Notes to and forming part of the Unconsolidated Financial Statements

For the year ended December 31, 2018

5.15 Foreign currencies

5.15.1 Functional and presentation currency

Items included in these unconsolidated financial statements are measured using the currency of the primary economic
environment in which the Bank operates. These unconsolidated financial statements are presented in Pakistani Rupees,
which is the Bank's functional and presentation currency.

5.15.2 Foreign currency transactions

Transactions in foreign currencies are translated to rupees at the foreign exchange rates prevailing on the transaction date.
Monetary assets and liabilities in foreign currencies are expressed in rupee terms at the rates of exchange prevailing at the
statement of financial position date. Forward foreign exchange contracts and foreign bills purchased are valued in rupees at
the forward foreign exchange rates applicable to their respective maturities.

Non-monetary assets and liabilities in foreign currencies are expressed in rupee terms at the rates of exchange prevailing
at the date of initial recognition of the non-monetary assets / liabilities.

5.15.3 Foreign operations

The assets and liabilities of foreign operations are translated to rupees at exchange rates prevailing at the statement of
financial position date. The results of foreign operations are translated at the average rates of exchange for the year.

5.15.4 Translation gains and losses

Translation gains and losses are taken to the profit and loss account, except those arising on translation of the net
investment in foreign branches which are taken to capital reserves (Exchange Translation Reserve) until the disposal of the
net investment, at which time these are recognized in the profit and loss account.

5.15.5 Contingencies and commitments

Commitments for outstanding forward foreign exchange contracts are disclosed in these unconsolidated financial
statements at contracted rates. Contingent liabilities / commitments denominated in foreign currencies are expressed in
rupee terms at the rates of exchange prevailing at the statement of financial position date.

Provision for claims under guarantees

A provision for claims under guarantees is recognized when intimated and reasonable certainty exists that the Bank will
settle the obligation. The charge to the profit and loss account is stated net of expected recoveries and the obligation is
recognized in other liabilities.

5.16 Financial instruments

5.16.1 Financial assets and liabilities

Financial assets and liabilities carried on the statement of financial position include cash and bank balances, lendings to
financial institutions, investments, advances, certain receivables, bills payable, borrowings from financial institutions,
deposits, subordinated loans and certain payables. The particular recognition methods adopted for significant financial
assets and financial liabilities are disclosed in the individual policy notes associated with them.

5.16.2 Derivative financial instruments

Derivative financial instruments are initially recognized at fair value on the date on which the derivative contract is entered
into and are subsequently re-measured at fair value using appropriate valuation techniques. All derivative financial
instruments are carried as assets when their fair value is positive and liabilities when their fair value is negative. Any
change in the fair value of derivative financial instruments during the period is taken to the profit and loss account.

5.16.3 Off setting

Financial assets and financial liabilities are set off and the net amount is reported in the unconsolidated financial
statements when there is a legally enforceable right to set off and the Bank intends to either settle on a net basis, or to
realize the assets and to settle the liabilities simultaneously.
88 United Bank Limited