11 profit or loss arising from the fair value measurement prior to the transfer to the trading portfolio
is included in the category of income and expense in the profit and loss account relating to the previously hedged transactions.
2.13.2 TRADING TRANSACTIONS
Derivative transactions, which do not meet the criteria to be designated as hedges, are deemed to be trading transactions except as described in Note 2.13.1.
Transactions undertaken for trading purposes are stated at fair value. Quoted market prices, when available, are used to determine the fair values of derivatives held for trading. Where mid
prices are used, a bid-offer spread adjustment will be made to ensure that all long positions are marked to bid prices and short positions to offer prices. In addition, where appropriate, a
liquidity adjustment is made when a market price may not be achievable as a result of certain material positions held by DBS Bank and a model reserve is set aside for positions where the
models used may be a proxy or there may be numerical uncertainty within certain ranges.
Resultant gains and losses from changes in fair value of trading transactions are recognised as “Other income” in the profit and loss account. Unrealised valuation gains or losses are included
in “Other assets” or “Other liabilities” respectively.
2.14 OFFSETTING FINANCIAL INSTRUMENTS
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to set off the recognised amounts and there is an intention to
settle on a net basis, or realise the asset and settle the liability simultaneously.
2.15 INTEREST INCOME Interest income is recognised on an accrual basis.
Interest earned but not received on non-performing loans is not recognised as income in the profit and loss account until receipt. All interest accrued previously and recognised in the profit
and loss account is reversed from interest income once a loan is classified as non-performing.
Amortisation of premiums and accretion of discounts are recognised as interest expense or interest income on straight-line basis over the life of the asset or liability.
2.16 FEE AND COMMISSION INCOME
Fee and commissions are recognised in the profit and loss account as and when the service is performed and when considered recoverable. Fee income relating to loans and guarantees is
recognised over the period during which the related service is provided or credit risk is undertaken. Where a fee is charged in lieu of interest, such fee is amortised over the same period
as the related income is recognised.
12
2.17 DIVIDENDS
Dividends from equities are recognised when declared payable.
2.18 STAFF COSTS, EQUITY COMPENSATION AND SHARE OPTION PLANS
DBS Bank has adopted a total compensation package that consists of base pay, cash bonuses, other staff-related allowances and long-term incentive schemesplans. These long-term
incentives are the DBSH Share Ownership Scheme, the DBSH Performance Share Plan, the DBSH Employee Share Plan, the DBSH Share Option Scheme and the DBSH Share Option
Plan. The details of these share schemesplans are described in the Directors’ Report and Note 13.
Remuneration expenses on base pay, cash bonuses, contributions to defined contribution plans e.g., Central Provident Fund, other staff-related allowances and contributions to the DBSH
Share Ownership Scheme are recognised in the profit and loss account once 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, DBS Bank has no further payment obligations.
For the DBSH Performance Share Plan and the DBSH Employee Share Plan, a trust is set up for each share plan. The shares purchased are recorded as “Other assets” in the balance sheet at cost
less provision for diminution in value. When the shares are awarded, remuneration expenses are computed using the average purchase price adjusted for provision for diminution in value and
recognised in the profit and loss account on a straight-line basis over the relevant performance period.
Options granted under the DBSH Share Option Scheme and the DBSH Share Option Plan are not recognised as remuneration expenses. When the options are exercised, the proceeds
received net of any transaction costs are credited to share capital par value and share premium accounts.
Employee entitlement to annual leave is recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by
employees up to the balance sheet date.
2.19 OPERATING LEASES
