Annual Report 2012

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Notes to the financial statements(Expressed in millions of RMB, unless otherwise stated)4 Significant accounting policies and accounting estimates (continued)(11) Allowances for impairment losses on non-financial assets (continued)(a)Testing CGU with goodwill for impairmentFor the purpose of impairment testing, goodwill acquired in a business combination is allocated to the CGU or group of CGUsthat is expected to benefit from the synergies of the combination.A CGU or group of CGUs to which goodwill has been allocated is tested for impairment by the Group semi-annually, orwhenever there is an indication that the CGU or group of CGUs are impaired, by comparing the carrying amount of the CGUor group of CGUs, including the goodwill, with the recoverable amount of the CGU or group of CGUs. The recoverableamount of the CGU or group of CGUs are the estimated future cash flows, which are discounted to their present value using adiscount rate that reflects current market assessments of the time value of money and the risks specific to the CGU or group ofCGUs with allocated goodwill.At the time of impairment testing of a CGU or group of CGUs to which goodwill has been allocated, there may be an indicationof an impairment of an asset within the CGU containing the goodwill. In such circumstances, the Group tests the asset forimpairment first, and recognises any impairment loss for that asset before testing for impairment on the CGU or group ofCGUs containing the goodwill. Similarly, there may be an indication of an impairment of a CGU within a group of CGUscontaining the goodwill. In such circumstances, the entity tests the CGU for impairment first, and recognises any impairmentloss for that CGU, before testing for impairment the group of CGUs to which the goodwill is allocated.(b) Impairment lossIf the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to itsrecoverable amount. That reduction is recognised as an impairment loss and charged to the profit or loss.(c)For a CGU or a group of CGUs, the amount of impairment loss firstly reduces the carrying amount of any goodwill allocatedto the CGU or group of CGUs, and then reduces the carrying amount of other assets (other than goodwill) within the CGU orgroup of CGUs, pro rata on the basis of the carrying amount of each asset.Reversing an impairment lossIf, in a subsequent period, the amount of impairment loss of the non-financial asset except for goodwill decreases and thedecrease can be linked objectively to an event occurring after the impairment was recognised, the previously recognisedimpairment loss is reversed through the profit or loss. A reversal of impairment loss is limited to the asset’s carrying amount thatwould have been determined had no impairment loss been recognised in prior periods.An impairment loss in respect of goodwill is not reversed.(12) Employee benefitsEmployee benefits are all forms of consideration given and other relevant expenditures incurred by the Group in exchange forservices rendered by employees. Except for termination benefits, employee benefits are recognised as a liability in the period in whichthe associated services are rendered by its employees, with a corresponding increase in cost of relevant assets or the expenses inprofit or loss. Where payment or settlement is deferred and the effect of discount would be material, these amounts are stated attheir present values in the statement of financial position.(a)Defined contribution retirement schemesPursuant to the relevant laws and regulations in the PRC, the Group has joined defined contribution retirement schemes forthe employees arranged by local government labor and security authorities. The Group makes contributions to the retirementschemes at the applicable rates based on the amounts stipulated by the local government organisations. The contributions arecharged to the profit or loss on an accrual basis. When employees retire, the local government labor and security authoritiesare responsible for the payment of the basic retirement benefits to the retired employees.In addition to the statutory provision schemes, the Bank’s employees have joined the annuity scheme set up by the Bank under“CCBC Annuity Scheme” (the “scheme”) in accordance with state enterprise annuity regulations. The Bank has made annuitycontributions in proportion to its employees’ gross wages, which are expensed in profit or loss when the contributions aremade.(b) Housing fund and other social insuranceIn accordance with the related laws, regulations and policies of the PRC, the Group participates in mandatory social insuranceprogrammes, including housing fund, basic medical insurance, unemployment insurance, work injury insurance and maternityinsurance etc. The Group makes housing fund and social insurance contributions to government agencies in proportion toeach employees’ salary and expenses monthly and recognises them in profit or loss on an accrual basis.China Construction Bank Corporation annual report <strong>2012</strong>109
Notes to the financial statements(Expressed in millions of RMB, unless otherwise stated)4 Significant accounting policies and accounting estimates (continued)(12) Employee benefits (continued)(c)Supplementary retirement benefitsThe Group pays supplementary retirement benefits for its employees in Mainland China who retired on or before 31 December2003 in addition to the contributions made to statutory insurance schemes.The Group’s obligations in respect of supplementary retirement benefits are calculated by estimating the amount of obligationsthat the Group is committed to pay to the employees after their retirement using actuarial techniques. At the end of eachreporting period, such obligations are discounted with interest yield of government bonds with similar duration. In calculatingthe Group’s obligations, to the extent that any cumulative unrecognised gains or losses exceed 10% of the present value ofthe obligation at the end of each reporting period, that portion is recognised in profit or loss. Otherwise, the gain or loss is notrecognised.The liability recognised in the statement of financial position in respect of supplementary retirement benefits is the definedbenefit obligation at the end of the reporting period less the fair value of plan assets.(d) Early retirement expenses(e)(f)The Group recognises the present value of all its liabilities to employees who voluntarily agreed to retire early. The earlyretirement benefit payments are made by the Group from the date of early retirement to the regulated retirement date.Differences arising from changes in assumptions and estimates of the present value of the liabilities are recognised in profit orloss when incurred.Termination benefitsWhere the Group terminates the employment relationship with employees before the end of the employment contracts orprovides compensation as an offer to encourage employees to accept voluntary redundancy, a provision is recognised forthe compensation arising from termination of employment relationship, with a corresponding charge to the profit or lossfor the current period, when both of the following conditions are satisfied: (i) the Group has a formal plan for termination ofemployment relationship or has made an offer for voluntary redundancy, which will be implemented immediately; (ii) the Groupcannot unilaterally withdraw from the termination plan or the redundancy offer.Staff incentive planAs approved by the board of directors, for the purposes of providing incentives and rewards to eligible employees for their pastservices, the Group awards a specified amount of staff compensation to the staff incentive plan independently managed by adesignated staff committee for those eligible participating employees. The Group recognises its contribution to the plan whenit has a present legal or constructive obligation to make such payment and a reliable estimate of the obligation can be made.(13) Provisions and contingent liabilitiesA provision is recognised in the statement of financial position if, as the result of a past event, the Group has a present legal orconstructive obligation that can be reliably estimated and it is probable that an outflow of economic benefits will be required to settlethe obligation. A provision is initially measured at the best estimate of the expenditure required to settle the related present obligation.Factors pertaining to a contingency such as the risks, uncertainties and time value of money are taken into account as a whole inreaching the best estimate. Where the effect of the time value of money is material, the best estimate is determined by discountingthe related future cash outflows.A potential obligation arising from a past transaction or event whose existence can only be confirmed by the occurrence ornonoccurrence of future uncertain events; or a present obligation that arises from past transactions or events where it is not probablethat an outflow of economic benefits is required to settle the obligation or the amount of the obligation cannot be measured reliably,is disclosed as a contingent liability unless the probability of outflow of economic benefit is remote.(14) Financial guaranteesFinancial guarantees are contracts that require the Group as the guarantor (the “issuer”) to make specified payments to reimbursethe beneficiary of the guarantee (the “holder”) for a loss the holder incurs when a specified debtor fails to make payment when duein accordance with the terms of a debt instrument. The fair value of the guarantee (being the guarantee fees received) is initiallyrecognised as deferred income in “other liabilities”. The deferred income is amortised in profit or loss over the term of the guaranteeas income from financial guarantees issued. Provisions are recognised in the statement of financial position if and when it becomesprobable that the holder of the guarantee will call upon the Group under the guarantee, and the amount of that claim on the Group isexpected to exceed the carrying amount of the deferred income.110 China Construction Bank Corporation annual report <strong>2012</strong>
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Annual Report 2012China Constructio
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DEFINITIONSIn this annual report, u
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INTRODUCTIONHeadquartered in Beijin
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2 CORPORATE INFORMATIONLegal name a
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2 CORPORATE INFORMATIONForbes Ranke
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3 CHAIRMAN’S STATEMENTDear shareh
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4 PRESIDENT’S REPORTDear sharehol
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5 MANAGEMENT DISCUSSION AND ANALYSI
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6 CHANGES IN SHARE CAPITAL AND PART
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6 CHANGES IN SHARE CAPITAL AND PART
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7 CORPORATE GOVERNANCE REPORT7.2 BO
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14 UNAUDITED SUPPLEMENTARY FINANCIA
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15 ORGANISATIONAL STRUCTUREPublic R
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16 BRANCHES AND SUBSIDIARIESTier-on
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16 BRANCHES AND SUBSIDIARIESBranche
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16 BRANCHES AND SUBSIDIARIESChongqi
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16 BRANCHES AND SUBSIDIARIESZhejian
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Annual Report 2012

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