2011 Annual Report Financial Supplements - BDO

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Regular purchases and sales of financial assets are recognized on their settlement date. Allfinancial assets that are not classified as at FVTPL are initially recognized at fair value plus anydirectly attributable transaction costs. Financial assets carried at FVTPL are initially recordedat fair value and transaction costs related to it are recognized in profit or loss.The foregoing categories of financial instruments are more fully described below.(a) Financial Assets at Fair Value Through Profit or LossThis category includes derivative financial instruments and financial assets that are eitherclassified as held for trading (HFT) or are designated by BDO Unibank Group to becarried at FVTPL upon initial recognition. A financial asset is classified in this category ifacquired principally for the purpose of selling in the near term or if so designated bymanagement. Derivatives are also categorized as “held for trading” unless they aredesignated as hedges.Subsequent to initial recognition, the financial assets included in this category aremeasured at fair value with changes in fair value recognized in profit or loss. Financialassets (except derivatives and financial assets originally designated as financial assets atFVTPL) may be subsequently reclassified out of FVTPL category:(i) Only in rare circumstances and if there is a change in intention (i.e., the financial assetis no longer held for the purpose of selling or repurchasing it in the near future);(ii) If the financial asset would have met the definition of loans receivables and if thefinancial asset had not been required to be classified as HFT at initial recognition andthe entity has the intention and ability to hold the financial asset for the foreseeablefuture or until maturity; and,(iii) For CLNs and derivatives embedded in CLNs linked to ROP bonds as permitted byBSP for prudential reporting and by the SEC for financial reporting.(b) Loans and ReceivablesLoans and receivables are non-derivative financial assets with fixed or determinablepayments that are not quoted in an active market. These arise when BDO UnibankGroup provides money, goods or services directly to the debtor with no intention oftrading the receivables. Included in this category are financial assets arising from directloans to customers, interbank loans and receivables, sales contract receivables and allreceivables from customers and other banks. Loans and receivables also include theaggregate rental on finance lease transactions. Unearned income on finance leasetransactions is shown as a deduction from loans and receivables.www.bdo.com.ph 29
NOTES TOFINANCIAL STATEMENTSDECEMBER 31, 2011, 2010 AND 2009(Amounts in Millions of Philippine Pesos, Except Per Share Data or As Indicated)Loans and receivables are subsequently measured at amortized cost using the effectiveinterest method, less impairment losses. Any change in the value of loans and receivablesis recognized in profit or loss, except for reclassified financial assets under PAS 39 andPFRS 7. Increases in estimates of future cash receipts from financial assets that have beenreclassified in accordance with PAS 39 and PFRS 7 shall be recognized as an adjustmentto the effective interest rate from the date of the change in estimate. The differencebetween the sale and repurchase price is recognized as interest and accrued over the life ofthe agreements using the effective interest method. Securities Purchased Under ReverseRepurchase Agreement (SPURRA), wherein BDO Unibank Group enters into short-termpurchases of securities under reverse repurchase agreements of substantially identicalsecurities with the BSP, are included in this category.BDO Unibank Group’s financial assets categorized as loans and receivables are presentedas Cash and Cash Equivalents and Loans and Other Receivables in the statement offinancial position. Cash and cash equivalents consist of cash and non-restricted balanceswith the BSP and amounts due from other banks. For purposes of reporting cash flows,cash and cash equivalents include cash and other cash items, amounts due from BSPand other banks, interbank call loans receivable and SPURRA with original maturitiesof three months or less from placement date.Impairment loss is the estimated amount of loss in BDO Unibank Group’s loan portfolio,based on the evaluation of the estimated future cash flows discounted at the loan’s originaleffective interest rate or the last repricing rate for loans issued at variable rates (see Note2.23). Impairment is established through an allowance account which is charged toexpense. Loans and receivables are written off against the allowance for impairment whenmanagement believes that the collectibility of the principal is unlikely, subject to BSPregulations.(c) HTM InvestmentsThis category includes non-derivative financial assets with fixed or determinable paymentsand a fixed date of maturity that BDO Unibank Group has the positive intention andability to hold to maturity. Investments intended to be held for an undefined period arenot included under this category.HTM investments consist of government and private debt securities. If BDO UnibankGroup were to sell other than an insignificant amount of HTM investments, the entirecategory of HTM securities would be tainted and would be reclassified as AFS securities.The tainting provision will not apply if the sales or reclassifications of HTM investments:(i) are so close to maturity or the financial asset’s call date that changes in the market rateof interest would not have a significant effect on the financial asset’s fair value; (ii) occurafter BDO Unibank Group has collected substantially all of the financial asset’s originalprincipal through scheduled payments or prepayments; or, (iii) are attributable to anisolated event that is beyond the control of BDO Unibank Group, is nonrecurring andcould not have been reasonably anticipated by BDO Unibank Group.
Page 7 and 8: REPORT OFINDEPENDENT AUDITORSReport
Page 9 and 10: STATEMENTS OFINCOMEFOR THE YEARS EN
Page 12: BALANCE AT JANUARY 1, 2009 P 23,020
Page 16 and 17: FOR THE YEARS ENDED DECEMBER 31, 20
Page 18 and 19: 1.02 Approval of Financial Statemen
Page 22 and 23: (ii) Philippine Interpretation IFRI
Page 24 and 25: PFRS 7 (Amendment), Financial Instr
Page 26 and 27: (v)PFRS 9, Financial Instruments: C
Page 28 and 29: BDO Unibank Group accounts for its
Page 32 and 33: Subsequent to initial recognition,
Page 34: Certain derivatives may be designat
Page 37 and 38: NOTES TOFINANCIAL STATEMENTSDECEMBE
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NOTES TOFINANCIAL STATEMENTSDECEMBE
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COMPANY HEADQUARTERSBDO Unibank, In
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2011 Annual Report Financial Supplements - BDO

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