Notes to and forming part of the Unconsolidated Financial Statements

For the year ended December 31, 2018

During the current year, IFRS 9, Financial Instruments: Classification and Measurement, became applicable for certain
overseas branches of the Bank. The impact of the adoption of IFRS 9 on the Bank's financial statements is disclosed in
note 5.1.2.

In addition, there are certain other new standards and interpretations of and amendments to existing accounting standards
that have become applicable to the Bank for accounting periods beginning on or after January 1, 2018. These are
considered either to not be relevant or to not have any significant impact on the Bank's financial statements.

4. BASIS OF MEASUREMENT

4.1 Accounting convention

These unconsolidated financial statements have been prepared under the historical cost convention except that certain
fixed assets / non-banking assets acquired in satisfaction of claims have been stated at revalued amounts, certain
investments and derivative financial instruments have been stated at fair value and net obligations in respect of defined
benefit schemes are carried at their present values.

4.2 Critical accounting estimates and judgments

The preparation of these unconsolidated financial statements in conformity with accounting and reporting standards
requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and
liabilities and income and expenses. It also requires management to exercise judgment in the application of its accounting
policies. The estimates and assumptions are based on historical experience and various other factors that are believed to
be reasonable under the circumstances. These estimates and assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or
in the period of revision and future periods if the revision affects both current and future periods.

Significant accounting estimates and areas where judgments were made by management in the application of accounting
policies are as follows:

i) classification of investments (notes 5.4 and 9)

ii) provision against investments (notes 5.4 and 9.3), lendings to financial institutions (note 8.6) and advances (notes 5.5
and 10.4)
iii) income taxes (notes 5.9 and 35)
iv) staff retirement benefits (notes 5.11 and 40)
v) fair value of derivatives (note 5.16.2)
vi) fixed assets and intangible assets - revaluation, depreciation and amortization (notes 5.6, 11 and 12)
vii) impairment (note 5.8)
viii)valuation of non-banking assets acquired in satisfaction of claims (note 5.7)

5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies adopted in the preparation of these unconsolidated financial statements are consistent with those
of the previous financial year, except for changes explained in note 5.1:

5.1 Change in accounting policies

5.1.1 The Companies Ordinance, 1984 was repealed through the enactment of the Companies Act, 2017. However, as directed
by the Securities and Exchange Commission of Pakistan vide Circular No. 23 dated October 4, 2017, the financial reporting
requirements of the Companies Act, 2017 were only made applicable for reporting periods starting from January 1, 2018.

Consequent to the enactment of the Companies Act, 2017 the Bank has changed its policy for accounting for a deficit
arising on revaluation of fixed assets. The Bank's previous accounting policy, in accordance with the repealed Companies
Ordinance, 1984, required that a deficit arising on revaluation of a particular property was to be adjusted against the total
balance in the surplus account or, if no surplus existed, was to be charged to the profit and loss account as an impairment
of the asset. The Companies Act, 2017 removed the specific provisions allowing the above treatment. A deficit arising on
revaluation of a particular property is now to be accounted for in accordance with IFRS, which requires that such deficit
cannot be adjusted against surplus in another property, but is to be taken to the profit and loss account as an impairment.

80 United Bank Limited