Financial statements 121
Associates Associates are entities over which the Group has significant influence,
but no control where the Group generally holds a shareholding of between and including 20 and 50 of the voting rights.
Investments in associates are accounted for using the equity method.
2.5 Foreign currency treatment
Functional and presentation currency Items in the financial statements are measured using the functional
currency of each entity in the Group, this being the currency of the primary economic environment in which the entity operates. The
Group’s financial statements are presented in Singapore dollars, which is the functional currency of the Company.
Foreign currency transactions and balances Transactions in foreign currencies are measured using the exchange
rate at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency of the entity undertaking the
transaction at the exchange rates at the balance sheet date. Foreign exchange differences arising from this translation are recognised in
the income statement within “Net trading income”.
Non-monetary assets and liabilities measured at cost in a foreign currency are translated using the exchange rates at the date of
the transaction.
Non-monetary assets and liabilities measured at fair values in foreign currencies are translated using the exchange rates at the date when
the fair values are determined, which is generally the balance sheet date.
Unrealised foreign exchange differences arising from non-monetary financial assets and liabilities classified as fair value through profit or
loss are recognised in the income statement as trading income. For non-monetary financial assets such as equity investments classified
as available-for-sale, unrealised foreign exchange differences are recorded in other comprehensive income and accumulated in equity
until the assets are disposed of or become impaired, upon which they are reclassified to the income statement.
Subsidiaries and branches The results and financial position of subsidiaries and branches whose
functional currency is not Singapore dollars “foreign operations” are translated into Singapore dollars in the following manner:
balance sheet date;
exchange rates prevailing at each month-end, approximating the exchange rates at the dates of the transactions; and
comprehensive income and accumulated under capital reserves in
equity. When a foreign operation is disposed of, such exchange differences are recognised in the income statement as part of the
gain or loss on disposal.
For acquisitions prior to 1 January 2005, the foreign exchange rates at the respective dates of acquisition were used. Please refer to Note
26 for an overview of goodwill recorded. Goodwill and fair value adjustments arising on the acquisition of a foreign operation on
or after 1 January 2005 are treated as assets and liabilities of the foreign operation and translated at the closing rate.
2.6 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to management.
In preparing the segment information, amounts for each business segment are shown after the allocation of certain centralised costs,
funding income and the application of transfer pricing, where appropriate. Transactions between segments are recorded within
the segment as if they are third party transactions and are eliminated on consolidation.
Please refer to Note 43 for further details on business and geographical segment reporting.
B Income Statement
2.7 Income recognition
Interest income and interest expense Interest income and interest expense as presented in Note 4 arise
from all interest-bearing financial assets and financial liabilities regardless of their classification and measurement, with the
exception of the Group’s structured investment deposits which are carried at fair value through profit or loss. Interest expense on such
structured investment deposits is presented together with other fair value changes in trading income.
Interest income and interest expense are recognised on a time- proportionate basis using the effective interest method. The
calculation includes significant fees and transaction costs that are integral to the effective interest rate, as well as premiums
or discounts.
Fee and commission income The Group earns fee and commission income from a diverse range
of products and services provided to its customers.
Fee and commission income is generally recognised on the completion of a transaction. Such fees include underwriting fees,
brokerage fees and fees related to completion of corporate finance transactions.
For a service that is provided over a period of time, fee and commission income is recognised over the period during which
the related service is provided or credit risk is undertaken. Such fees include the income from issuance of financial guarantees and
bancassurance fixed service fees.
Fee and commission income is recorded net of expenses directly related to it. These expenses typically include brokerage fees paid,
card-related expenses and sales commissions, but do not include expenses for services delivered over a period such as service
contracts and other expenses that are not specifically related to fee and commission income transactions.
Dividend income Dividend income is recognised when the right to receive payment
is established. This is generally the ex-dividend date for listed equity securities, and the date when shareholders approve the dividend
for unlisted equity securities. Dividend income arising from held-for- trading financial assets is recognised in “Net trading income”, while
those arising from available-for-sale financial assets is recognised in “Net income from investment securities”.
Allowances for credit and other losses
Please refer to Note 2.10 for the accounting policy on impairment of financial assets.
DBS Annual Report 2015 122
C Balance Sheet
2.8 Financial assets
