7 significant influence. A joint venture is a contractual arrangement whereby DBS Bank and its
joint venture partners undertake an economic activity, which is subject to joint control, and none of the parties involved unilaterally have control over the economic activity.
Investments in associated and joint venture companies are stated in the financial statements at cost less impairment losses.
2.5 FOREIGN CURRENCIES
Assets and liabilities denominated in foreign currencies are translated into Singapore dollars using the closing exchange rate at balance sheet date. Income and expense are translated using
exchange rates at the transaction date. All resulting changes are recognised in the profit and loss account.
The income statement of foreign entities not reporting in Singapore dollars are translated at the average rates of exchange. Balance sheets are translated at closing rate. Exchange differences
arising from the retranslation of opening foreign currency net investments and the related cost of hedging and exchange differences resulting from retranslation of the result for the year from
average rate to the year end rate are accounted for in reserves.
2.6 CASH AND CASH EQUIVALENTS
Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand and deposits held at call with
the central banks.
2.7 LOANS AND ADVANCES
Loans and advances are carried at recoverable amounts i.e., outstanding balances after deduction of provisions for bad and doubtful debts.
Loans are classified in accordance with MAS’ guidelines as well as internal loan grading policies. These classifications, and underlying collateral valuations, are used to determine the
amount of provision required. MAS’ guidelines require banks to classify their loan portfolios into five categories – two categories for performing loans Pass and Special Mention and three
categories for classified, or non-performing loans Substandard, Doubtful or Loss.
When concessions are granted to the original terms of the loan for reasons that related to the financial difficulties of the borrower, the loan is considered a Restructured Loan. A
Restructured Loan is generally graded as Substandard or worse. Restructured Loans are not returned to performing status until specific conditions have been met, including there being no
longer any reasonable doubt regarding the timely collection of principal and interest and there having been a reasonable period of sustained performance under the restructured terms.
2.8 PROVISION FOR LOAN LOSSES
Provision for loan losses comprise specific provisions against certain loans and advances and a general provision on total loans and advances.
8 A specific provision is made when a loan is classified as Substandard or worse and there is
insufficient collateral security or other unencumbered assets available to repay loans in full. Specific provisions are based on several factors including: loan amount, other commitments to
the borrower, the borrower’s payment history and business prospects, collateral value, and the estimated costs to obtain repayment. The actual percentage provided depends on management’s
judgement and whether the loan is graded “Substandard”, “Doubtful”, or “Loss”. Substandard loans will generally have a specific provision of 10 to 49 of the unsecured principal amount.
Doubtful loans will typically have a specific provision of 50 to less than 100 of the unsecured principal amount, and Loss grade loans are provisioned at 100 of the unsecured
principal amount. Interest on Substandard and worse loans is provisioned at 100 of the accrued amount.
General provisions are maintained for losses that can reasonably be expected to arise, based on historical experience, from the existing overall loan portfolio over its remaining life but which
are not yet identifiable. In determining the level of general provision, reference is also made to country conditions, the composition of the portfolio and industry practices.
In the case of loans managed on an individual basis, bad debts are written off against provisions when recovery action has been instituted and the losses can be determined with reasonable
certainty. For loans managed on a portfolio basis, unsecured bad debts are written off against provisions when amounts owing are 180 days past due while secured bad debts are written off to
provisions when the collateral has been disposed of or sold. DBS Bank continues to make every effort to recover amounts owing, even after write-offs have been recorded.
2.9 DEBT SECURITIES AND EQUITIES
