2009 ANNUAL REPORT FINANCIAL SUPPLEMENTS - BDO

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NOTES TO FINANCIAL STATEMENTSDecember 31, 2009, 2008 and 2007(Amounts in Millions of Philippine Pesos, Except Per Share Data or as Indicated)(iii)HTM InvestmentsFair value for held-to-maturity assets is based on market prices. Where this information is notavailable, fair value has been estimated using quoted market prices for securities with similarcredit, maturity and yield characteristics or through valuation techniques using discounted cashflow analysis.(iv)Loans and Other ReceivablesLoans and other receivables are net of provisions for impairment. The estimated fair value ofloans and receivables represents the discounted amount of estimated future cash flows expectedto be received. Expected cash flows are discounted at current market rates to determine fairvalue.(v)Deposits and BorrowingsBDO ANNUAL REPORT 2009(c)The estimated fair value of demand deposits with no stated maturity, which includesnon-interest-bearing deposits, is the amount repayable on demand. The estimated fair valueof long-term fixed interest-bearing deposits and other borrowings without quoted market priceis based on discounted cash flows using interest rates for new debts with similar remainingmaturity.Fair Value of Derivatives46(d)The fair value of derivative financial instruments that are not quoted in an active market is determinedthrough valuation techniques using the net present value computation.Valuation techniques are used to determine fair values which are validated and periodically reviewed.To the extent practicable, models use observable data, however, areas such as credit risk (both ownand counterparty), volatilities and correlations require management to make estimates. Changes inassumptions could affect reported fair value of financial instruments. BDO Unibank Group usesjudgment to select a variety of methods and make assumptions that are mainly based on marketconditions existing at the end of each reporting period.Financial Instruments Measured at Fair ValueBDO Unibank Group adopted the amendments to PFRS 7, Financial Instruments: Disclosures – ImprovingDisclosures about Financial Instruments effective from January 1, 2009. These amendments require BDOUnibank Group to present certain information about financial instruments measured at fair value in thestatements of financial position. In the first year of application comparative information need not bepresented for the disclosures required by the amendment. Accordingly, the disclosure for the fair valuehierarchy is only presented for December 31, 2009.
NOTES TO FINANCIAL STATEMENTSDecember 31, 2009, 2008 and 2007(Amounts in Millions of Philippine Pesos, Except Per Share Data or as Indicated)The following table presents financial assets and liabilities measured at fair value in the statements offinancial position in accordance with the fair value hierarchy. This hierarchy groups financial assets andliabilities into three levels based on the significance of inputs used in measuring the fair value of thefinancial assets and liabilities. The fair value hierarchy has the following levels:• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;• Level 2: inputs other than quoted prices included within Level 1 that are observable for the assetor liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and,• Level 3: inputs for the asset or liability that are not based on observable market data (unobservableinputs).The level within which the financial asset or liability is classified is determined based on the lowest levelof significant input to the fair value measurement.The financial assets and liabilities measured at fair value in the statement of financial position as ofDecember 31, 2009 are grouped into the fair value hierarchy as presented in the following table. For thepurpose of this disclosure, the investments in unquoted equity securities classified as AFS amounting toP3,376 and P565 in the financial statements of BDO Unibank Group and the Parent Bank, respectively,are measured at cost less impairment charges because the fair value cannot be reliably measured andtherefore are not included. Unquoted equity securities consist of preferred shares and common shares ofvarious unlisted local companies.BDO Unibank GroupNotes Level 1 Level 2 TotalResourcesFinancial assets at FVTPL 9.1Derivative financial assets P 3,957 P 1,604 P 5,561Government bonds 1,886 37 1,923Other debt securities 32 936 968Equity securities - quoted 50 - 505,925 2,577 8,502BDO ANNUAL REPORT 200947AFS securitiesGovernment debt securities 34,540 435 34,975Other debt securitiesQuoted 6,483 652 7,135Equity securitiesQuoted 1,118 - 1,118Not quoted - 429 4299.2 42,141 1,516 43,657P 48,066 P 4,093 P 52,159LiabilitiesDerivative with negativefair values 18 P 3,549 P 1,394 P 4,943
Page 3 and 4: FINANCIAL HIGHLIGHTSIn Billion Peso
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COMPANY HEADQUARTERSBanco De Oro Un
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2009 ANNUAL REPORT FINANCIAL SUPPLEMENTS - BDO

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