Revenue is recognized to the extent that it is probable that the economic benefits flow to the Bank and that the revenue can be measured reliably.
| 18.1. | Interest income and expenses |
For all financial instruments measured at amortized cost, interest income and interest expenses are recognized using the effective interest rate. The effective interest rate is the rate that exactly discounts future estimated cash flows payments through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying value of the financial liability or asset. The computation takes into account all the contractual conditions of the financial instrument (for example, prepayment options) and includes incremental fees or expenses that are directly attributed to the instrument and are an integral part of the Effective Interest Rate (EIR), but not future credit losses.
For debt securities at fair value, gains and losses arising from changes in fair value are included in the statement of income as ‘Interest and valuation on investments’
| 18.2. | Fees and commission income |
The Bancolombia Group charges fees for the services it provides to its customers. Fee income can be divided into the following three categories:
Income from fees that are an integral part of the effective interest rate of a financial instrument:
Commissions for loan commitments that have a high probability of being used are deferred (together with any incremental cost) via the effective interest rate once the loan is granted (in accordance with section 18.1). If the commitment expires and no loan is made, the fee is recognized as income at the time of termination.
The opening fees received for the issuance of a financial liability measured at amortized cost are included in the effective interest rate of the financial instrument and its recognition as income is generated during the estimated life of the asset.
Commissions obtained from the services that are provided during a certain period of time:
Fees accrued for the transference of services during a period of time. The payments include income from commissions and asset management, custody and other administration and advisory commissions. In loan commitments when it is not possible to demonstrate the probability that a loan will be used, the opening fees of the loan are recognized in income statement during the commitment period on a straight line basis.
Fee and commission recognized on the performance of a significant act:
Fees arising from the negotiation or participation in the negotiation of a transaction for a third party, such as the acquisition of shares or other securities or the purchase or sale of businesses, are recognized at the closing of the underlying transaction. Commissions or fee components that are linked to a specified performance are recognized after the corresponding criteria are met.
For the investments that are not associates or joint ventures, dividends are recognized when the right to payment of the Bank is established, which is generally when the stockholders declares the dividend. These are included in the statement of income as Dividends received and share of profits of equity method investees.
| 18.4. | Total operating income, net |
The income derived from commercial operations (trading) includes all profits and losses from variations in the fair value and revenue or expenses for related interests from financial liabilities or assets. This includes any ineffectiveness registered in the hedging transactions.
