2011 Annual Report - BDO

NOTES TOFINANCIAL STATEMENTSDBO is determined by discounting the estimated future cash outflows using interestrates of high quality corporate bonds that are denominated in the currency in whichthe benefits will be paid and that have terms to maturity approximating to the terms ofthe related pension liability.Actuarial gains and losses are not recognized as an expense unless the totalunrecognized gain or loss exceeds 10% of the greater of the obligation and relatedplan assets. The amount exceeding this 10% corridor is charged or credited to profitor loss over the employees’ expected average remaining working lives. Actuarial gainsand losses within the 10% corridor are disclosed separately. Past-service costs arerecognized immediately in the statement of income, unless the changes to the pensionplan are conditional on the employees remaining in service for a specified periodof time (the vesting period). In this case, the past service costs are amortized on astraight-line basis over the vesting period.(ii) Defined Benefit Contribution PlanA defined contribution plan is a pension plan under which the Bank pays fixedcontributions into an independent entity such as the Social Security System. The Bankhas no legal or constructive obligations to pay further contributions after paymentof the fixed contribution. The contributions recognized in respect of definedcontribution plans are expensed as they fall due.(b) Profit-sharing and Bonus PlansThe Bank recognizes a liability and an expense for bonuses and profit-sharing, based on aformula that takes into consideration the profit attributable to the Bank’s shareholders aftercertain adjustments. The Bank recognizes a provision where it is contractually obliged topay the benefits, or where there is a past practice that has created a constructive obligation.(c) Compensated AbsencesCompensated absences are recognized for the number of paid leave days (including holidayentitlement) remaining at the end of reporting period. They are included in the AccruedTaxes and Other Liabilities account at the undiscounted amount that the Bank expects topay as a result of the unused entitlement.2.13 Income TaxesCurrent income tax assets or liabilities comprise those claims from, or obligations to, fiscalauthorities relating to the current or prior reporting period, that are uncollected or unpaid atthe end of the reporting period. They are calculated according to the tax rates and tax lawsapplicable to the fiscal periods to which they relate, based on the taxable profit for the year.All changes to current tax assets or liabilities are recognized as a component of tax expense inprofit or loss.