2011 Annual Report Financial Supplements - BDO

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The fair values are determined through valuation techniques by determining the net presentvalue of estimated future cash flows. Annual interest rates on these investments range from0% to 14% in 2011, 0% to 14% in 2010 and 0% to 11.4% in 2009 both in the BDO UnibankGroup and the Parent Bank financial statements.9.04 Reclassification of Investment SecuritiesBDO Unibank Group recognized the deterioration of the world’s financial markets thatoccurred in the third quarter of 2008. The enormity and extent of the global credit crisis wascrystallized by the substantial government programs instituted by major economies inresponse to the crisis, including temporary liquidity facilities, outright purchase of commercialpapers and mortgaged-backed securities, guarantee of new unsecured debt issued by banksand purchase of equity stakes in financial institutions.In 2008, BDO Unibank Group chose to avail of the regulatory relief on specific financialassets granted by the BSP under the governing provisions of Circular No. 628, whichpermitted the reclassification of certain financial assets to help banks cope with the adverseimpact of the global financial crisis.Presented below are the details of the reclassifications made by BDO Unibank Group in 2008and the related details at the end of 2011 and 2010.BDO Unibank GroupAtReclassification DateCarrying FairValue ValueReclassification from FVTPL to HTM P 6,297 P 6,297Reclassification of debt securities from AFS to HTM 25,540 25,540Reclassification of embedded derivatives of CLNsfrom FVTPL to Loans and Other Receivables ( 183) ( 183)Reclassification of CLNs from AFS to Loans and Other Receivables 18,520 18,520Balances atDecember 31, 2011 December 31, 2010Carrying Fair Carrying FairValue Value Value ValueReclassification from FVTPL to HTM P 1,547 P 1,960 P 1,635 P 1,885Reclassification of debt securitiesfrom AFS to HTM 17,960 20,768 20,184 22,696Reclassification of CLNs from AFSto Loans and Other Receivables 7,287 7,959 13,037 14,224Parent BankAtReclassification DateCarrying FairValue ValueReclassification from FVTPL to HTM P 6,297 P 6,297Reclassification of debt securities from AFS to HTM 22,474 22,474Reclassification of embedded derivatives of CLNsfrom FVTPL to Loans and Other Receivables ( 70) ( 70)Reclassification of CLNs from AFS to Loans and Other Receivables 14,096 14,096www.bdo.com.ph 93
NOTES TOFINANCIAL STATEMENTSDECEMBER 31, 2011, 2010 AND 2009(Amounts in Millions of Philippine Pesos, Except Per Share Data or As Indicated)Balances atDecember 31, 2011 December 31, 2010Carrying Fair Carrying FairValue Value Value ValueReclassification from FVTPL to HTM P 1,547 P 1,960 P 1,635 P 1,885Reclassification of debt securitiesfrom AFS to HTM 16,107 18,743 18,248 20,539Reclassification of CLNs from AFSto Loans and Other Receivables 7,287 7,959 12,159 13,351Estimated cash flows on instruments reclassified from FVTPL to HTM at the date ofreclassification amounted to P9,174 both for BDO Unibank Group and Parent Bank. On theother hand, estimated cash flows on CLNs reclassified from AFS to Loans and OtherReceivables at the date of reclassification amounted to P22,591 and P18,728 for BDOUnibank Group and Parent Bank, respectively.Reclassification from FVTPL to HTMTotal trading losses on FVTPL reclassified to HTM both in the BDO Unibank Group andParent Bank financial statements which were recognized in profit or loss amounted toP199 in 2008. On the other hand, the net trading gain (loss) that would have been recognizedin the period following the reclassification during 2011, 2010 and 2009 if the reclassificationshad not been made would have amounted to P151, P84 and P396, respectively, for bothBDO Unibank Group and Parent Bank. Effective interest rates of FVTPL reclassified toHTM range from 7.0% to 8.6% in 2011, 2010 and 2009 in the BDO Unibank Group andParent Bank financial statements. Amortization of premium due to change in effectiveinterest rates recognized as part of interest income in profit or loss on reclassified securitiesamounted to (P9) in both the BDO Unibank Group and Parent Bank financial statements in2011 and 2010. No impairment recovery or loss was booked on reclassified instruments inboth the BDO Unibank Group and Parent Bank financial statements in 2011 and 2010.Reclassification of Debt Securities from AFS to HTMUnrealized fair value losses in equity of debt securities reclassified from AFS to HTM atreclassification dates amounted to P102 and P46 in the BDO Unibank Group and ParentBank financial statements, respectively, in 2008. The net trading gain (loss) that would havebeen recognized in other comprehensive income during the period following thereclassification if the reclassifications had not been made would have amounted to P635,P1,395, and 3,395 in 2011, 2010 and 2009, respectively, in the BDO Unibank Group financialstatement and P463, P1,175 and P3,190 in 2011, 2010 and 2009, respectively, in the ParentBank financial statement. Trading gain (loss) booked on the redemption of the reclassifiedsecurities both in BDO Unibank Group and Parent Bank financial statements are (P5) in 2011and P98 in 2010. On the other hand, amortization of fair value loss previously recognized inother comprehensive income to profit or loss due to reclassification amounted to P71 andP30 in the BDO Unibank Group financial statement and P62 and P20 in the Parent Bankfinancial statements in 2011 and 2010, respectively.
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REPORT OFINDEPENDENT AUDITORSReport
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STATEMENTS OFINCOMEFOR THE YEARS EN
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BALANCE AT JANUARY 1, 2009 P 23,020
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FOR THE YEARS ENDED DECEMBER 31, 20
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1.02 Approval of Financial Statemen
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(ii) Philippine Interpretation IFRI
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PFRS 7 (Amendment), Financial Instr
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(v)PFRS 9, Financial Instruments: C
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BDO Unibank Group accounts for its
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Regular purchases and sales of fina
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Subsequent to initial recognition,
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Certain derivatives may be designat
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NOTES TOFINANCIAL STATEMENTSDECEMBE
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Page 43 and 44: 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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