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

- 35 -Some properties comprise a portion that is held to earn rental or for capitalappreciation and another portion that is held for use in the production and supplyof goods and services or for administrative purposes. If these portions can be soldseparately (or leased out separately under finance lease), BDO Unibank Groupaccounts for those portions separately. If the portion cannot be sold separately, theproperty is accounted for as investment property only if an insignificant portion isheld for use in the production or supply of goods or services for administrativepurposes. Judgment is applied in determining whether ancillary services are sosignificant that a property does not qualify as investment property. BDO UnibankGroup considers each property separately in making its judgment.(d) Operating and Finance LeasesBDO Unibank Group has entered into various lease agreements either as a lessor orlessee. Critical judgment was exercised by management to distinguish each leaseagreement as either an operating or finance lease by looking at the transfer orretention of significant risks and rewards of ownership of the properties covered bythe agreements. Failure to make the right judgment will result in eitheroverstatement or understatement of resources and liabilities.(e) Classification of Acquired Properties and Fair Value Determination of Non-current Assets Heldfor Sale and Investment PropertiesBDO Unibank Group classifies its acquired properties as Premises, Furniture,Fixtures and Equipment if used in operations, as Non-current Assets Held for Saleif expected that the properties will be recovered through sale rather than use, asInvestment Properties if intended to be held for capital appreciation or as FinancialAssets if qualified as such in accordance with PAS 39. At initial recognition, BDOUnibank Group determines the fair value of the acquired properties throughinternally or externally generated appraisal. The appraised value is determined basedon the current economic and market conditions as well as the physical condition ofthe properties.(f) Provisions and ContingenciesJudgment is exercised by management to distinguish between provisions andcontingencies. Policies on recognition and disclosure of provisions andcontingencies are discussed in Note 2.21 and relevant disclosures are presented inNote 31.