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reflected as a liability either as “Due to banks” or
“Deposits and balances from customers”. The securities sold under repos are treated as pledged
assets and remain on the balance sheet at 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 as “Cash and balances with
central banks”, “Due from banks” or “Loans and advances to customers”.
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.
2.13 Goodwill Goodwill arising from business combinations generally
represents the excess of the acquisition cost over the fair value of identifiable assets acquired and liabilities
and contingent liabilities assumed on the acquisition date. Goodwill is stated at cost less impairment losses
and 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. An impairment loss is recognised when the carrying
amount of a CGU, or group of CGUs, including the goodwill, exceeds the applicable recoverable amount.
The 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.
2.14 Properties and other fixed assets Properties including investment properties and other
fixed assets are stated at cost less accumulated depreciation and impairment losses.
Depreciation is calculated using the straight-line method over the estimated useful lives of the assets.
Generally, the useful lives are as follows: Buildings
50 years or over the remaining lease period, whichever is
shorter.
Leasehold land 100 years or over the 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,
furniture and fittings 5 - 10 years
Please refer to Note 25 for the details of properties and other fixed assets and their movements during the
year. 2.15 Financial liabilities
Initial recognition, classification and subsequent measurement
Financial liabilities are initially recognised at fair value. The Group generally classifies and measures its
financial liabilities in accordance with the purpose for which the financial liabilities are incurred and managed.
Accordingly:
Financial liabilities are classified as financial liabilities at fair value through profit or loss
if they are incurred for the purpose of repurchasing in the near term held for
trading, and this usually pertains to short positions in securities for the purpose of
ongoing market-making, hedging or trading. Financial liabilities at fair value through profit
or loss can also be designated by management on initial recognition designated
under the fair value option. Financial liabilities in this classification are usually within the
“Treasury” segment. In addition, some financial liabilities used to
fund specific financial assets measured at fair value through profit or loss are designated
under the fair value option when doing so eliminates or significantly reduces
measurement or recognition inconsistencies that would otherwise arise.
Realised or unrealised gains or losses on financial liabilities held for trading and financial
liabilities designated under the fair value option, except interest expense, are taken to
“Net trading income” in the income statement in the period they arise. Interest expense on
structured investment deposits at fair value through profit or loss are also presented
together with other fair value changes in “Net trading income.”
Derivative liabilities are treated consistently
with derivative assets. Please refer to Note 2.9 for the accounting policy on derivatives.
Other financial liabilities are carried at
amortised cost using the effective interest method. These comprise predominantly the
Group’s deposit portfolio under “Deposits and balances from
customers” and “Due to banks”, and those under “Other liabilities”.
Please refer to Note 14 for further details on the types of financial liabilities classified and measured as above.
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Determination of fair value The fair value of financial liabilities is the price that
would be paid to transfer the liability in an orderly transaction between market participants at the
measurement date. Please refer also to Note 39 for further fair value
measurement disclosures. Derecognition
A financial liability is derecognised from the balance sheet when the obligation specified in the contract is
discharged, cancelled or expired. 2.16 Loan Commitments, Letters of Credit and
Financial Guarantees Loan Commitments
Loan commitments are typically not financial instruments and are not recognised on balance sheet
but are disclosed off-balance sheet in accordance with FRS 37. They form part of the disclosures in Note 35.
Upon a loan draw-down, the amount of the loan is accounted for unde
r “loans and receivables” as described in Note 2.9.
Letters of Credit Letters of credit are recorded off-balance sheet as
contingent liabilities upon issuance, and the corresponding payables to the beneficiaries and
receivables from the applicants are recognised on- balance sheet upon acceptance of the underlying
documents. Financial Guarantees
A financial guarantee is initially recognised in the financial statements at fair value on the date the
guarantee is given. This is generally the amount fee paid by the counterparty. Subsequently, the fee is
recognised over time as income in accordance with the principles in note 2.8.
Off balance sheet credit exposures are managed for credit risk in the same manner as financial assets.
Please refer to Note 2.11 on the Group’s accounting policies on specific allowances for credit losses.
2.17 Provisions and other liabilities Provisions for other liabilities of uncertain timing and
