UOB Annual Report 2002 - United Overseas Bank

(k)
Derivative Financial Instruments
Derivative financial instruments are initially recognised in the balance sheets at amounts paid or received, as appropriate.
Those undertaken for trading purposes are subsequently remeasured to fair value and the resultant profits and losses are taken
up in the income statements.
Those entered into for hedging purposes are subsequently accounted for in a manner consistent with the accounting treatment
of the hedged items.
(l)
Goodwill
Goodwill represents the excess of the fair value of the consideration given over the fair value of the identifiable net assets of
subsidiaries, associates or businesses acquired.
Goodwill arising on acquisition of subsidiaries occurring on or after 1 January 2001 is reported in the balance sheet as an
intangible asset. Goodwill on acquisition of associates occurring on or after 1 January 2001 is included in investments in
associates.
Goodwill is amortised on a straight-line basis, through the income statement, over its useful economic life up to a maximum of
20 years. Goodwill which is assessed as having no continuing economic value is written off to the income statement.
Negative goodwill represents the excess of the fair value of the identifiable net assets of subsidiaries or businesses acquired over
the fair value of the consideration given. Negative goodwill is amortised on a straight-line basis, through the income statement
over the remaining weighted average useful life of the identifiable depreciable/amortisable assets acquired, with the exception
of the amount of negative goodwill exceeding the fair values of acquired identifiable non-monetary assets which is recognised
as income immediately.
(m) Provisions
Provisions are recognised when the Group or the Bank has a present legal or constructive obligation as a result of past events, it
is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be
made.
(n)
Employee Benefits
Equity Compensation Benefits
Employees of the Group and the Bank with the corporate grade of Vice President (or equivalent position) and above as well as
selected employees below Vice President qualify for the UOB Executives’ Share Option Scheme and the UOB 1999 Share Option
Scheme, subject to certain restrictions.
Pursuant to these Schemes, options have been awarded to enable the holders to acquire shares in the Bank at the exercise price.
The Group and the Bank do not recognise share options issued under these Schemes as a charge to the income statements.
Post Employment Benefits
The Group contributes to legally required social security schemes and these schemes are considered defined contribution schemes.
These expenses are charged to the income statements as and when they arise and are included as part of staff costs.
(o)
Dividends
Dividends on ordinary shares are recognised in equity in the period in which they are declared.
UNITED OVERSEAS BANK 103