UBL Financial Statements - United Bank Limited

NOTES TO AND FORMING PART OF THE UNCONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2011Significant accounting estimates and areas where judgments were made by the management in the application ofaccounting policies are as follows:i) classification of investments (notes 5.4 and 9)ii) provision against investments (notes 5.4 and 9.3) and advances (notes 5.5 and 10.4)iii) income taxes (notes 5.8 and 32)iv) staff retirement benefits (notes 5.10 and 36)v) fair value of derivatives (notes 5.15.2 and 19.4)vi) operating fixed assets, depreciation and amortization (notes 5.6 and 11)vii) impairment (note 5.7)5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES5.1 Significant accounting policiesThe Bank has adopted the following new and amended IFRSs and related interpretations which became effective duringthe year. Other than these, the accounting policies adopted in the preparation of these unconsolidated financialstatements are consistent with those of the previous financial year.IAS 32 - Financial Instruments: Presentation - Classification of Rights Issues (Amendment)IAS 24 - Related Party Disclosures (Revised)IFRIC 14 - IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their InteractionIFRIC 19 - Extinguishing Financial Liabilities with Equity InstrumentsThe adoption of the above standards, amendments and interpretations did not have a material effect on the financialstatements.5.2 Cash and cash equivalentsCash and cash equivalents for the purpose of the cash flow statement represent cash and balances with treasury banksand balances with other banks.5.3 Lendings to / borrowings from financial institutionsThe Bank enters into transactions of repos and reverse repos at contracted rates for a specified period of time. These arerecorded as under:5.3.1 Purchase under resale agreementsSecurities purchased under agreement to resell (reverse repo) are included in lendings to financial institutions. Thedifferential between the purchase price and resale price is amortized over the period of the agreement and recorded asincome.Securities held as collateral are not recognized in the unconsolidated financial statements, unless these are sold to thirdparties, in which case the obligation to return them is recorded at fair value as a trading liability under borrowings fromfinancial institutions.5.3.2 Sale under repurchase agreementsSecurities sold subject to a re-purchase agreement (repo) are retained in the unconsolidated financial statements asinvestments and the counterparty liability is included in borrowings from financial institutions. The differential in sale andre-purchase value is accrued over the period of the agreement and recorded as an expense.3