UBL Financial Statements - United Bank Limited

NOTES TO AND FORMING PART OF THE UNCONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2011Investments in Subsidiaries and AssociatesInvestments in subsidiaries and associates are valued at cost less impairment, if any. A reversal of an impairment loss onassociates and subsidiaries is recognized as it arises provided the increased carrying value does not exceed cost.5.5 Advances5.6 Operating fixed assets and depreciation5.6.1 OwnedGain or loss on sale of investments in subsidiaries and associates is included in the profit and loss account for the year.Advances are stated net of specific and general provisions which are charged to the profit and loss account. Specificprovision against domestic advances and general provision against domestic consumer loans are determined on thebasis of the Prudential Regulations and other directives issued by the SBP. General and specific provisions pertaining tooverseas advances are made in accordance with the requirements of the monetary agencies and the regulatoryauthorities of the respective countries. If circumstances warrant, the Bank, from time to time, makes general provisionagainst weaknesses in its portfolio on the basis of management's estimation. Advances are written off when there is norealistic prospect of recovery. The amount so written off is a book entry without prejudice to the Bank's right of recoveryagainst the customer.The Bank determines write-offs in accordance with the criteria prescribed by the SBP vide BPRD Circular No. 06 datedJune 05, 2007.Property and equipment, other than land (which is not depreciated) and capital work-in-progress, are stated at cost orrevalued amount less accumulated depreciation and accumulated impairment losses (if any). Land is carried at revaluedamount less impairment losses while capital work-in-progress is stated at cost less impairment losses. The cost ofproperty and equipment of foreign branches includes exchange differences arising on currency translation at the year-endrates of exchange.Depreciation is calculated so as to write off the depreciable amount of the assets over their expected useful lives at therates specified in note 11.2 to these unconsolidated financial statements. The depreciation charge for the year iscalculated on a straight line basis after taking into account the residual value, if any. The residual values and useful livesare reviewed and adjusted, if appropriate, at each statement of financial position date.Depreciation on additions is charged from the month the asset is available for use. No depreciation is charged in themonth of disposal.Land and buildings are revalued by professionally qualified valuers with sufficient regularity to ensure that their netcarrying value does not differ materially from their fair value. A surplus arising on revaluation is credited to the surplus onrevaluation of fixed assets account. Any deficit arising on subsequent revaluation of fixed assets is adjusted against thebalance in the above-mentioned surplus account as allowed under the provisions of the Companies Ordinance, 1984.The surplus on revaluation of fixed assets, to the extent of incremental depreciation, is transferred to unappropriatedGains and losses on sale of fixed assets are included in income currently, except that the related surplus on revaluationof fixed assets (net of deferred taxation) is transferred directly to unappropriated profit.Major renewals and improvements are capitalized and the assets so replaced, if any, are retired. Normal repairs andmaintenance are charged to the profit and loss account as and when incurred.5.6.2 Leased (Ijarah)Assets leased out under Ijarah are stated at cost less accumulated depreciation and accumulated impairment losses, ifany. Assets under Ijarah are depreciated over the term of the lease.Ijarah income is recognized on an accrual basis as and when the rental becomes due.5