Annual report 2009-OK.qxp - Canadia Bank Plc.

Canadia Bank Plc.2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)2.21 Fiduciary assetsAssets held in trust or in a fiduciary capacity are not reported in the financial statements since they are notthe assets of the Bank.2.22 Rounding of amountsAmounts in the financial statements have been rounded off to the nearest dollar and nearest million Rielfor US$ and Riel amounts, respectively.2.23 Corresponding figuresCertain corresponding figures have been reclassified to conform with current year's presentation.3. CRITICAL ACCOUNTING ESTIMATES, ASSUMPTIONS AND JUDGEMENTSThe Bank makes estimates, assumptions and judgments that affect the reported amounts of assets andliabilities. Estimates, assumptions and judgments are continually evaluated and are based on historicalexperience and other factors, including expectations of future events that are believed to be reasonableunder the circumstances.a) Impairment losses on loans and advancesThe Bank follows the mandatory credit classification and provisioning as required by Prakas No. B7-09-074dated 25 February 2009 of the NBC.The NBC requires commercial banks to classify their loan portfolio intofive classes and the minimum mandatory level of specific provision is made depending on theclassification concerned and regardless of the assets (except for cash) pledged as collateral. For purposesof loan classification, the Bank takes into account historical payment experience and the borrower'sfinancial condition.41Annual Report 2009b) Investment in shares of another bankThe Bank now owns 15.22% of the share capital of Foreign Trade Bank, a local bank, after divesting its30.78% ownership of this bank during the year. This remaining investment is carried at cost. The Directorsbelieve it is appropriate to carry this investment at cost since fair value cannot be reliably estimated.Current CAS in force has also not adopted the equity method of accounting for investments of this nature.c) Income taxTaxes are calculated on the basis of current interpretation of the tax regulations. However, theseregulations are subject to periodic variation and the ultimate deter mination of tax expenses will be madefollowing inspection by the Tax Department.Where the final tax outcome of these matters is different from the amounts that were initially recorded,such differences will have an impact on the income tax and deferred tax provisions in the year in whichsuch determination is made.