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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