2011 Annual Report Financial Supplements - BDO

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Deferred tax is provided, using the liability method, on temporary differences at the end ofthe reporting period between the tax base of assets and liabilities and their carrying amountsfor financial reporting purposes. Under the liability method, with certain exceptions, deferredtax liabilities are recognized for all taxable temporary differences and deferred tax assets arerecognized for all deductible temporary differences and the carryforward of unused tax lossesand unused tax credits to the extent that it is probable that taxable profit will be availableagainst which the deferred tax asset can be utilized.The carrying amount of deferred tax assets is reviewed at the end of each reporting period andreduced to the extent that it is probable that sufficient taxable profit will be available to allowall or part of the deferred tax asset to be utilized.Deferred tax assets and liabilities are measured at the tax rates that are expected to apply tothe period when the asset is realized or the liability is settled, based on tax rates and tax lawsthat have been enacted or substantively enacted at the end of each reporting period.Most changes in deferred tax assets or liabilities are recognized as a component of tax expensein the statement of income. Only changes in deferred tax assets or liabilities that relate to achange in value of resources or liabilities relate to items recognized in other comprehensiveincome or directly in equity are recognized in other comprehensive income or directly inequity.2.28 Earnings Per Share (EPS)Basic earnings per common share is determined by dividing net profit by the weighted averagenumber of common shares subscribed and issued during the period, after retroactiveadjustment for any stock dividend declared in the current period.The diluted earnings per common share is also computed by dividing net profit by theweighted average number of common shares subscribed and issued during the period.However, net profit attributable to common shares and the weighted average number ofcommon shares outstanding are adjusted to reflect the effects of potentially dilutiveconvertible preferred shares and stock option plan granted by BDO Unibank Group to thequalified officers. Convertible preferred shares are deemed to have been converted tocommon shares at the issuance of preferred shares. The stock option plan is deemed to havebeen converted into common stock in the year the stock option is granted.2.29 Trust ActivitiesBDO Unibank Group commonly acts as trustee and in other fiduciary capacities that result inthe holding or placing of assets on behalf of individuals, trusts, retirement benefit plans andother institutions. Assets and income arising thereon are excluded from these financialstatements, as these are neither assets nor income of BDO Unibank Group.2.30 Event After the Reporting PeriodAny post-year-end event that provides additional information about BDO Unibank Group’sposition at the end of reporting period (adjusting event) is reflected in the financialstatements. Post-year-end events that are not adjusting events, if any, are disclosed whenmaterial to the financial statements.www.bdo.com.ph 47
NOTES TOFINANCIAL STATEMENTSDECEMBER 31, 2011, 2010 AND 2009(Amounts in Millions of Philippine Pesos, Except Per Share Data or As Indicated)3. SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATESBDO Unibank Group’s financial statements prepared in accordance with FRSP for banksrequire management to make judgments and estimates that affect the amounts reported in thefinancial statements and related notes. Judgments and estimates are continually evaluated andare based on historical experience and other factors, including expectations of future eventsthat are believed to be reasonable under the circumstances. Actual results may ultimatelydiffer from these estimates and the differences could be significant.3.01 Critical Management Judgments in Applying Accounting PoliciesIn the process of applying BDO Unibank Group’s accounting policies, management has madethe following judgments, apart from those involving estimation, which have the mostsignificant effect on the amounts recognized in the financial statements:(a) HTM InvestmentsBDO Unibank Group follows the guidance of PAS 39 in classifying non-derivativefinancial assets with fixed or determinable payments and fixed maturity as HTM. Thisclassification requires significant judgment. In making this judgment, BDO UnibankGroup considers its intention and ability to hold such investments to maturity.Management has confirmed its intention and determined its ability to hold theinvestments up to maturity.If BDO Unibank Group fails to keep these investments at maturity (other than for theallowed specific circumstances, e.g., selling more than an insignificant amount close tomaturity), it will be required to reclassify the entire class to AFS securities. Theinvestments would therefore be measured at fair value and not at amortized cost.However, the tainting provision will not apply if the sales or reclassifications of HTMinvestments: (i) are so close to maturity or the financial asset’s call date that changes in themarket rate of interest would not have a significant effect on the financial asset’s fairvalue; (ii) occur after BDO Unibank Group has collected substantially all of the financialasset’s original principal through scheduled payments or prepayments; or,(iii) are attributable to an isolated event that is beyond the control of BDO UnibankGroup, is nonrecurring and could not have been reasonably anticipated by BDO UnibankGroup.(b) Impairment of AFS SecuritiesBDO Unibank Group follows the guidance of PAS 39 in determining when an investmentis permanently impaired. This determination requires significant judgment. In makingthis judgment, BDO Unibank Group evaluates, among other factors, the duration andextent to which the fair value of an investment is less than its cost; and the financial healthof and near-term business outlook for the investee, including factors such as industry andsector performance, changes in technology and operational and financing cash flow. Forinvestments issued by counterparty under bankruptcy, BDO Unibank Group determinespermanent impairment based on the price of the most recent transaction and on latestindications obtained from reputable counterparties (which regularly quote prices fordistressed securities) since current bid prices are no longer available.
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
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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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