2011 Annual Report Financial Supplements - BDO

BDO Unibank Group accounts for its investments in subsidiaries and non-controlling interest(previously called “minority interest”) as follows:(a) Investments in SubsidiariesSubsidiaries are all entities over which BDO Unibank Group has the power to control interms of financial and operating policies generally accompanying a shareholding of morethan one half of the voting rights. BDO Unibank Group obtains and exercises controlover subsidiaries through voting rights. The existence and effect of potential voting rightsthat are currently exercisable or convertible are considered when assessing whether BDOUnibank Group controls another entity. Subsidiaries are consolidated from the date BDOUnibank Group obtains control until such time that such control ceases.Except as otherwise indicated, the acquisition of subsidiaries are accounted for using theacquisition method (previously called “purchase method” - see Note 2.13). Acquisitionmethod requires recognizing and measuring the identifiable assets acquired, the liabilitiesassumed and any non-controlling interest in the acquiree. The consideration transferredfor the acquisition of a subsidiary is the fair values of the assets transferred, the liabilitiesincurred and the equity interests issued by the BDO Unibank, if any. The considerationtransferred also includes the fair value of any asset or liability resulting from a contingentconsideration arrangement. Acquisition-related costs are expensed as incurred andsubsequent change in the fair value of contingent consideration is recognized directly inprofit or loss.Identifiable assets acquired and liabilities and contingent liabilities assumed in abusiness combination are measured initially at their fair values at the acquisition date. Onan acquisition-by-acquisition basis, the BDO Unibank Group recognizes anynon-controlling interest in the acquiree either at fair value or at the non-controllinginterest’s proportionate share of the acquiree’s net assets.The excess of the consideration transferred, the amount of any non-controlling interest inthe acquiree and the acquisition-date fair value of any previous equity interest in theacquiree over the fair value of the Group’s share of the identifiable net assets acquired isrecognized as goodwill. If this is less than the fair value of the net assets of the subsidiaryacquired in the case of a bargain purchase, the difference is recognized directly as a gain inprofit or loss (see Note 2.13).(b) Transactions with Non-controlling InterestsBDO Unibank Group’s transaction with non-controlling interests that do not result inloss of control are accounted for as equity transactions – that is, as transaction with theowners of BDO Unibank Group in their capacity as owners. The difference between thefair value of any consideration paid and the relevant share acquired of the carrying valueof net assets of the subsidiary is recognized in equity. Disposals of equity investments tonon-controlling interests results in gains or losses for the Group that are also recognizedin equity.www.bdo.com.ph 27