BANCOLOMBIA SA | CIK:0001071371 |

 

The consolidated financial statements include the financial statements of Bancolombia S.A. and its subsidiaries as of and for the periods ended on December 31, 2017 and 2016. The Parent Company consolidates the financial results of the entities on which it exerts control.

 

In accordance with IFRS 10, a subsidiary is an organization controlled by any of the companies that comprise The Bank, as long as it has:

 

 

The Parent Company has the following subsidiaries making up the Bank´s organizational structure, which is currently registered as a corporate group:

 

 

 

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Bank’s accounting policies.

 

All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Bank are eliminated in full on consolidation.

 

Non-controlling interests in controlled entities are presented in equity separately from the Parent Company stockholders equity. When the Bank loses control over a subsidiary, any residual interest remaining on the Bank’s balances is measured at fair value; gains or losses arising from this measurement are recognized in net income

 

There are restrictions on the ability of the Parent Company to obtain distributions of capital, due to the regulatory requirements of its subsidiaries in Panama. Banistmo and Bancolombia Panama have net assets before intercompany eliminations amounting to COP 6,872,171 and COP 6,360,729 at December 31, 2017 and 2016, respectively.

 

The loans and financial leases granted by those subsidiaries are subject to prudential regulation in Panama issued by the Panamanian Superintency of Banks to maintain minimum reserves as a countercyclical capital buffer. For the years ended at December 31, 2017 and 2016, the reserves recognized amounted to COP 616,814 and COP 523,376. These requirements restrict the ability of the aforementioned subsidiaries to make remittances of dividends to Bancolombia S.A., the ultimate parent, except in the event of liquidation.

 

 

Combination of entities under common control, ie transactions in which all the combining entities are under the control of the Bank both before and after the combination, and that control is not transitory, are outside the scope of the IFRS 3- Business combinations. Currently, there is no specific guidance for these transactions under IFRS, therefore, as permitted by IAS 8, the Bank has developed an accounting policy considering pronouncement of other standard-setting bodies. The assets and liabilities recognized as a result of transactions between entities under common control are recognized at the carrying value of the acquiree’s financial statements. The Bank presents the net assets received prospectively from the date of the transfer.

 

 

An associate is an entity over which the Bank has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

 

A joint venture is an entity that the Bank controls jointly with other participants, where the parties maintain a contractual agreement that establishes joint control over the relevant activities of the entity (which only exists when decisions about those activities require unanimous consent of the parties sharing control) and the parties have rights to the net assets of the joint arrangement. 

At the acquisition date, the excess of the acquisition cost of the associate or joint venture shares exceeding the Bank´s share of the net fair value of identifiable assets and liabilities of the investee is recognized as goodwill. Goodwill is included in the carrying amount of the investment and it is not amortized. The requirements of IAS 39 are applied to determine whether it is necessary to recognize any impairment loss with respect to the Bank’s investment in an associate or a joint venture. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with IAS 36 Impairment of Assets as a single asset. Impairment losses are recognized in net income and are calculated as the difference between the recoverable amount of the associate or joint venture, using the higher value between its value in use and its fair value less costs of disposal, and their carrying value.

 

The results and assets and liabilities of associates or joint ventures are incorporated in the consolidated financial statements using the equity method of accounting, except when the investment, or a portion thereof, is classified as held for sale, in which case it is accounted for in accordance with IFRS 5. When an investment in an associate or joint venture is held by, or is held indirectly through, an entity that is a venture capital organization, or a mutual fund, unit trust or similar entities, and such investment is measured at fair value through profit or loss in that entity, the Bank may elect to measure investments in those associates and joint ventures at fair value through profit or loss in the consolidated financial statements. This election is applied on an investment by investment basis.

 

Under the equity method, the investment is initially recorded at cost and adjusted thereafter to recongnize the Bank’s share of the profits or loss and other comprehensive income of the associate or join venture. When the Bank's share of losses of an associate or joint venture exceeds the Bank's interest in that associate or joint venture (which includes any long-term interests that, in substance, form part of the Bank's net investment in the associate or joint venture), the Bank discontinues recognizing its share of further losses. Additional losses are recognized only to the extent that the Bank has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture.

 

When the equity method is applicable, adjustments are considered in order to adopt uniform accounting policies of the associate or joint venture with the Bank. The portion that corresponds to the Bank for changes in the investee´s other comprehensive income items is recognized in the consolidated statement of comprehensive income and gains or losses of the associate or joint venture are recognized in the consolidated statement of income as “Dividends received and share of profits of equity method investees”, in accordance with the Bank's participation. Gains and losses resulting from transactions between the Bank and its associate or joint venture are recognized in the Bank´s consolidated financial statements only to the extent of unrelated investor´s interest in the associate or joint venture. The equity method is applied from the acquisition date until the significant influence or joint control over the entity is lost.

 

The unrealized gain or loss of an associate or joint venture is presented in the consolidated statement of comprehensive income, net of tax. Changes in the investment´s participation recognized directly in equity and other comprehensive income of the associate or joint venture are considered in the consolidated statement of equity and consolidated statement of comprehensive income.

 

The dividends received in cash from the associate or joint venture reduce the investment carrying value.

 

When the significant influence on the associate or the joint venture is lost, the Bank measures and recognizes any residual investment that remained at its fair value. The difference between the associate or joint venture carrying value (taking into account the relevant items of other comprehensive income), the fair value of the retained residual investment and any proceeds from disposing of a part interest in the associate or joint venture, is recognized in net income. The currency translation adjustments recognized in equity are reclassified to net income at the moment of disposal.

 

A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement.

 

The Bank recognizes and measures assets, liabilities, revenues and expenses in relation to its interest in the arrangements in accordance with the IFRSs applicable for the particular assets, liabilities revenues and expenses.

 

If the Bank acquires an interest in a joint operation in which the activity constitutes a business, as defined in IFRS 3 Business Combinations or when an existing business is contributed to the joint operation on its formation by one of the parties that participate in the joint operation, The Bank will apply all of the principles on business combinations accounting in IFRS 3. In this case the Bank recognizes goodwill in the event that consideration transferred exceeds the net of the acquisition date amounts of the identifiable assets acquired and the liabilities assumed. At least once per year goodwill is tested for impairment.

 

When the Bank transacts with a joint operation in which the Parent Company or its subsidiaries is a joint operator (such as a sale or contribution of assets), the Bank is considered to be conducting the transaction with the other parties to the joint operation, and gains and losses resulting from the transactions are recognized in the Bank’s consolidated financial statements only to the extent of other parties’ interests in the joint operation.

 

When the Bank transacts with a joint operation in which the Parent Company or its subsidiaries is a joint operator (such as a purchase of assets), the Bank does not recognize its share of the gains and losses until it resells those assets to a third party.

 

 

The Bank manages assets held in mutual funds and other forms of investment. Assets managed by the Bank’s subsidiaries and owned by third parties are not included in the consolidated financial statements unless control exists as structured entities.

 

The Bank consolidates the following funds:

 

 

For all the aforementioned funds, the Bank has participated in the design of the structured entity, establishes operating and financial decisions of the funds and it is exposed to variable returns such as dividends or returns paid in quarterly installments.

 

The commissions earned by the management of funds that are not consolidated are included in the statement of income as “Fees and commission income”. 

 

 

Non-controlling interests in the net assets of consolidated subsidiaries are presented separately within the Bank’s equity. Similarly net income and other comprehensive income are also attributed to non-controlling interest and equity holders of the Parent Company. The amount of non-controlling interest may be initially measured either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets. The option for recognition is made on a investment by investment basis.

 

Any purchase or sale of shares in subsidiaries that does not imply a loss or gain of control is directly recognized in equity.

 

 

 

As of December 31, 2017 and 2016, the portion of the non-controlling interest in the FCP Colombia Inmobiliario was 36.53% and 37.45% respectively, reason for which is considered as a significant non-controlling interest for the Bank and its subsidiaries. The principal place of business of FCP Colombia Inmobiliario is Bogotá (Colombia).

 

As of December 31, 2017 and 2016, there were no dividends declared by this subsidiary. In contrast, there were returns paid in quarterly installments due to the nature of its business, which mainly comprises long- term investment in real state, considered as low-risk portfolio.

 

The following table summarizes the assets, liabilities, net assets, net income and cash flows as of December 31, 2017, 2016 and 2015, related to the FCP Colombia Inmobiliario:

 

 

The information above is the amount before inter-company eliminations.

 

As of December 31, 2017, 2016 and 2015, the profit allocated to non-controlling interest amounted to COP 96,179, COP 23,701 and COP 69,074, respectively.

 

As of December 31, 2017, 2016 and 2015, the accumulated non-controlling interest of the FCP Colombia Inmobiliario amounted to COP 602,548, COP 507,115 and COP 442,314, respectively.

 

 

On December 30, 2015 the Bank Acquired 60.00% of Grupo Agromercantil Holding S.A. (GAH). As of December 30, 2016, the portion of ownership in GAH by the non controlling interest was 40.00%, reason for which is considered as a significant non-controlling interest for the Bank and its subsidiaries. Guatemala is the principal place of business of GAH and its subsidiaries.

 

The following table summarizes the assets, liabilities, net assets, net income and cash flows as of December 31, 2017, 2016 and 2015 of Grupo Agromercantil Holding.

 

 

For the year 2017, 2016 and 2015, the dividends received from Grupo Agromercantil amounted to COP 39,482, COP 46,416 and COP 33,403, respectively.