2011 Annual Report Financial Supplements - BDO

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(e) Useful Lives of Premises, Furniture, Fixtures and Equipment and Investment PropertiesBDO Unibank Group estimates the useful lives of premises, furniture, fixtures andequipment and investment properties based on the period over which the assets areexpected to be available for use. The estimated useful lives of premises, furniture, fixturesand equipment and investment properties are reviewed periodically and are updated ifexpectations differ from previous estimates due to physical wear and tear, technical orcommercial obsolescence and legal or other limits on the use of the assets. The carryingamounts of premises, furniture, fixtures and equipment are analyzed in Note 11. On theother hand, the carrying amounts of investment properties are analyzed in Note 12. Basedon management’s assessment as at December 31, 2011 and 2010, there is no change inestimated useful lives of premises, furniture, fixtures and equipment and investmentproperties during the year. Actual results, however, may vary due to changes in estimatesbrought about by changes in factors mentioned above.(f) Realizable Amount of Deferred Tax AssetsBDO Unibank Group reviews its deferred tax assets at the end of each reporting periodand reduces the carrying amount to the extent that it is no longer probable that sufficienttaxable profit will be available to allow all or part of the deferred tax assets to be utilized.The carrying value of deferred tax assets, which management assessed to be fully utilizedwithin the next two to three years, as of December 31, 2011 and 2010 is disclosed inNote 27.01.(g) Impairment of Non-financial AssetsExcept for intangible assets with indefinite useful lives, PFRS requires that an impairmentreview be performed when certain impairment indicators are present. BDO UnibankGroup’s policy on estimating the impairment of non-financial assets is discussed in detailin Note 2.24. Though management believes that the assumptions used in the estimationof fair values reflected in the financial statements are appropriate and reasonable,significant changes in these assumptions may materially affect the assessment ofrecoverable values and any resulting impairment loss could have a material adverse effecton the results of operations.Impairment losses recognized in profit or loss are disclosed in Note 14.(h) Retirement BenefitsThe determination of BDO Unibank Group’s obligation and cost of post-employmentand other retirement benefits is dependent on the selection of certain assumptions used byactuaries in calculating such amounts. Those assumptions are described in Note 23 andinclude, among others, discount rates, expected rate of return on plan assets and salaryincrease rates. In accordance with PFRS, actual results that differ from the assumptionsare accumulated and amortized over future periods and therefore, generally affect therecognized expense and recorded obligation in such future periods.www.bdo.com.ph 55
NOTES TOFINANCIAL STATEMENTSDECEMBER 31, 2011, 2010 AND 2009(Amounts in Millions of Philippine Pesos, Except Per Share Data or As Indicated)The retirement benefit asset and net unrecognized actuarial losses of BDO UnibankGroup amounted to P1,494 and P4,520, respectively, in 2011 while the retirement benefitasset and net unrecognized actuarial losses of BDO Unibank Group amounted to P998and P3,821, respectively, in 2010. On the other hand, the retirement benefit asset and netunrecognized actuarial losses of the Parent Bank amounted to P1,519 and P4,252,respectively, in 2011 while the retirement benefit asset and net unrecognized actuariallosses amounted to P1,026 and P3,650, respectively, in 2010 (see Note 23.02).(i) Reward PointsThe BDO Unibank Group provides rewards points to its banking clients and customerseach time they avail of the pre-identified products and services of the Bank and thecompanies which the Bank has identified as partners in the rewards program. Rewardpoints are redeemable in a wide selection of reward categories, including travel,merchandise of third parties, reward credits and gift certificates. Certain loyalty points forcredit card have no expiration date unless the credit card is cancelled but for otherrewards program, unredeemed points may expire at some future date.The BDO Unibank Group establishes reserves to cover the cost of future rewardredemptions for points earned to date. The provision for the cost of rewards is basedupon points earned by bank clients and the current cost per point of redemption. Theestimated points to be redeemed are measured and adjusted based on many factorsincluding but not limited to past redemption behavior of bank clients, product type onwhich the points are earned and their ultimate redemption rate on the points earned todate but not yet redeemed.The BDO Unibank Group continually evaluates its reserve methodology for rewardsbased on developments in redemption patterns, cost per point redeemed and otherfactors. The reserve for unredeemed points is impacted over time by enrollment levels,amount of points earned and redeemed, weighted-average cost per point, redemptionchoices made by bank clients and other membership rewards program changes. Thecalculation is most sensitive to changes in the estimated ultimate redemption rate. Thisrate is based on the expectation that a large majority of all points earned will eventually beredeemed and the awards will be redeemed through goods or services supplied by a thirdparty based on BDO Unibank Group’s past experience.The carrying value of the rewards points accrued by the BDO Unibank Group and theParent Bank is presented as part of Accrued expenses under Other Liabilities in thestatements of financial position as disclosed in Note 18.4. RISK MANAGEMENTBy their nature, BDO Unibank Group’s activities are principally related to the use of financialinstruments including derivatives. BDO Unibank Group accepts deposits from customers atfixed and floating rates for various periods, and seeks to earn above-average interest marginsby investing these funds in high-quality assets. BDO Unibank Group seeks to increase thesemargins by consolidating short-term funds and lending for longer periods at higher rates,while maintaining sufficient liquidity to meet all claims that might fall due. BDO UnibankGroup also trades in financial instruments where it takes positions in traded and over-thecounterinstruments, including derivatives, to take advantage of short-term market movementsin equities and bonds and in currency and interest rate prices.
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 55: 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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