DBS Annual Report 2015 126
For the DBSH Share Plan and the DBSH Employee Share Plan, a trust has been set up for each share plan. The employee trust
funds are consolidated and the DBSH shares held by the trust funds are accounted for as “treasury shares”, which is presented as a
deduction within equity.
2.21 Current and deferred taxes
Current income tax for current and prior periods is recognised as the amount expected to be paid or recovered from the tax
authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date. The Group
considers uncertain tax positions generally at the level of the total tax liability to each tax authority for each period. The liability is
determined based on the total amount of current tax expected to be paid, taking into account all tax uncertainties, using either an
expected value approach or a single best estimate of the most likely outcome.
Tax assets and liabilities of the same type current or deferred are offset when a legal right of offset exist and settlement in this manner
is intended. This applies generally when they arise from the same tax reporting group and relate to the same tax authority.
Deferred income tax is provided on temporary differences arising between the tax bases of assets and liabilities and their carrying
amounts in the financial statements. The amount of deferred tax provided is based on the expected manner of realisation or
settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted by the balance sheet date.
The amount of deferred tax assets recognised takes into account the likelihood the amount that can be used to offset payable taxes
on future profits.
Deferred tax related to fair value re-measurement of available-for- sale investments, which are recognised outside profit or loss, is also
recognised outside profit or loss, i.e. in other comprehensive income and accumulated in the available-for-sale revaluation reserves.
3 Critical Accounting Estimates
The Group’s accounting policies and use of estimates are integral to the reported amounts in the financial statements. Certain accounting
estimates require management’s judgement in determining the appropriate methodology for valuation of assets and liabilities.
Procedures are in place to ensure that methodologies are reviewed and revised as appropriate. The Group believes its estimates for
determining the valuation of its assets and liabilities are appropriate.
The following is a brief description of the Group’s critical accounting estimates that involve management’s valuation judgement.
3.1 Impairment allowances
It is the Group’s policy to recognise, through charges against profit, specific and general allowances in respect of estimated and inherent
credit losses in its portfolio as described in Note 2.10.
In estimating specific allowances, the Group assesses the gap between borrowers’ obligations to the Group and their repayment
ability. The assessment takes into account various factors, including the economic or business outlook, the future profitability of the
borrowers and the liquidation value of collateral. Such assessment requires considerable judgement.
Another area requiring judgement is the calculation of general allowances, which are determined after taking into account historical
data and management’s assessment of the current economic and credit environment, country and portfolio risks, as well as industry
practices.
Please refer to Risk management section for a further description of the Group’s credit risk management.
3.2 Fair value of financial instruments
The majority of the Group’s financial instruments reported at fair value are based on quoted and observable market prices or on
internally developed models that are based on independently sourced market parameters.
The fair value of financial instruments without an observable market price in an active market may be determined using valuation models.
The choice of model requires significant judgement for complex products especially those in the “Treasury” segment.
Policies and procedures have been established to facilitate the exercise of judgement in determining the risk characteristics of
various financial instruments, discount rates, estimates of future cash flows and other factors used in the valuation process.
Please refer to Note 39 for details on fair valuation and fair value hierarchy of the Group’s financial instruments
measured at fair value.
3.3 Goodwill
The Group performs an impairment review to ensure that the carrying amount of a CGU to which goodwill is allocated does not
exceed the recoverable amount of the CGU. Note 26 provides details of goodwill at the reporting date.
The recoverable amount represents the present value of the estimated future cash flows expected to arise from continuing
operations. Therefore, in arriving at the recoverable amount, management exercises judgement in estimating the future cash
flows, growth rate and discount rate.
3.4 Income taxes
