2011 Annual Report Financial Supplements - BDO

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(b) BDO Unibank Group as LesseeLeases, which do not transfer to BDO Unibank Group substantially all the risks andbenefits of ownership of the asset are classified as operating leases. Operating leasepayments are recognized as expense in profit or loss on a straight-line basis over the leaseterm.BDO Unibank Group determines whether an arrangement is, or contains a lease based on thesubstance of the arrangement. It makes an assessment of whether the fulfillment of thearrangement is dependent on the use of a specific asset or assets and the arrangement conveysa right to use the asset.2.23 Impairment of Financial AssetsBDO Unibank Group assesses at the end of each reporting period whether there is objectiveevidence that a financial asset or group of financial assets is impaired. A financial asset or agroup of financial assets is impaired and impairment losses are incurred if, and only if, there isobjective evidence of impairment as a result of one or more events that occurred after theinitial recognition of the asset (a loss event) and that loss event has an impact on the estimatedfuture cash flows of the financial asset or group of financial assets that can be reliablyestimated. Objective evidence that a financial asset or group of assets is impaired includesobservable data that comes to the attention of BDO Unibank Group about certain lossevents, including, among others: (i) significant financial difficulty of the issuer or debtor; (ii) abreach of contract, such as a default or delinquency in interest or principal payments; (iii) theprobability that the borrower will enter bankruptcy or other financial reorganization; (iv) thedisappearance of an active market for that financial asset because of financial difficulties; or,(v) observable data indicating that there is a measurable decrease in the estimated future cashflows from a group of financial assets since the initial recognition of those assets, although thedecrease cannot yet be identified with the individual financial assets in the group.(a) Assets carried at amortized cost. BDO Unibank Group first assesses whether objectiveevidence of impairment exists individually for financial assets that are individuallysignificant and individually or collectively for financial assets that are not individuallysignificant. If BDO Unibank Group determines that no objective evidence of impairmentexists for an individually assessed financial asset, whether significant or not, BDOUnibank Group includes the asset in a group of financial assets with similar credit riskcharacteristics and collectively assesses them for impairment. Assets that are individuallyassessed for impairment and for which an impairment loss is or continues to berecognized are not included in a collective assessment of impairment.If there is objective evidence that an impairment loss on loans and receivable or HTMinvestments carried at amortized cost has been incurred, the amount of the loss ismeasured as the difference between the asset’s carrying amount and the present value ofestimated future cash flows (excluding future credit losses that have not been incurred)discounted at the financial asset’s original effective interest rate. The carrying amount ofthe asset is reduced through the use of an allowance account and the amount of the loss isrecognized in profit or loss. If a loan or HTM investment has a variable interest rate, thediscount rate for measuring any impairment loss is the current effective interest ratedetermined under the contract. When practicable, BDO Unibank Group may measureimpairment on the basis of an instrument’s fair value using an observable market price.www.bdo.com.ph 41
NOTES TOFINANCIAL STATEMENTSDECEMBER 31, 2011, 2010 AND 2009(Amounts in Millions of Philippine Pesos, Except Per Share Data or As Indicated)The calculation of the present value of the estimated future cash flows of a collateralizedfinancial asset reflects the cash flows that may result from foreclosure less costs forobtaining and selling the collateral, whether or not foreclosure is probable.For the purpose of a collective evaluation of impairment, financial assets are grouped onthe basis of similar credit risk characteristics, i.e., on the basis of BDO Unibank Group’sor BSP’s grading process that considers asset type, industry, collateral type, status andother relevant factors. Those characteristics are relevant to the estimation of future cashflows for groups of such assets by being indicative of the debtors’ ability to pay allamounts due according to the contractual terms of the assets being evaluated.Future cash flows in a group of financial assets that are collectively evaluated forimpairment are estimated on the basis of the contractual cash flows of the assets andhistorical loss experience for assets with credit risk characteristics similar to those in thegroup. Historical loss experience is adjusted on the basis of current observable data toreflect the effects of current conditions that did not affect the period on which thehistorical loss experience is based and to remove the effects of conditions in the historicalperiod that do not exist currently.Estimates of changes in future cash flows for groups of assets should reflect and beconsistent with changes in related observable data from period to period. Themethodologies and assumptions used for estimating future cash flows are reviewedregularly by BDO Unibank Group to reduce any differences between loss estimates andactual loss experience.When a loan is uncollectible, it is written off against the related allowance for loanimpairment. Such loans are written off after all the necessary procedures, includingapproval from the management and the BOD, have been completed and the amount ofthe loss has been determined. Subsequent recoveries of amounts previously written offdecrease the amount of the impairment loss in profit or loss. If in a subsequent periodthe amount of the impairment loss decreases and the decrease can be related objectively toan event occurring after the impairment was recognized (such as an improvement in thedebtor’s credit rating), the previously recognized impairment loss is reversed by adjustingthe allowance account. The amount of the reversal is recognized in profit or loss.(b) Assets carried at fair value with changes recognized in other comprehensive income. In the case ofinvestments classified as AFS securities, a significant or prolonged decline in the fair valueof the security below its cost is considered in determining whether the assetsare impaired. If any such evidence exists for AFS securities, the cumulativeloss – measured as the difference between the acquisition cost and the current fair value,less any impairment loss on that financial asset previously recognized in profit or loss – isreclassified from other comprehensive income to profit or loss as a reclassificationadjustment. Impairment losses recognized in profit or loss on equity instruments are notreversed through profit or loss. If, in a subsequent period, the fair value of a debtinstrument classified as AFS increases and the increase can be objectively related to anevent occurring after the impairment loss was recognized in profit or loss, the impairmentloss is reversed through profit or 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 and 38: NOTES TOFINANCIAL STATEMENTSDECEMBE
Page 41: 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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