2011 Annual Report Financial Supplements - BDO

The residual values and estimated useful lives of premises, furniture, fixtures and equipmentare reviewed and adjusted, if appropriate, at the end of each reporting period.An item of premises, furniture, fixtures and equipment is derecognized upon disposal or whenno future economic benefits are expected to arise from the continued use of the asset. Anygain or loss arising on derecognition of the asset (calculated as the difference between the netdisposal proceeds and the carrying amount of the item) is included in profit or loss in theperiod the item is derecognized.2.13 Business CombinationExcept as indicated otherwise, business acquisitions are accounted for using the acquisitionmethod of accounting.Goodwill acquired in a business combination is initially measured at cost being the excess ofthe cost of a business combination over BDO Unibank Group’s interest in the net fair valueof the identifiable assets, liabilities and contingent liabilities. Subsequent to initial recognition,goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewedfor impairment annually or more frequently if events or changes in circumstances indicate thatthe carrying value may be impaired (see Note 2.24).Impairment losses on goodwill are not reversed. Negative goodwill, if any, which is the excessof BDO Unibank Group’s interest in the net fair value of acquired identifiable assets,liabilities and contingent liabilities over cost is recognized directly in profit or loss.For the purpose of impairment testing, goodwill is allocated to cash-generating units orgroups of cash-generating units that are expected to benefit from the business combination inwhich the goodwill arose. The cash-generating units or groups of cash-generating units areidentified according to operating segment.Gains and losses on the disposal of an interest in a subsidiary include the carrying amount ofgoodwill relating to it.If the business combination is achieved in stages, the acquirer is required to remeasure itspreviously held equity interest in the acquiree at its acquisition-date fair value and recognizethe resulting gain or loss, if any, in the profit or loss or other comprehensive income, asappropriate.Any contingent consideration to be transferred by the Group is recognized at fair value at theacquisition date. Subsequent changes to the fair value of the contingent consideration that isdeemed to be an asset or liability is recognized in accordance with PAS 37 either in profit orloss or as a change to other comprehensive income. Contingent consideration that isclassified as equity is not remeasured, and its subsequent settlement is accounted for withinequity.Transfers of assets between commonly-controlled entities are accounted for under historicalcost accounting.www.bdo.com.ph 35