2011 Annual Report - BDO

NOTES TOFINANCIAL STATEMENTS2.03.03 Offsetting Financial InstrumentsFinancial assets and financial liabilities are offset and the net amount reported in the statementof financial position when there is a currently enforceable legal right to offset the recognizedamounts and there is an intention to settle on a net basis, or realize the asset and settle theliability simultaneously. This is not generally the case with master netting agreements, and therelated assets and liabilities are presented gross in the statement of financial position.2.03.04 Sale and Repurchase AgreementsSecurities purchased under agreements to resell (such as Securities Purchased Under ReverseRepurchase Agreements) are recorded at fair value through profit or loss. The Bank entersinto short-term purchases of securities under reverse repurchase agreements of substantiallyidentical securities with the BSP. Interest earned on resale agreements are reported as interestincome.2.03.05 Impairment of Financial AssetsThe Bank assesses at the end of each reporting period whether there is objective evidencethat a financial asset or group of financial assets is impaired. A financial asset or a groupof financial assets is impaired and impairment losses are incurred if, and only if, there isobjective evidence of impairment as a result of one or more events that occurred after theinitial recognition of the asset (a “loss event”) and that loss event (events) has an impact onthe estimated future cash flows of the financial asset or group of financial assets that can bereliably estimated.Objective evidence that a financial asset or group of assets is impaired includes observabledata that comes to the attention of the Bank about certain loss events, including, amongothers: significant financial difficulty of the issuer or debtor; a breach of contract, such as adefault or delinquency in interest or principal payments; it is probable that the borrower willenter bankruptcy or other financial reorganization; the disappearance of an active market forthat financial asset because of financial difficulties; or observable data indicating that there is ameasurable decrease in the estimated future cash flows from a group of financial assets sincethe initial recognition of those assets, although the decrease cannot yet be identified with theindividual financial assets in the group.(a) Assets Carried at Amortized CostThe Bank first assesses whether objective evidence of impairment exists individuallyfor financial assets that are individually significant, and individually or collectively forfinancial assets that are not individually significant. If the Bank determines that noobjective evidence of impairment exists for an individually assessed financial asset, whethersignificant or not, it includes the asset in a group of financial asset with similar credit riskcharacteristics and collectively assesses them for impairment. Assets that are individuallyassessed for impairment and for which an impairment loss is or continues to be recognizedare not included in a collective assessment of impairment.