) 1,821,278 54,671,602

 

 

29  

GRUPO SUPERVIELLE S.A.

 

Notes to Unaudited Interim Consolidated Condensed Financial Statements 

As of June 30, 2018 presented in comparative format  

(Expressed in thousands of pesos)

 

2.3.2. Reconciliation of net income for the period ended on June 30, 2017

 

  Ref. 06/30/2017 Reclassification  IFRS
Adjustments
06/30/2017
  Argentine Central Bank IFRS
Financial income   6,742,770 (6,728,305) (14,465)
Income from interests a., b., l.,
m., n.
5,935,505 282,259 6.217.764
Financial expenses   (2,681,754) 2,681,754  
Expenses from interests m., n. (2,435,541) 94,498 (2.341.043)
Gross intermediation margin   4,061,016 (546,587) 362,292 3.876.721
Income from commissions a., n. 1,963,065 (155,818) 1.807.247
Expenses from commissions n. (235,118) 6,258 (228.860)
Result from insurance activity   222,751   222.751
Net income from commissions   1,950,698 (149,560) 1.801.138
Subtotal   4,061,016 1,404,111 212,732 5.677.859
Net income from financial instruments at fair value through profit or loss c., n. 879,128 7,618 886.746
Exchange rate difference on gold and foreign currency   48,598   48.598
Other operating income e., g., n. 675,660 (48,933) 626.727
Loan loss provisions m., n. (738,613) (79,643) 14,620 (803.636)
Net operating income   3,322,403 2,927,854 186,037 6.436.294
Income from services   2,287,101 (2,287,101)
Expenses from services   (668,399) 668,399
Result from insurance activity   222,751 (222,751)
Administration expenses   (3,906,852) 3,906,852
Benefits to the personnel b., h. (2,372,979) (114,748) (2.487.727)
Administration expenses a., n. (1,480,953) (26,614) (1.507.567)
Depreciations and devaluation of assets e., f. (126,331) (13,511) (139.842)
Other operating expenses b., k. (1,061,580) (117,543) (1.179.123)
Miscellaneous income   266,742 (266,742)
Miscellaneous losses   (157,748) 157,748
Net income from financial intermediation   1,365,998 (157,584) (86,379) 1.122.035
Profit of associates and joint ventures  
Result from investments of third parties   (4,922) 4,922
Result before taxes from continuing operations   1,361,076 (152,662) (86,379) 1.122.035
Income tax from continuing operations j., n. (182,504) (132,394) (314.898)
Income tax   (399,490) 399,490
Net income from continuing operations   961,586 64,325 (218,774) 807.137
Net income of the period   961,586 64,325 (218,774) 807.137
Net income of the period attributable to parent company 1,023,472 (227,390) 796,082
Net income of the period attributable to non-controlling interest 2,439 8,616 11.055
Other comprehensive income 48,848 48.848
Other comprehensive income 48,819 48.819
Income tax from other comprehensive income 29 29
Comprehensive income of the period 1,025,911 (169,926) 855.985
Comprehensive income of the period attributable to owners of controlling 1,023,472 (178,571) 844,901
Comprehensive income of the period attributable to owners of non-controlling 2,439 8,645 11,084

  

 

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GRUPO SUPERVIELLE S.A.

   

Notes to Unaudited Interim Consolidated Condensed Financial Statements 

As of June 30, 2018 presented in comparative format  

(Expressed in thousands of pesos)

 

2.3.3. Reconciliation of comprehensive income for the fiscal year ended on June 30, 2017

 

  06/30/2017
Other comprehensive income attributable to Grupo Supervielle
Investments in Corporate and Government Securities 12,812
Property, Facility and Equipment 54,831
Investment in other equity instruments 4,659
Income tax (23,483)
Other comprehensive income under IFRS attributable to Grupo Supervielle 48,819
Non-controlling investment 29
Total other comprehensive income under IFRS 48,848

 

2.3.4. Reconciliation of comprehensive income and net income for the fiscal year ended on June 30, 2017

 

  06/30/2017
Net income attributable to Grupo Supervielle 961,586
Net income under IFRS attributable to Grupo Supervielle 796,082
Other comprehensive income under IFRS attributable to Grupo Supervielle 48,819
Total net income plus comprehensive income attributable to Grupo Supervielle under IFRS 844,901

 

2.3.5. Reconciliation of cash and cash equivalents of the statement of cash flow

 

 

12/31/2017 

Argentine
Central Bank 

Reclassifications

12/31/2017 

IFRS 

Cash and due from Banks 11,129,475 (31,672) 11,097,803
Bills and Notes issued by the Central Bank for own portfolio 13,611,524 (4,340,800) 9,270,724
Listed sort term government securities 375,976 375,976
Mutual Funds 680,866 - 680,865
Total 25,421,865 (3,996,496) 21,425,368

 

  06/30/2017 Reclassifications 06/30/2017
  Argentine
Central Bank
IFRS
Cash and due from Banks 9,866,215 (420,667) 9,445,548
Bills and Notes issued by the Central Bank for own portfolio 3,819,528 3,819,528
Listed sort term government securities
Mutual Funds 1,170,648 1,170,648
Total 14,856,391 (420,667) 14,435,724

 

  01/01/2017 Reclassifications 01/01/2017
  Argentine
Central Bank
IFRS
Cash and due from Banks  8,166,132  (136,140) 8,029,992
Bills and Notes issued by the Central Bank for own portfolio  336,785  336,785
Mutual Funds  1,185,637  1,185,637
Total  9,688,554  (136,140)  9,552,414

 

 

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GRUPO SUPERVIELLE S.A.

   

Notes to Unaudited Interim Consolidated Condensed Financial Statements 

As of June 30, 2018 presented in comparative format  

(Expressed in thousands of pesos)

 

2.3.6.  Explanation of adjustments

 

(a)       Adjustment in the recognition of interest income through the effective rate method

 

Pursuant to IFRS, costs and income directly related to the granting of a loan are not directly expensed against income but are added to the loan rate and are accrued along the useful life of such loan. As a result of the application of this method, income from commissions and administration expenses have decreased and interest income has increased, recognized in the assets recorded in loans and other financings.

 

(b)       Adjustment in the financing initial value at lower rates than market rates

 

The initial value of financing operations through credit cards and mortgage loans has been adjusted at lower rates than market rates, thus recognizing a loss at the beginning as a result of the application of the market rate that is later accrued as interest income along the useful life of the loan. The loss is expensed against other operating expenses and in employee benefits for mortgage loans. Earnings were recorded under interest income and the asset value was modified thus being recorded under loans and other financing.

 

(c)       Valuation of investments at fair value

 

Pursuant to the Argentine Central Bank, the Entity valuated its investments in government bonds according to the most probable destination of the asset. Distributions in kind which appeared in lists of volatilities or present values issued by the Argentine Central Bank were valuated at their market value, while those distributions in kind which not appeared in the aforementioned lists were valuated at their incorporation value increasing exponentially depending on its internal return rate.

 

IFRS 9 “Financial instruments” establishes that an entity must classify its financial assets according to the business model the entity utilizes to manage the assets and the characteristics of contractual cash flows. Pursuant to the aforementioned, the Entity has classified its investment portfolio into portfolios for trading, which have been valuated at a fair value through profit or loss and which are maintained for investment, which have been valuated at a fair value through changes in other comprehensive income.

 

(d)       Investments in subsidiaries and other equity instruments

 

Under IFRS, any and all investments in which the Bank has no control or significant influence must be measured at fair value. Under BCRA regulations, such investments are measured at cost value with a limit on the proportional equity value. The adjustment at fair value of the investment meant an increase with the counterparty in other comprehensive income by application of the exception in IFRS 1.

 

(e)       Property, plant and equipment and other non-financial assets

 

By application of IAS 16 and IAS 40, the Bank has adopted the revaluation model for its real property and the fair value method for its investment property. Under BCRA regulations, such assets were recorded at their historical value minus the accrued amortization.

 

The revaluation of affected real property as property, plant and equipment was imputed against other comprehensive income and increased the depreciation charge. As regards investment property, the revaluation increase was imputed to other operating income within the statement of income.

 

Under BCRA, other non-financial assets were recognized, as well as stationery expenses which do not comply with IFRS requirements to be recognized as assets. The recognition of such assets originated an increase in administrative expenses.

 

(f)       Intangible assets

 

Pursuant to IFRS, an intangible asset is an identifiable, non-monetary asset without physical substance. In order for the intangible asset to be identified, the Bank must have control over it and the asset must generate future economic benefits.

 

Under Argentine Central Bank, intangible assets that do not comply with the IFRS requirements to be recognized as such have been recognized. The adjustment answers to the recognition of such assets and the reversal of the accumulated amortization that was imputed against earnings per depreciations and devaluation of assets.

 

 

32  

GRUPO SUPERVIELLE S.A.

  

Notes to Unaudited Interim Consolidated Condensed Financial Statements 

As of June 30, 2018 presented in comparative format  

(Expressed in thousands of pesos)

 

(g)       Granted Guarantees

 

Under IFRS, the financial guarantees granted must be recognized initially at their fair value, which equals to the commission charged in most of the cases. Such amount is later amortized at a straight line throughout the life of the contract. Upon each closing, the financial guarantees are measured by the higher between: (i) the value of the commission pending of accrual as of fiscal year closing and (ii) the best amount forecast to be paid to honor the contract discounted at its current value as of fiscal year closing.

 

Pursuant to standards issued by the Argentine Central Bank, commissions collected in financial guarantee agreements are imputed to results upon collection.

 

As a result of IFRS application, assets in loans and other financings were recognized and liabilities in other financial liabilities. The impact on results was a decrease in other operating income.

 

(h)       Employee Benefits

 

Pursuant to IFRS, short-term benefits for employees such as vacations, salaries and social security contributions, are recognized as liabilities equivalent to the undiscounted amount the Bank expects to pay for such benefit. Likewise, long-term benefits such as seniority awards and pre-retirements, are recognized as liabilities equivalent to the amount discounted from the benefit the Bank expects to pay.

 

The recognition of these liabilities generated an increase in other non-financial liabilities and a negative result within employee benefits.

 

(i)       Repo transactions

 

Reverse repos

 

Pursuant to IFRS, a repo reverse operation is recognized as financing granted with guarantee of securities. Pursuant to Regulations issued by the Argentine Central Bank, the bond received as collateral with the counterparty is recorded in other obligations through financial intermediation for an agreed upon amount of the sale future reverse operation.

 

As a result, the financing that was previously recorded in other receivables through financial intermediation was reclassified to repo transactions item and assets of received securities by repo transactions were recognized, consequently, with the reversion of the obligation through financial intermediation.

 

(j)       Income tax

 

Pursuant to IFRS, tax charges for the fiscal year includes current and deferred taxes. The current income tax is calculated pursuant to passed laws and substantially passed as of these Financial Statements. The deferred tax is recognized pursuant to the liabilities method, given the temporary differences that arise between tax basis of assets and liabilities and amounts recorded in books in the Consolidated Financial Statements. Pursuant to regulations issued by the Central Bank, the Bank recognizes the current tax for the fiscal year.

 

The Tax effect of the recognition of the deferred tax accounts for an increase in deferred tax assets, an adjustment in results in income tax and an adjustment in other comprehensive results for the tax pursuant to the results recorded therein.

 

(k)       Goodwill

 

Pursuant to standards issued by the Argentine Central Bank, the recognized goodwill is amortized over a maximum 120-month term. Pursuant to IFRS, goodwill is not amortized, instead, it is calculated through annual depreciation. As a result, the value of intangible assets with their counterparty in other operating expenses has increased.

 

 

33  

GRUPO SUPERVIELLE S.A.

 

Notes to Unaudited Interim Consolidated Condensed Financial Statements 

As of June 30, 2018 presented in comparative format  

(Expressed in thousands of pesos)

 

(l)       Loyalty Programs

 

As part of the Bank’s loyalty programs, the Bank relies on a point reward program based on credit and debit card consumption. Such points can be redeemed by different products or tourism services. Such points can be redeemed over a specific term and after such term they expire and cannot be redeemed.

 

Pursuant to IFRS 15, the Bank fixes liabilities based on the fair value of granted points to be redeemed by clients. Points to be redeemed are calculated based on the last redemption behavior type of card product and other historical information of the card. Liabilities are reduced as points are redeemed by clients.

 

The adjustment to liabilities has increased other non-financial liabilities and has generated a negative result that was recorded as a decrease in interest income.

 

(m)       Derecognition of Financial Assets

 

Pursuant to the previous accounting framework, the Entity records as recognition of assets the portfolios transfer for the constitution of financial trusts and the portfolios sales with resource for the transferor. Pursuant to IFRS 9 “Financial Instruments” it is necessary to analyze if the Entity has substantially transferred all the risks and rewards inherent to the property of the transferred asset. From the analysis performed it can be drawn that this is not fulfilled, therefore, the Entity will continue recognizing such transferred asset in its entirety and will recognize financial liabilities for the received consideration.

 

Therefore, the Company recognized assets for transferred portfolios included in loans and other receivables and liabilities for the received consideration included in financial liabilities and an adjustment of interest incomes, interest expenses and uncollectibility charges.

 

(n)       Trust Debt Securities and (TDS) and Participation Certificated (PC) of financial trusts

 

Pursuant to IFRS 10, the Bank manages a trust when it has power over, is exposed to or has a right to the variable returns arising from its interest in such trust and has the capacity to affect those results through its power to run the relevant activities of the trust. Trusts have been consolidated as from the date the Bank acquired the control.

 

The Bank has evaluated the following:

 

- The object and design of the trust 

- Spotting of main activities 

- Decision-making processes regarding such activities 

- Whether the Bank´s rights result in the capacity to run relevant activities of the trust 

- Whether the Bank is exposed to, or has the right on, variable returns of its interest in such trust 

- Whether the Bank has the capacity to utilize its power on the trust to affect such returns.

 

In accordance with the aforementioned, the Bank has decided that it holds control on such financial trusts and, therefore, such financial trusts have been consolidated

 

(o)       Third parties’ interest in controlled companies

 

Pursuant to IFRS 10 on consolidated Financial Statements, the non-controlling interests will be reported in the consolidated financial statement, within shareholders’ equity, separately from the controlling interest’s equity. Under the previous accounting framework, this interest is reported in liabilities as non-related interest.

 

As a result, the entity has made the appropriate reclassification. Additionally, the financial trust property from which the Bank does not own participation certificates has been imputed in this line.

 

 

34  

GRUPO SUPERVIELLE S.A.

 

Notes to Unaudited Interim Consolidated Condensed Financial Statements 

As of June 30, 2018 presented in comparative format  

(Expressed in thousands of pesos)

 

3. CRITICAL ACCOUNTING POLICIES AND FORECASTS

 

The preparation of Unaudited Interim Consolidated Condensed Financial Statements pursuant to the accounting framework set by the Argentine Central Bank requires the utilization of certain critical accounting forecasts. Likewise, such framework requires that the Senior Management takes decisions regarding the application of accounting standards set by the Argentine Central Bank and accounting policies of the Group.

 

The Group has identified the following areas that entail a higher judgment and complexity degree, or areas where assumptions and forecasts play a significant role for Unaudited Interim Consolidated condensed Financial Statements which play a key role in the understanding of underlying accounting/financial accounting reporting risks:

 

a- Fair value of derivatives and other instruments

 

The fair value of financial instruments that do not list in active markets are defined through the utilization of valuation techniques. Such techniques are validated and regularly reviewed by qualified independent personnel of the area that developed such techniques. All models are evaluated and adjusted before being utilized in order to make sure that results express current information and comparative market prices. As long as possible, models utilize only observable information; however, factors such as credit risk (own or counterparty), volatilities and correlations require the utilization of estimates. Changes in assumptions regarding such factors may impact on the fair value reported for financial instruments.

 

The information on instruments that have not been valuated based on the market information is included in Note 6. In this regard, the Senior Management decides whether significant risks and property benefits of financial assets and financial lease are transferred to the counterparty, especially those of higher risk.

 

b- <