Annual report 2008-OK-B-up.qxp - Canadia Bank Plc.

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NOTES TO THE FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.6 Provision for loan losses (continued)
Rate of provision
Standard 0%
Substandard 10%
Doubtful 30%
Loss 100%
2.7 Other credit related commitments
In the normal course of business, the Bank enters into other credit related commitments including loan
commitments, letters of credit and guarantees. The accounting policy and provision methodology are
similar to those for originated loans as noted above. Specific provisions are raised against other credit
related commitments when losses are considered probable.
2.8 Investment in Foreign Trade Bank of Cambodia
The Bank entered into a sale and purchase agreement dated 28 October 2005 with the Privatisation Committee
(acting on be of the Royal Government of Cambodia) to acquire 46% of the share capital of the
Foreign Trade Bank of Cambodia ("FTB"). This investment is carried at cost. The dividend is recognised as
income when received. The Bank does not have power to govern the financial and operational policy of
FTB which requires the Bank to consolidate FTB. Cambodia has not adopted equity accounting standard
and the Bank intends to reduce its shareholdings to below 20% as required by the Central Bank.
2.9 Interest income and expenses
Interest earned on loans and advances to customers, deposits with the Central Bank and other banks are
recognised on accruals basis, except where serious doubt exists as to the collectability of loans and
advances to customers, in which case no interest income is recognised. The policy on the suspension of
interest is in conformity with the Central Bank's guidelines on the suspension of interest on non-performing
loans and provision for bad and doubtful debts.
Interest expense on deposits of customer and settlement accounts of other banks and borrowings are
recognised on accruals basis.
2.10 Fee and commission income
Fee and commission income is recognised on an accruals basis when the service has been provided. Fee
and commission income comprises income received from inward and outward bank transfers, loan
processing, bank guarantees, letters of credit, ATM/Visa and Mastercard charges. Loan commitment fees
are deferred and recognised as other income in the income statement over the loan term. Unamortised
loan commitment fees are presented as a deduction from loans.
2.11 Property and equipment
Property and equipment is stated at cost less accumulated depreciation, except land which is not
depreciated. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that the future economic benefits associated with the item will flow
to the Bank and cost of the item can be measured reliably. All other repairs and maintenance are charged
to the income statement during the financial year in which they are incurred.
Land is not depreciated. Depreciation on other assets is calculated using the following rates and methods:
Annual Report 2008