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

- 24 -2.20 Revenue and Expense RecognitionRevenue is recognized to the extent that it can be reliably measured; it is probable thatthe economic benefits will flow to BDO Unibank Group; and the expenses incurred orto be incurred can be measured reliably. The following specific recognition criteria ofincome and expenses must also be met before revenue is recognized:(a) Interest – Interest income and expenses are recognized in profit or loss for allfinancial assets or instruments using the effective interest method.The effective interest method is a method of calculating the amortized cost of afinancial asset or a financial liability and of allocating the interest income or interestexpense over the relevant period. The effective interest rate is the rate that exactlydiscounts estimated future cash payments or receipts through the expected life ofthe financial instrument or, when appropriate, a shorter period to the net carryingamount of the financial asset or financial liability. When calculating the effectiveinterest rate, BDO Unibank Group estimates cash flows considering all contractualterms of the financial instrument but does not consider future credit losses. Thecalculation includes all fees and points paid or received between parties to thecontract that are an integral part of the effective interest rate, transaction costs andall other premiums or discounts.Once a financial asset or a group of similar financial assets has been written down asa result of an impairment loss, interest income is recognized using the rate ofinterest used to discount the future cash flows for the purpose of measuring theimpairment loss.(b) Service charges, fees and commissions – Service charges, fees and commissions aregenerally recognized when the service has been provided. Loan syndication fees arerecognized as revenue when the syndication has been completed and BDO UnibankGroup retained no part of the loan package for itself or retained a part at the sameeffective interest rate for the other participants. Commission and fees arising fromnegotiating, or participating in the negotiation of a transaction for a third party –such as the arrangement of the acquisition of shares or other securities or thepurchase or sale of businesses – are recognized at the completion of the underlyingtransaction. Portfolio and other management advisory and service fees arerecognized based on the applicable service contracts, usually on a timeproportionatebasis. Asset management fees related to investment funds arerecognized ratably over the period the service is provided. The same principle isapplied for wealth management, financial planning and custody services that arecontinuously provided over an extended period of time.(c) Trading gain – Trading gain is recognized when the ownership of the securities istransferred to the buyer (at an amount equal to the excess of the selling price overthe carrying amount of securities) and as a result of the mark-to-market valuation ofthe securities at year-end. Only trading gain arising from mark-to-market valuationof financial assets at FVTPL is recognized in profit or loss by the BDO UnibankGroup.