2009 ANNUAL REPORT FINANCIAL SUPPLEMENTS - BDO

NOTES TO FINANCIAL STATEMENTSDecember 31, 2009, 2008 and 2007(Amounts in Millions of Philippine Pesos, Except Per Share Data or as Indicated)2.11 Premises, Furniture, Fixtures and EquipmentPremises, furniture, fixtures and equipment are carried at acquisition cost less accumulated depreciation andamortization and any impairment in value. Property items of the former EPCIB stated at appraised valueswere included in BDO Unibank Group balances at their deemed costs at date of transition to PFRS onJanuary 1, 2005. The revaluation increment is credited to Revaluation Increment account in the Equity section,net of applicable deferred income tax.The cost of an asset comprises its purchase price and directly attributable costs of bringing the asset to workingcondition for its intended use. Expenditures for additions, major improvements and renewals are capitalized;expenditures for repairs and maintenance are charged to expense as incurred. When assets are sold, retired orotherwise disposed of, their cost and related accumulated depreciation and amortization and impairment lossesare removed from the accounts and any resulting gain or loss is reflected in profit or loss for the period.Depreciation is computed on straight-line basis over the estimated useful lives of the depreciable assets asfollows:BuildingsFurniture, fixtures and equipment10 - 50 years3 - 5 yearsLeasehold rights and improvements are amortized over the terms of the leases or the estimated useful lives of theimprovements, whichever is shorter.An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amountis greater than its estimated recoverable amount (see Note 2.22).BDO ANNUAL REPORT 200931The residual values and estimated useful lives of premises, furniture, fixtures and equipment are reviewed, andadjusted if appropriate, at the end of each reporting period.An item of premises, furniture, fixtures and equipment is derecognized upon disposal or when no future economicbenefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition ofthe asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) isincluded in profit or loss in the period the item is derecognized.2.12 Business CombinationExcept as indicated otherwise, business acquisitions are accounted for using the purchase method ofaccounting.Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of a businesscombination over BDO Unibank Group’s interest in the net fair value of the identifiable assets, liabilities andcontingent liabilities. Goodwill is reviewed for impairment annually or more frequently if events or changesin circumstances indicate that the carrying value may be impaired (see Note 2.22). Negative goodwill, ifany, which is the excess of BDO Unibank Group’s interest in the net fair value of acquired identifiable assets,liabilities and contingent liabilities over cost is recognized directly to income.Transfers of assets between commonly-controlled entities are accounted for under historical cost accounting.