2011 Annual Report Financial Supplements - BDO

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(c) Assets carried at cost. BDO Unibank Group assesses at the end of each reporting periodwhether there is objective evidence that any of the unquoted equity securities andderivative assets linked to and required to be settled in such unquoted equity instruments,which are carried at cost, may be impaired. The amount of impairment loss is thedifference between the carrying amount of the equity security and the present value of theestimated future cash flows discounted at the current market rate of return of a similarasset. Impairment losses on assets carried at cost cannot be reversed.When possible, BDO Unibank Group seeks to restructure loans rather than to takepossession of collateral. This may involve extending the payment arrangements and theagreement of new loan conditions. Once the terms have been renegotiated, the loan is nolonger considered past due. Management continuously reviews restructured loans toensure that all criteria are met and that future payments are likely to occur. The loanscontinue to be subject to an individual or collective impairment assessment, calculatedusing the loans’ original effective interest rate. The difference between the recorded saleof the original loan and the present value of the restructured cash flows, discounted at theoriginal effective interest rate, is recognized as part of Impairment Losses account inprofit or loss.2.24 Impairment of Non-financial AssetsBDO Unibank Group’s real properties for development and sale, equity investments,goodwill, intangible assets (recorded as part of Other Resources), premises, furniture, fixturesand equipment and investment properties are subject to impairment testing. Intangible assetswith an indefinite useful life, such as goodwill are tested for impairment at least annually. Allother individual assets or cash-generating units are tested for impairment whenever events orchanges in circumstances indicate that the carrying amount may not be recoverable.For purposes of assessing impairment, assets are grouped at the lowest levels for which thereare separately identifiable cash flows (cash-generating units). As a result, assets are tested forimpairment either individually or at the cash-generating unit level.An impairment loss is recognized for the amount by which the asset’s or cash-generatingunit’s carrying amount exceeds its recoverable amounts which is the higher of its fair valueless costs to sell and its value in use. In determining value in use, management estimates theexpected future cash flows from each cash-generating unit and determines the suitable interestrate in order to calculate the present value of those cash flows. Discount factors aredetermined individually for each cash-generating unit and reflect management’s assessment ofrespective risk profiles, such as market and asset-specific risk factors.All assets are subsequently reassessed for indications that an impairment loss previouslyrecognized may no longer exist and the carrying amount of the asset is adjusted to therecoverable amount resulting in the reversal of the impairment loss.www.bdo.com.ph 43
NOTES TOFINANCIAL STATEMENTSDECEMBER 31, 2011, 2010 AND 2009(Amounts in Millions of Philippine Pesos, Except Per Share Data or As Indicated)2.25 Foreign Currency Transactions and TranslationsThe financial statements of the FCDUs of BDO Unibank Group and foreign subsidiaries aretranslated at the prevailing current exchange rates (for statement of financial positionaccounts) and average exchange rate during the period (for statement of income accounts) forconsolidation purposes.The accounting records of BDO Unibank Group are maintained in Philippine pesos exceptfor the FCDUs and foreign subsidiaries which are maintained in US dollars or EuropeanUnion Euro (Euro). BDO Remittance, an overseas branch, and Express Padala HK aremaintained in Hong Kong dollars. Foreign currency transactions during the period aretranslated into the functional currency at exchange rates which approximate those prevailingon transaction dates.Foreign exchange gains and losses resulting from the settlement of such transactions and fromthe translation at period-end exchange rates of monetary assets and liabilities denominated inforeign currencies are recognized in profit or loss.The operating results and financial position of foreign subsidiaries and an overseas branch,which are measured using the US dollar or Euro and Hong Kong dollars, respectively, aretranslated to Philippine pesos, the BDO Unibank Group’s functional currency, as follows:(a) Assets and liabilities are translated at the closing rate at the end of the reporting period;(b) Income and expenses are translated at the monthly average exchange rates (unless thisaverage is not reasonable approximation of the cumulative effect of the rates prevailing onthe transaction dates, in which case income and expenses are translated at the dates of thetransactions), except for FCDU which uses the book rate or the previous month-endPhilippine Dealing System closing rate in translating income and expenses and theoverseas branch which used the month-end Philippine Dealing System closing rate intranslating income and expenses; and,(c) All resulting exchange differences are recognized as a separate component of othercomprehensive income.On consolidation, exchange differences arising from the translation of the net investment inforeign subsidiaries and an overseas branch is recognized to other comprehensive income aspart of Accumulated Translation Adjustment. When a foreign operation is sold, suchexchange differences are recognized in profit or loss.The translation of the financial statements into Philippine peso should not be construed as arepresentation that the US dollar, Euro or Hong Kong dollar amounts could be convertedinto Philippine peso amounts at the translation rates or at any other rates of exchange.
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
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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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