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)(g)(h)Commissions earned on credit cards – Commissions earned on credit cards are taken up as income uponreceipt from member establishments of charges arising from credit availments by credit cardholders.These commissions are computed based on certain agreed rates and are deducted from amountsremittable to member establishments.Income on direct financing leases and receivables financed – Income on loans and receivables financedwith short-term maturities is recognized using the effective interest method. Interest and finance feeson finance leases on loans and receivables financed with long-term maturities and the excess of theaggregate lease rental plus the estimated terminal value of the leased equipment over its cost are creditedto unearned discount and amortized over the term of the note or lease using the effective interest method.Unearned income ceases to be amortized when receivables become past due.Cost and expenses are recognized in profit or loss upon utilization of the assets or services or at the date theseare incurred.2.19 ProvisionsProvisions are recognized when present obligations will probably lead to an outflow of economic resources andthese can be estimated reliably even if the timing or amount of the outflow may still be uncertain. A presentobligation arises from the presence of a legal or constructive commitment that has resulted from past events, forexample, legal disputes or onerous contracts.Provisions are measured at the estimated expenditure required to settle the present obligation, based on themost reliable evidence available at the end of reporting period, including the risks and uncertainties associatedwith the present obligation. Any reimbursement expected to be received in the course of settlement of thepresent obligation is recognized, if virtually certain, as a separate asset, not exceeding the amount of the relatedprovision. Where there are a number of similar obligations, the likelihood that an outflow will be required insettlement is determined by considering the class of obligations as a whole. In addition, long-term provisionsare discounted to their present values, where time value of money is material.BDO ANNUAL REPORT 200935Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate.In those cases where the possible outflow of economic resource as a result of present obligations is consideredimprobable or remote, or the amount to be provided for cannot be measured reliably, no liability is recognizedin the financial statements.Probable inflows of economic benefits that do not yet meet the recognition criteria of an asset are consideredcontingent assets, hence, are not recognized in the financial statements.2.20 LeasesBDO Unibank Group accounts for its leases as follows:(a)BDO Unibank Group as LessorLeases wherein BDO Unibank Group substantially transfers to the lessee all risks and benefits incidentalto ownership of the leased item are classified as finance leases and are presented as receivable at anamount equal to BDO Unibank Group’s net investment in the lease. Finance income is recognized basedon the pattern reflecting a constant periodic rate of return on BDO Unibank Group’s net investmentoutstanding in respect of the finance lease.