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31 OTHER ASSETS
In millions 2004
2003 Accrued interest receivable
a
868 647
Accrued income 65
55 Balances arising from revaluation of financial
instruments Note 34 10,574
8,684 Less: Valuation adjustments Note 31.1
231 10,343
250 8,434
Deposits and prepayments Note 31.2 188
172 Sundry debtors and others
1,044 582
Total 12,508
9,890
a Accrued interest receivable is net of interest-in-suspense Note 25.
31.1 Valuation adjustments includes bid-offer spread adjustments made to mark all long
positions to bid prices and short positions to offer prices; liquidity reserves to reflect possible price adjustments to the market values to liquidate certain material positions held by the Bank;
and model risk reserves for positions where the models used may be a proxy or there may be numerical uncertainty within certain ranges. Note 2.12.2.
31.2 Included in “Deposits and prepayments” at December 31, 2004, was an amount of 84
million 2003: 78 million relating to an advance placed in a trust. The trust is for the purchase of shares in connection with the DBSH Performance Share Plan and the DBSH Employee Share
Plan Note 13. The advance at December 31, 2004 had been written down to its recoverable amount at reporting date. The cumulative provision at December 31, 2004 amounting to 35
million 2003: 44 million represents the shortfall in the value of shares held in the trust when compared against the purchase cost of the shares.
32 CONTINGENT LIABILITIES
DBS Bank conducts business involving guarantees, performance bonds and indemnities. The majority of these facilities are offset by corresponding obligations of third parties.
Nature of instruments Guarantees and performance bonds are generally written by a bank to support the performance
of a customer to third parties. As DBS Bank will only be required to meet these obligations in the event of the customer’s default, the cash requirements of these instruments are expected to
be considerably below their nominal amount.
Endorsements are residual liabilities of DBS Bank in respect of bills of exchange, which have been paid and subsequently rediscounted.
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32.1 The amounts outstanding at December 31 comprise the following:
In millions 2004
2003 Guarantees on account of customers
4,131 3,394
Endorsements and other obligations on account of customers
Letters of credit Others
2,604 273
1,632 379
Other contingent items 87
89 Total
7,095 5,494
Industry Breakdown
Manufacturing 1,634
974 Building and Construction
333 270
General Commerce 1,945
1,438 Transportation, Storage and Communications
570 336
Financial Institutions, Investment and Holding Companies
952 669
Professionals and Private Individuals except Housing Loans
740 747
Others 921
1,060 Total
7,095 5,494
32.2 DBS Bank has an existing outsourcing agreement with IBM with respect to the provision of information technology and related support to DBS Bank’s operations in
Singapore and Hong Kong. As with all similar market standard arrangements, there are various termination clauses contained within the agreement that under certain circumstances
could require DBS Bank to pay a penalty on early termination of the contract. The exact amount of any penalty amount cannot be reliably determined, as it is dependent upon business
volumes over the period of the contract and on the timing of the termination itself.
32.3 Included in “Other contingent items” at December 31, 2004, is an amount of 87 million 2003: 89 million, representing the termination fee payable by DBS Bank should it terminate
its Life Insurance Bancassurance Distribution Agreement with Aviva Ltd prematurely before the expiry date.
32.4 Included in Guarantees on account of customers at December 31, 2004, was a guarantee of 507million 2003: 590 million which was given by DBS Bank to holders of
DBS UP Guaranteed Fund 5.01, DBS UP Guaranteed Fund 5.02, DBS UP Guaranteed Fund 5.03, DBS UP Guaranteed Fund 7.02, and DBS UP Guaranteed Fund 7.03. The guaranteed
value is payable on December 23, 2005, April 30, 2006, June 30, 2006, April 30, 2008 and June 30, 2008 respectively.
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33 COMMITMENTS
33.1 Undrawn Commitments
