Share-based compensation DBS Bank Full Year 2016 Accounts DBS Bank FS 2016
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If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a
hedged item is amortised to the income statement over its remaining maturity, using the effective interest method.
Cash flow hedge For transactions with highly probable cash flows,
derivatives are used to hedge against cash flow variability due to exchange rate movements in certain situations.
Cash flow hedge accounting is principally applied in such cases.
The effective portion of changes in the fair value of a derivative designated and qualifying as a cash flow hedge
is recognised in other comprehensive income and accumulated under the cash flow hedge reserve in equity.
This amount is reclassified to the income statement in the periods when the hedged forecast cash flows affect the
income statement. The ineffective portion of the gain or loss is recognised immediately in the income statement
under “Net trading income”. When a hedging instrument expires or is sold, or when a
hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in the cash flow hedge
reserve remains until the forecast transaction is recognised in the income statement. When a forecast transaction is no
longer expected to occur, the cumulative gain or loss in the cash flow hedge reserve is reclassified from equity to the
income statement. Net investment hedge
Net investment hedge accounting is applied to hedged investments in foreign operations which comprise certain
subsidiaries, branches and associates with a functional currency different from that of the Bank. Under the
Group’s hedging strategy, the carrying amount of these investments could be fully hedged, partially hedged or
not hedged at all. Hedges of net investments in the Group’s foreign
operations are accounted for in a manner similar to cash flow hedges. On disposal of the foreign operations, the
cumulative gain or loss in the capital reserves is reclassified to the income statement as part of the gain or
loss on disposal. Economic hedges which do not qualify for hedge
accounting Some derivatives may be transacted as economic
hedges as part of the Group’s risk management but do not qualify for hedge accounting under FRS 39. These
include swaps and other derivatives e.g. futures and options that the Group transacts to manage interest
rate, foreign exchange or other risks. Such derivatives are treated in the same way as derivatives held for
trading purposes, i.e. realised and unrealised gains and losses are recognised in “Net trading income”. In some
cases, the hedged exposures are designated at fair value through profit or loss, thereby achieving some
measure of offset in the income statement. Please refer to Note 37.2 for disclosures on hedging
derivatives. 2.20
Employee benefits
Employee benefits, which include base pay, cash bonuses, share-based compensation, contribution to
defined contribution plans such as the Central Provident Fund and other staff-related allowances, are recognised
in the income statement when incurred. For defined contribution plans, contributions are made to publicly or
privately administered funds on a mandatory, contractual or voluntary basis. Once the contributions have been
paid, the Group has no further payment obligations.
Employee entitlement to annual leave is recognised when they accrue to employees. A provision is made for
the estimated liability for annual unutilised leave as a result of services rendered by employees up to the
balance sheet date.