2011 Annual Report - BDO

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losses on AFS, can be reclassified to profit or loss when specified conditions aremet.(iii) PAS 19 (Amendment), Employee Benefits (effective from January 1, 2013). Theamendment made a number of changes as part of the improvements throughoutthe standard. The main changes relate to defined benefit plans as follows:• eliminates the corridor approach under the existing guidance ofPAS 19 and requires an entity to recognize all gains and losses arising in thereporting period;• streamlines the presentation of changes in plan assets and liabilitiesresulting in the disaggregation of changes into three main components ofservice costs, net interest on net defined benefit obligation or asset, andremeasurement; and,• enhances disclosure requirements, including information about thecharacteristics of defined benefit plans and the risks that entities are exposedto through participation in them.Currently, the Bank is using the corridor approach and its unrecognized actuariallosses as of December 31, <strong>2011</strong> amounted to P103,779,742 which will beretrospectively recognized as loss in other comprehensive income in 2013.(iv) PFRS 9, Financial Instruments: Classification and Measurement (effective fromJanuary 1, 2015). This is the first part of a new standard on classification andmeasurement of financial assets and financial liabilities that will replacePAS 39 in its entirety. This chapter deals with two measurement categories forfinancial assets: amortized cost and fair value. All equity instruments will bemeasured at fair value while debt instruments will be measured at amortized costonly if the entity is holding it to collect contractual cash flows which representpayment of principal and interest. The accounting for embedded derivatives inhost contracts that are financial assets is simplified by removing the requirementto consider whether or not they are closely related, and, in most arrangement,does not require separation from the host contract.For liabilities, the standard retains most of the PAS 39 requirements whichinclude amortized-cost accounting for most financial liabilities, with bifurcationof embedded derivatives. The main change is that, in case where the fair valueoption is taken for financial liabilities, the part of a fair value change due to anentity’s own credit risk is recorded in other comprehensive income rather than inprofit or loss, unless this creates an accounting mismatch.To date, other chapters of PFRS 9 dealing with impairment methodology andhedge accounting are still being completed.www.bdo.com.ph 41
NOTES TOFINANCIAL STATEMENTSThe Bank does not expect to implement and adopt PFRS 9 until its effectivedate or until all chapters of this new standard have been published. In addition,management is currently assessing the impact of PFRS 9 on the financialstatements of the Bank and is committed to conduct a comprehensive study ofthe potential impact of this standard in 2012 to assess the impact of all changes.(v)PFRS 13, Fair Value Measurement (effective from January 1, 2013). This standardaims to improve consistency and reduce complexity by providing a precisedefinition of fair value and a single source of fair value measurement anddisclosure requirements for use across PFRS. The requirements do not extendthe use of fair value accounting but provide guidance on how it should be appliedwhere its use is already required or permitted by other standards. The Bank is yetto assess the impact of this new standard.2.03 Financial Instruments2.03.01 Financial AssetsFinancial assets are recognized when the Bank becomes a party to the contractual termsof the financial instrument. Financial assets other than those designated and effectiveas hedging instruments are classified into the following categories: financial assets at fairvalue through profit or loss (FVTPL), loans and receivables, held-to-maturity (HTM)investments and available-for-sale (AFS) financial assets. Financial assets are assigned tothe different categories by management on initial recognition, depending on the purposefor which the investments were acquired. Regular purchases and sales of financialassets are recognized on their trade date. All financial assets that are not classified as atFVTPL are initially recognized at fair value plus any directly attributable transaction costs.Financial assets carried at FVTPL are initially recorded at fair value and transaction costsrelated to it are recognized in profit or loss.The foregoing categories of financial instruments are more fully described below.(a) Financial Assets at FVTPLThis category includes financial assets that are either classified as held for trading orthat meets certain conditions and are designated by the entity to be carried at fair valuethrough profit or loss upon initial recognition. All derivatives fall into this category,except for those designated and effective as hedging instruments.Financial assets at FVTPL are measured at fair value, and changes therein are recognizedin profit or loss. Financial assets (except derivatives and financial instruments originallydesignated as financial assets at fair value through profit or loss) may be reclassified outof fair value through profit or loss category effective July 1, 2008:
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 36 and 37: 2.01 Basis of Preparation of Financ
Page 38 and 39: 2010Notes FRSP Difference PFRSChang
Page 40 and 41: Bank is not subject to minimum fund
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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