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

- 26 -Provisions are measured at the estimated expenditure required to settle the presentobligation, based on the most reliable evidence available at the end of reporting period,including the risks and uncertainties associated with the present obligation. Where thereare a number of similar obligations, the likelihood that an outflow will be required insettlement is determined by considering the class of obligations as a whole. In addition,long-term provisions are discounted to their present values, where time value of money ismaterial.Provisions are reviewed at the end of each reporting period and adjusted to reflect thecurrent best estimate.In those cases where the possible outflow of economic resource as a result of presentobligations is considered improbable or remote, or the amount to be provided for cannotbe measured reliably, no liability is recognized in the financial statements. On the otherhand, any reimbursement expected to be received in the course of settlement of thepresent obligation is recognized, if virtually certain, as a separate asset, not exceeding theamount of the related provision. Similarly, probable inflows of economic benefits that donot yet meet the recognition criteria of an asset are considered contingent assets, hence,are not recognized in the financial statements.2.22 LeasesBDO Unibank Group accounts for its leases as follows:(a) BDO Unibank Group as LessorLeases, wherein BDO Unibank Group substantially transfers to the lessee all risksand benefits incidental to ownership of the leased item, are classified as financeleases and are presented as receivable at an amount equal to BDO Unibank Group’snet investment in the lease. Finance income is recognized based on the patternreflecting a constant periodic rate of return on BDO Unibank Group’s netinvestment outstanding in respect of the finance lease.Leases, which do not transfer to the lessee substantially all the risks and benefits ofownership of the asset, are classified as operating leases. Operating lease collectionsare recognized as income in profit or loss on a straight-line basis over the leaseterm.(b) BDO Unibank Group as LesseeLeases, which do not transfer to BDO Unibank Group substantially all the risks andbenefits of ownership of the asset are classified as operating leases. Operating leasepayments are recognized as expense in profit or loss on a straight-line basis over thelease term.BDO Unibank Group determines whether an arrangement is, or contains a lease basedon the substance of the arrangement. It makes an assessment of whether the fulfillmentof the arrangement is dependent on the use of a specific asset or assets and thearrangement conveys a right to use the asset.