2011 Annual Report - BDO

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2.01 Basis of Preparation of Financial Statements(a) Statement of Compliance with Financial Reporting Standards in the Philippines for BanksThe financial statements of the Bank have been prepared in accordance with the financialreporting standards in the Philippines (FRSP) for banks. The Bank prepared its financialstatements in accordance with Philippine Financial Reporting Standards (PFRS), except forthe reclassification of the embedded derivatives in credit-linked notes (CLNs) that are linkedto Republic of the Philippines (ROP) bonds from fair value through profit or loss (FVTPL)to unquoted debt securities classified as loans (UDSCL), that are outstanding as of theeffective date of reclassification, which is permitted by the BSP for prudential reporting, andby the Securities and Exchange Commission (SEC) for financial reporting purposes.PFRSs are adopted by the Financial Reporting Standards Council (FRSC) from thepronouncements issued by the International Accounting Standards Board.The financial statements have been prepared using the measurement bases specified byPFRS for each type of assets, liabilities, income and expense. The measurement basesare more fully described in the accounting policies that follow.(b) Adoption of Financial Reporting Standards in the Philippines for Banks in 2008In 2008, the Monetary Board of the BSP approved the prudential reporting guidelines forbanks governing the reclassification of investments in debt and equity securities betweencategories in accordance with the provisions of the October 2008 amendments to thePhilippine Accounting Standard (PAS 39) and PFRS 7, and provided additional guidelines(under BSP Circular No. 628) which include among others the reclassification of CLNsand other similar instruments that are linked to ROP bonds:• out of the held-for-trading into available-for-sale (AFS)/held-to-maturity (HTM)/unquoted debt securities classified as loans (UDSCL); or,• from AFS to UDSCL or HTM, without bifurcating the embedded derivatives from thehost instruments.Provided that these shall only apply for CLNs that are outstanding as of the effective dateof reclassification, which shall not be on or later than November 15, 2008.On February 2, 2009, the SEC approved the adoption of BSP Circular No. 628 as beingcompliant with generally accepted accounting principles for banks.On May 24, 2011 and July 25, 2011, the Bank unwound the outstanding Credit LinkedDeposits (CLDs) and CLNs related to the reclassified securities with certain financialinstitutions amounting to P437,342,716 and P445,054,240, respectively (see Note 6.02).As of December 31, 2011, the Bank has no outstanding UDSCL.www.bdo.com.ph 35
NOTES TOFINANCIAL STATEMENTSThe following reconciliations and explanatory notes thereto describe the differences on the2011 and 2010 statements of financial position under FRSP and PFRS:(i) The reconciliations of the equity reported under FRSP to equity under PFRS follow.Note 2011 2010Equity under FRSP P 5,043,756,483 P 4 ,471,415,688Net adjustment to equityin prior year 71,490,154 80,387,314Amortization of negativefair value of embeddedderivative on CLNreclassified to loans andreceivables 8,986,559 ( 12,548,857 )Reversal of net adjustment toequity due to the unwindingof the CLNs ( 80,476,713 ) -Mark-to-market gain onembedded derivatives onCLNs reclassified to loansand receivables 6 - 3,651,697- 71,490,154Equity under PFRS P 5,043,756,483 P 4 ,542,905,842(ii) Differences in the measurement of statement of financial position itemsare summarized below (in thousand pesos).2011Notes FRSP Difference PFRSChanges in resources:Trading and investment securities 5, 6, 7 P 18,262,748 P - P 18,262,748Loans and receivables 8 1,533,921 - 1,533,92119,796,669 - 19,796,669Changes in liabilities:Derivative financial liabilities 13 1,446,946 - 1,446,946Net adjustments to equity P -
Page 2 and 3: TABLE OFCONTENTS246Corporate Missio
Page 4 and 5: OUR COMMITMENTOur commitment to pro
Page 6: We remain steadfast in our vision a
Page 10 and 11: The Storywww.bdo.com.ph 9
Page 12 and 13: • Execution. If you are more of a
Page 14 and 15: ELIZABETH T. SY,Director59 years ol
Page 16: ADVISERSHarley T. Sy Ian T. Fish Ra
Page 19 and 20: CORPORATEGOVERNANCEBDO Private Bank
Page 21 and 22: CORPORATEGOVERNANCEChairman: Nestor
Page 24 and 25: Awardswww.bdo.com.ph 23
Page 26 and 27: Best Private Bankin the Philippines
Page 28 and 29: REPORT OFINDEPENDENT AUDITORSTHE BO
Page 30 and 31: STATEMENTS OFINCOMEFOR THE YEARS EN
Page 32 and 33: STATEMENTS OFCHANGES IN EQUITYFOR T
Page 34 and 35: www.bdo.com.ph 33
Page 38 and 39: 2010Notes FRSP Difference PFRSChang
Page 40 and 41: Bank is not subject to minimum fund
Page 42 and 43: losses on AFS, can be reclassified
Page 44 and 45: i. only in rare circumstances and i
Page 46 and 47: together with the host contract wit
Page 48 and 49: If there is objective evidence that
Page 50 and 51: Bills payable are recognized initia
Page 52 and 53: In considering each possible relate
Page 54 and 55: translated into the Bank’s presen
Page 56 and 57: Deferred tax is provided, using the
Page 58 and 59: • The Risk Management Unit is res
Page 60 and 61: 2.15.02.01 Foreign Exchange RiskThe
Page 62 and 63: The following table shows the amoun
Page 64 and 65: 2011More MoreOne to than three than
Page 66 and 67: 2010More MoreOne to than three than
Page 68 and 69: The following table sets out the cr
Page 70 and 71: December 31, 2010Loans - Trading an
Page 72 and 73: The Bank’s lead regulator, the BS
Page 74 and 75: 3. CRITICAL ACCOUNTING ESTIMATES AN
Page 76 and 77: Details of impairment losses (recov
Page 78 and 79: payable) with repricing frequencies
Page 80 and 81: and any resulting impairment loss c
Page 82 and 83: from 0.0% to 9.13% per annum in 201
Page 84 and 85: 6.01 Collateralized Debt Obligation
Page 86 and 87:
P9,483,508 in 2011 and 2010, respec
Page 88 and 89:
this transaction amounted to P84,58
Page 90 and 91:
In 2010, the Bank has assessed two
Page 92 and 93:
A reconciliation of the carrying am
Page 94 and 95:
Interest rates on deposit liabiliti
Page 96 and 97:
14. ACCRUED TAXES AND OTHER LIABILI
Page 98 and 99:
15.05 Surplus ReserveIn compliance
Page 100 and 101:
Changes in the present value of the
Page 102 and 103:
Assumptions rgarding future mortali
Page 104 and 105:
21. TAXES21.01 Current and Deferred
Page 106 and 107:
The Bank is subject to MCIT which i
Page 108 and 109:
The composition of the Bank’s AUM
Page 110 and 111:
www.bdo.com.ph 109
Page 112:
PRODUCTSAND SERVICESWEALTH ADVISORY
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2011 Annual Report - BDO

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