Repurchase agreements Goodwill Properties and other fixed assets

130 | DBS Annual Report 2016 A specific allowance for credit losses is recorded as a reduction in the carrying value of a claim on the balance sheet. For an off-balance sheet item such as a commitment, a specific allowance for credit loss is recorded as “provision for loss in respect of off-balance sheet credit exposures” within “Other liabilities”. Specific allowances for credit losses are evaluated either individually or collectively for a portfolio. Specific allowance for an individual credit exposure is made when existing facts, conditions or valuations indicate that the Group is not likely to collect the principal and interest due contractually on the claim. An allowance is reversed only when there has been an identifiable event that has led to an improvement in the collectability of the claim. The amount of specific allowance also takes into account the collateral value, which may be discounted to reflect the impact of a forced sale or untimely liquidation. Overdue unsecured consumer loans which are homogenous in nature, such as credit card receivables, are pooled according to their delinquency behaviour and evaluated for impairment collectively as a group, taking into account the historical loss experience of such loans. When a loan is uncollectible, it is written off against the related allowance for loan impairment. Such loans are written off after all the recovery procedures have been exhausted and the amount of the loss has been determined. Recoveries in full or in part of amounts previously written off are credited to the income statement in “Allowances for credit and other losses”. General allowances for credit losses Apart from specific allowances, the Group also recognises general allowances for credit losses. The Group maintains a level of allowances that is deemed sufficient to absorb the estimated credit losses inherent in its loan portfolio including off-balance sheet credit exposures. The Group maintains general allowances of at least 1 of credit exposures arising from both on and off-balance sheet items against which specific allowances have not been made, adjusted for collateral held. This is in accordance with the transitional arrangements under MAS Notice 612. b Financial assets classified as available- for-sale The Group assesses at each balance sheet date whether there is evidence that an available-for-sale financial asset is impaired. In the case of an equity investment, a significant or prolonged decline in the fair value of the security below its cost is a factor in determining whether the asset is impaired. When there is evidence of an impairment of an available-for-sale financial asset, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in the income statement – is reclassified from the revaluation reserve within equity to the income statement as “Allowances for credit and other losses”. For equity investments, impairment losses are not reversed until they are disposed of. For impaired debt instruments that subsequently recover in value, the impairment losses are reversed through the income statement if there has been an identifiable event that led to the recovery.

2.12 Repurchase agreements

Repurchase agreements Repos are treated as collateralised borrowings. The amount borrowed is reflected as a financial liability either as “Due to banks” or “Deposits and balances from customers”. The securities sold under repos are treated as pledged assets and remain on the balance sheet at amortised cost or fair value depending on their classification. Reverse repurchase agreements Reverse repos are treated as collateralised lending. The amount lent is reflected as a financial asset as “Cash and balances with central banks”, “Due from banks” or “Loans and advances to customers”. Amounts paid and received in excess of the amounts borrowed and lent on the repos and reverse repos are amortised as interest expense and interest income respectively using the effective interest method.

2.13 Goodwill

Goodwill arising from business combinations generally represents the excess of the acquisition cost over the fair value of identifiable assets acquired and liabilities and contingent liabilities assumed on the acquisition date. Goodwill is stated at cost less impairment losses and is tested at least annually for impairment. At the acquisition date, any goodwill acquired is allocated to each of the cash-generating units CGU or group of CGUs expected to benefit from the combination’s synergies. An impairment loss is recognised when the carrying amount of a CGU, or group of CGUs, including the goodwill, exceeds the applicable recoverable amount. The recoverable amount of a CGU or CGU group is the higher of the CGU’s or CGU group’s fair value less cost to sell and its value-in-use. An impairment loss on goodwill is recognised in the income statement and cannot be reversed in subsequent periods.

2.14 Properties and other fixed assets

Properties including investment properties and other fixed assets are stated at cost less accumulated depreciation and impairment losses. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Generally, the useful lives are as follows: Buildings 50 years or over the remaining lease period, whichever is shorter. Leasehold land 100 years or over the remaining lease period, whichever is shorter. Leasehold land where the unexpired lease period is more than 100 years is not depreciated. Computer software 3 – 5 years Office equipment, 5 – 10 years furniture and fittings Please refer to Note 26 for the details of properties and other fixed assets and their movements during the year.

2.15 Financial liabilities