2011 Annual Report Financial Supplements - BDO

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Financial assistance from the Philippine Deposit Insurance Corporation (PDIC), arising fromthe acquisition of First e-Bank in 2002, is accounted for under PAS 20, Accounting forGovernment Grants and Disclosure of Government Assistance, whereby the loan received is initiallyrecorded at the amount borrowed with no re-measurement to fair value or imputation ofmarket interest.Financial liabilities are derecognized in the statement of financial position only when theobligations are extinguished either through discharge, cancellation or expiration.2.16 Offsetting Financial InstrumentsFinancial assets and liabilities are offset and the net amount is reported in the statement offinancial position when there is a legally enforceable right to offset the recognized amountsand there is an intention to settle on a net basis or realize the asset and settle the liabilitysimultaneously.2.17 Terminal Value of Leased Assets and Deposits on Finance LeaseThe residual value of leased assets, which approximates the amount of guaranty deposit paidby the lessee at the inception of the lease, is the estimated proceeds from the disposal of theleased asset at the end of the lease term. At the end of the lease term, the residual value of theleased asset is generally applied against the guaranty deposit of the lessee. The residual valueof leased assets is included as part of Other Liabilities account in the BDO Unibank Groupstatement of financial position.2.18 Related Party TransactionsRelated party transactions are transfers of resources, services or obligations between BDOUnibank Group and its related parties, regardless whether a price is charged.Parties are considered to be related if one party has the ability to control the other party orexercise significant influence over the other party in making financial and operating decisions.These include: (a) individuals owning, directly or indirectly through one or moreintermediaries, control or are controlled by, or under common control with the BDOUnibank Group; (b) associates; and, (c) individuals owning, directly or indirectly, an interest inthe voting power of the BDO Unibank Group that gives them significant influence overBDO Unibank Group and close members of the family of any such individual.In considering each possible related party relationship, attention is directed to the substanceof the relationship and not merely on the legal form.2.19 EquityCapital stock represents the nominal value of shares that have been issued.Common stock options pertain to the cumulative amount of stock option arising from thestock option plan granted by BDO Unibank Group to its qualified officers. The optionsunder the stock option plan were fully exercised and paid for in 2010.Additional paid-in capital includes any premiums received on the issuance of capital stock.Any transaction costs associated with the issuance of shares are deducted from additionalpaid-in capital.www.bdo.com.ph 37
NOTES TOFINANCIAL STATEMENTSDECEMBER 31, 2011, 2010 AND 2009(Amounts in Millions of Philippine Pesos, Except Per Share Data or As Indicated)Surplus reserves pertain to a portion of BDO Unibank Group’s income from trust operationsset-up on a yearly basis in compliance with BSP regulations. Surplus reserves also consist ofreserve for contingencies and self-insurance.Surplus free includes all current and prior period results as disclosed in profit or loss andwhich are available and not restricted for use by BDO Unibank Group.Net unrealized fair value gains (losses) on AFS securities pertains to cumulativemark-to-market valuation of AFS financial assets.Revaluation increment consists of gains arising from the revaluation of land under bankpremises, furniture, fixtures and equipment.Accumulated translation adjustment pertains to exchange differences arising on translation ofthe assets and liabilities of foreign subsidiaries and overseas branch that are taken to othercomprehensive income.Non-controlling interests represents the portion of the net assets and profit or loss notattributable to BDO Unibank Group and are presented separately in the BDO UnibankGroup statement of income and within equity in the BDO Unibank Group statement offinancial position and changes in equity.2.20 Revenue and Expense RecognitionRevenue is recognized to the extent that it can be reliably measured; it is probable that theeconomic benefits will flow to BDO Unibank Group; and the expenses incurred or to beincurred can be measured reliably. The following specific recognition criteria of income andexpenses must also be met before revenue is recognized:(a) Interest – Interest income and expenses are recognized in profit or loss for all financialassets or instruments using the effective interest method.The effective interest method is a method of calculating the amortized cost of a financialasset or a financial liability and of allocating the interest income or interest expense overthe relevant period. The effective interest rate is the rate that exactly discounts estimatedfuture cash payments or receipts through the expected life of the financial instrument or,when appropriate, a shorter period to the net carrying amount of the financial asset orfinancial liability. When calculating the effective interest rate, BDO Unibank Groupestimates cash flows considering all contractual terms of the financial instrument but doesnot consider future credit losses. The calculation includes all fees and points paid orreceived between parties to the contract that are an integral part of the effective interestrate, transaction costs and all other premiums or discounts.Once a financial asset or a group of similar financial assets has been written down as aresult of an impairment loss, interest income is recognized using the rate of interest usedto discount the future cash flows for the purpose of measuring the impairment loss.
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 30 and 31: Regular purchases and sales of fina
Page 32 and 33: Subsequent to initial recognition,
Page 34: Certain derivatives may be designat
Page 37: 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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