Via ODiSy March 22, 2012 PHILIPPINE STOCK EXCHANGE ... - BDO

- 15 -(b) Loans and ReceivablesLoans and receivables are non-derivative financial assets with fixed or determinablepayments that are not quoted in an active market. These arise when BDO UnibankGroup provides money, goods or services directly to the debtor with no intentionof trading the receivables. Included in this category are financial assets arising fromdirect loans to customers, interbank loans and receivables, sales contract receivablesand all receivables from customers and other banks. Loans and receivables alsoinclude the aggregate rental on finance lease transactions. Unearned income onfinance lease transactions is shown as a deduction from loans and receivables.Loans and receivables are subsequently measured at amortized cost using theeffective interest method, less impairment losses. Any change in the value of loansand receivables is recognized in profit or loss, except for reclassified financial assetsunder PAS 39 and PFRS 7. Increases in estimates of future cash receipts fromfinancial assets that have been reclassified in accordance with PAS 39 and PFRS 7shall be recognized as an adjustment to the effective interest rate from the date ofthe change in estimate. The difference between the sale and repurchase price isrecognized as interest and accrued over the life of the agreements using the effectiveinterest method. Securities Purchased Under Reverse Repurchase Agreement(SPURRA), wherein BDO Unibank Group enters into short-term purchases ofsecurities under reverse repurchase agreements of substantially identical securitieswith the BSP, are included in this category.BDO Unibank Group’s financial assets categorized as loans and receivables arepresented as Cash and Cash Equivalents and Loans and Other Receivables in thestatement of financial position. Cash and cash equivalents consist of cash andnon-restricted balances with the BSP and amounts due from other banks. Forpurposes of reporting cash flows, cash and cash equivalents include cash and othercash items, amounts due from BSP and other banks, interbank call loans receivableand SPURRA with original maturities of three months or less from placement date.Impairment loss is the estimated amount of loss in BDO Unibank Group’s loanportfolio, based on the evaluation of the estimated future cash flows discounted atthe loan’s original effective interest rate or the last repricing rate for loans issued atvariable rates (see Note 2.23). Impairment is established through an allowanceaccount which is charged to expense. Loans and receivables are written off againstthe allowance for impairment when management believes that the collectibility ofthe principal is unlikely, subject to BSP regulations.(c) HTM InvestmentsThis category includes non-derivative financial assets with fixed or determinablepayments and a fixed date of maturity that BDO Unibank Group has the positiveintention and ability to hold to maturity. Investments intended to be held for anundefined period are not included under this category.