Cash and cash equivalents Impairment of financial assets The Group assesses at each balance sheet date

Year ended 31 December 2012 11

2.9 Cash and cash equivalents

For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand and non- restricted balances with central banks which are readily convertible into cash.

2.10 Impairment of financial assets The Group assesses at each balance sheet date

whether there is objective evidence that a financial asset or a group of financial assets is impaired. a Financial assets classified as loans and receivables The Group carries out regular and systematic reviews of all credit facilities extended to customers. The criteria that the Group uses to determine that there is objective evidence of an impairment loss include:  Significant financial difficulty of the issuer or obligor, including breach of covenants andor financial conditions;  A breach of contract, such as a default or delinquency in interest or principal payments;  Granting of a concession to the borrower, for economic or legal reasons relating to the borrower’s financial difficulty, that the Group would not otherwise consider; and  High probability of bankruptcy or other financial reorganisation of the borrower. Specific allowances for credit losses A specific allowance for credit losses is established if there is objective evidence that the Group will be unable to collect all amounts due under a claim according to the original contractual terms or the equivalent value. A “claim” means a loan, debt security or a commitment such as financial guarantees and letters of credit. 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 a component 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 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. Over-due 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 necessary procedures have been completed 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 carries 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 collaterals held. This is in accordance with the transitional arrangements under Notice to Banks No. 612 “Credit Files, Grading and Provisioning” issued by the Monetary Authority of Singapore. Loans which are restructured as determined in Note 44.2 will no longer be presented as past due but remain classified as non-performing. Accordingly such loans will continue to follow the accounting treatment for the relevant classification as outlined above. b Financial assets classified as available-for-sale The Group assesses at each balance sheet date whether there is objective 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 considered in determining whether the asset is impaired. When there is objective 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. Impairment losses recognised in the income statement on equity investments are not reversed, until the equity investments are disposed of. A subsequent recovery in the value of an available-for- sale debt instrument whose value has been impaired is reversed through the income statement if there has been an identifiable event that led to the recovery. 2.11 Repurchase agreements Repurchase agreements Repos are treated as collateralised borrowing. The amount borrowed is reflected as a liability either as “Due to non-bank customers”, “Due to banks” or “Financial liabilities at fair value through profit or loss” when related to trading activities. The securities sold under repos are treated as pledged assets and remain on the balance sheet at Year ended 31 December 2012 12 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 an asset either as “Loans and advances to customers”, “Due from banks” or “Financial assets at fair value through profit or loss”. 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. 2.12 Goodwill on consolidation Goodwill arising from business combinations on or after 1 January 2010 represents the excess of the consideration transferred, the amount of any non- controlling interest in the acquiree and the acquisition- date fair value of any previous equity interest in the acquiree over the fair value of the net identifiable assets acquired. Goodwill in business combinations prior to 1 January 2010 represents the excess of acquisition cost over the fair values of the identifiable assets acquired, liabilities and contingent liabilities assumed at the date of exchange. Goodwill is stated at cost less impairment losses and it 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 for the purpose of impairment testing. The determination of CGUs takes into account how the Group manages and reports its businesses and requires judgment. An impairment loss is recognised when the carrying amount of a CGU, including the goodwill, exceeds the recoverable amount of the CGU or group of CGUs to which goodwill is allocated. 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. 2.13 Properties and other fixed assets Properties including investment properties and other fixed assets are stated at cost less accumulated depreciation and allowances for impairment. The cost of an item of properties and other fixed assets includes its purchase price and any cost that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Depreciation is calculated using the straight-line method to write down the cost of properties and other fixed assets to their residual values over their estimated useful lives. Generally the useful lives are as follows: Buildings 50 years or over the remaining lease period, whichever is shorter Leasehold land 100 years or remaining lease period, whichever is shorter. Leasehold land where the unexpired lease period is more than 100 years is not depreciated. IntangibleComputer software 3 - 5 years Office equipment, 5 - 10 years furniture and fittings The estimated useful life and residual values of properties and fixed assets are reviewed on each balance sheet date. Subsequent expenditure relating to properties and other fixed assets that has already been recognised is added to the carrying amount of the asset only when it is probable that future economic benefits associated with the item will flow to the Group and the cost can be measured reliably. Other subsequent expenditure is recognised as hire and maintenance expense in the income statement during the financial year in which it is incurred. Properties and other fixed assets are subject to an impairment review if there are events or changes in circumstances which indicate that the carrying amount may not be recoverable. Upon disposal, the difference between the net disposal proceeds and the carrying amount is taken to the income statement. Please refer to Note 26 for the details of properties and other fixed assets and their movements during the year.

2.14 Financial liabilities Initial recognition, classification and subsequent