UBL Financial Statements - United Bank Limited

NOTES TO AND FORMING PART OF THE UNCONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 20115.6.3 Intangible assetsIntangible assets having a finite useful life are stated at cost less accumulated amortization and accumulated impairmentlosses, if any. Intangible assets are amortized using the straight line method, from the month when these assets areavailable for use, whereby the cost of the intangible asset is amortized on the basis of the estimated useful life over whicheconomic benefits are expected to flow to the Bank. The residual values and useful lives are reviewed and adjusted, ifappropriate, at each statement of financial position date.5.7 ImpairmentImpairment in available for sale equity investmentsAvailable for sale equity investments are impaired when there has been a significant or prolonged decline in the fair valuebelow their cost. The determination of what is significant or prolonged requires judgment. In making this judgment, theBank evaluates, among other factors, the normal volatility in share price.Impairment in investments in associates and subsidiariesThe Bank considers that a decline in the recoverable value of the investment in associates and subsidiaries below theircost may be evidence of impairment. Recoverable value is calculated as the higher of fair value less costs to sell andvalue in use. An impairment loss is recognized when the recoverable value falls below the carrying value and is chargedto the profit and loss account. A subsequent reversal of an impairment loss, upto the cost of the investment in associatesand subsidiaries, is credited to the profit and loss account.Impairment in non-financial assets (excluding deferred tax)The carrying amounts of non-financial assets are reviewed at each reporting date for impairment whenever events orchanges in circumstances indicate that the carrying amounts of the assets may not be recoverable. If such indicationexists, and where the carrying value exceeds the estimated recoverable amount, assets are written down to theirrecoverable amount. The resulting impairment loss is charged to the profit and loss account except for an impairmentloss on revalued assets, which is adjusted against the related revaluation surplus to the extent that the impairment lossdoes not exceed the revaluation surplus.5.8 Taxation5.8.1 CurrentProvision for current taxation is based on taxable income for the year determined in accordance with the prevailing lawsfor taxation on income earned from local as well as foreign operations. The charge for current tax is calculated usingprevailing tax rates. The charge for current tax also includes, where considered necessary, adjustments relating to prioryears, arising from assessments made during the year.5.8.2 DeferredDeferred tax is recognized using the liability method on all major temporary differences between the amounts attributed toassets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax iscalculated at the rates that are expected to apply to the period when the differences are expected to reverse, based ontax rates that have been enacted or substantively enacted at the statement of financial position date.Deferred tax assets are recognized only to the extent that it is probable that future taxable profits will be available againstwhich the assets can be utilized.The carrying amount of the deferred tax asset is reviewed at each statement of financial position date and reduced to theextent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred taxasset to be utilized.The Bank also recognizes a deferred tax asset / liability on the cash flow hedge reserve and on the deficit / surplus onrevaluation of fixed assets and securities which is adjusted against the related deficit / surplus in accordance with therequirements of the revised IAS 12, Income Taxes.6