Notes to Financial Statements - BDO

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Notes to Financial StatementsDECEMBER 31, 2008, 2007 AND 2006(Amounts in Millions Except Per Share Data)Real and other properties acquired (ROPA) in settlement of loans through foreclosure or dacion in payment are accounted for as financialassets, investment properties, non-current assets held-for-sale and other resources - others. As of December 31, 2008 and 2007, ROPA grossof allowance comprise of the following:GroupParent Bank2008 2007 2008 2007Investment properties P 14,768 P 16,203 P 13,978 P 16,278Non-current assets held-for-sale 2,209 1,586 2,181 1,586Available-for-sale securities 844 1,049 844 1,049Other resources - others - 28 - -P 17,821 P 18,866 P 17,003 P 18,91313. OTHER RESOURCESThe components of this account are shown below:GroupParent BankNotes 2008 2007 2008 2007Deferred tax assets 27 P 5,780 P 5,741 P 5,747 P 5,614Receivables from SPVs 3,435 3,435 3,435 3,435Deposits under escrow 2,931 2,931 2,931 2,931Foreign currency notes andcoins on hand 2,220 1,742 2,220 1,736Non-current assets held for sale 1,950 1,441 1,932 1,401Equity investments 1,704 1,696 10,874 11,560Interoffice float items - net 1,195 1,104 1,619 1,108Goodwill 26 747 747 747 747Returned checks and other cash items 465 2,743 465 2,740Deferred charges - net of amortization 456 1,038 446 1,025Others 8,860 7,464 7,330 6,94129,743 30,082 37,746 39,238Allowance for impairment 14 ( 7,299 ) ( 6,956 ) ( 9,586 ) ( 10,065 )P 22,444 P 23,126 P 28,160 P 29,17313.1 Receivables from SPVsReceivables from SPVs represent the amount due from sale of certain non-performing assets to the SPVs. In 2005, the former EPCIB soldcertain nonperforming assets having book value of P15,069 to Philippine Investment One, Philippine Investment Two and Cameron GranvilleAsset Management, Inc. (CGAM) for a consideration of P4,134. Cash received from the SPVs amounted to P98 in 2005 and the balance ofP3,336, through issuance of SPV Notes, shall be paid based on a cash flow waterfall arrangement and interest rate of 20% and 50% per annumon the P2,776 and P560, respectively. Also, in 2005, the former Equitable Savings Bank, Inc. (ESB) entered into sale and purchase agreementswith CGAM and LNC (SPV-AMC) Corporation (LNC) for the sale of the former ESB’s loans to CGAM for P621 and for the sale of its investmentproperties to LNC for P98. The former ESB received SPV Notes amounting to P60 for loans from CGAM and P39 for investment properties fromLNC, in addition to cash received amounting to P23 from CGAM and P4 from LNC.As of December 31, 2008 and 2007, allowance for impairment losses on receivables from SPVs amounted to P2,991.13.2 Deposits Under EscrowDeposits under escrow pertain to the portion of the cash received by the Group in consideration for its assumption of First e-Bank Corporation’sdeposits and other liabilities in October 2002. This amount is held in escrow pending compliance by the Group with certain terms and conditionsas stipulated in the MOA. Deposits under escrow earn an annual effective interest of 4.7% and 3.4% in 2008 and 2007, respectively.13.3 Deferred ChargesDeferred charges mainly pertain to computer software licenses. Amortization expense on deferred charges amounted to P115, P94, and P37in 2008, 2007 and 2006, respectively, in the Group financial statements and P115, P93, and P37 in 2008, 2007 and 2006, respectively, in theParent Bank financial statements. These are included as part of Other Operating Expenses in the income statement (see Note 22).54Thinking Ahead To Get You Ahead • Annual Report 2008
Notes to Financial StatementsDECEMBER 31, 2008, 2007 AND 2006(Amounts in Millions Except Per Share Data)13.4 Non-current Assets Held-for-saleNon-current assets held-for-sale consist of real and other properties acquired through repossession or foreclosure that the Group intends tosell within one year from the date of classification as held for sale.13.5 Equity InvestmentsEquity investments consist of the following:Philippine Subsidiaries:GroupParent Bank% InterestHeld 2008 2007 2008 2007BDO Private Bank, Inc. (BDO Private) 100% P - P - P 2,579 P 2,579BDO Leasing Finance, Inc. 85% - - 1,854 1,854EBC Strategic Holdings Corporation (ESHC) 100% - - 1,421 1,421EBC Investments, Inc. (EBCII) 100% - - 1,003 1,003PCIB Properties, Inc. 100% - - 892 892BDO Elite Savings Bank, Inc. (BDO Elite) 100% - - - 678BDO Capital Investment Corporation (BDO Capital) 100% - - 300 300BDO Financial Services, Inc. 100% - - 200 200BDO Technology Center, Inc. (BDO Technology) 100% - - 47 47Equimark - NFC Development Corp. 60% - - 45 45BDO Realty Corporation 100% - - 40 40PCIB Securities, Inc. 100% - - 39 39PCI Realty Corporation 100% - - 34 34BDO Insurance Brokers, Inc. (BDOI) 100% - - 11 11PCI Insurance Brokers, Inc. (PCI Insurance) 100% - - 8 8Foreign Subsidiaries:PCI Express Padala (HK) Ltd. 100% - - 215 215PCIB Europe, S.P.A. 100% - - 33 33Express Padala HK Ltd. 100% - - 28 28BDO Remittance (USA), Inc 100% - - 26 26Express Padala Frankfurt GmbH 100% - - 1 1Equitable PCI Express Padala (Nederland) B.V. 100% - - 1 1Associates:SM Keppel Land, Inc. 50% 1,294 1,294 1,294 1,294Generali Pilipinas Holdings, Inc. 40% 446 446 378 378Northpine Land Incorporated 20% 232 232 232 232Taal Land 33% 170 170 170 170Others 10 10 10 102,152 2,152 10,861 11,539Accumulated equity in net losses:Balance at beginning of year ( 507 ) ( 435 ) - -Equity in net income (losses) during the year 47 ( 72 ) - -Balance at end of year ( 460 ) ( 507 ) - -At cost 12 51 12 21Gross 1,704 1,696 10,874 11,560Allowance for impairment (see Note 14) ( 7 ) - ( 3,291 ) ( 3,560 )Net P 1,697 P 1,696 P 7,583 P 8,000The Parent Bank’s percentage of interest held in each subsidiary and associate is the same as that of the Group, except for GeneraliPilipinas Holdings, Inc. which is at 30% at the Parent Bank and 40% at the Group level.Thinking Ahead To Get You Ahead • Annual Report 2008 55
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ATTUNED TO THE TIMES, WE AREALWAYS
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Financial HighlightsIn Billion Peso
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Page 84: BDO Corporate Center7899 Makati Ave
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