2004 - Asianbanks.net

All significant intercompany balances and transactions have been eliminated in consolidation.The Group financial statements were prepared using uniform accounting policies for like transactions and otherevents in similar circumstances.Resale AgreementsResale agreements are contracts wherein the Group or the Parent Company purchases securities andsimultaneously agrees to resell the same securities at a specified future date at a fixed price. Securities purchasedunder resale agreements (SPURA) are considered loans to the counterparty rather than as investment in securities.SPURA are carried at cost. The corresponding interest income is accrued when earned.Trading Account SecuritiesTAS, consisting of government and private debt and equity securities, are purchased and held principally with theintention of selling them in the near term. These securities are carried at fair market value; realized and unrealizedgains and losses on these instruments are recognized as Trading Gains - net in the statements of income. Interestearned on debt instruments is reported as Interest Income. Quoted market prices, when available, are used todetermine the fair value of trading instruments. If quoted market prices are not available, their fair values areestimated based on prices obtained from the BSP, Bureau of Treasury, Reuters, Telerates, Bloomberg andinvestment bankers.When a security is transferred to TAS, the unrealized holding gain or loss at the date of transfer is recognized in thestatements of income immediately.Available-for-Sale SecuritiesSecurities are classified as ASS when purchased and held indefinitely, i.e. neither held to maturity nor for tradingpurposes, where the Group anticipates to sell in response to liquidity requirements or in anticipation of changes ininterest rates or other factors. ASS are carried at fair market value; unrealized holding gains and losses are reportedas a separate component of capital funds.When a debt security is transferred to ASS from investment in bonds and other debt instruments (IBODI), theunrealized holding gain or loss on the date of transfer is excluded from reported earnings and reported as a separatecomponent of capital funds until realized.Investments in Bonds and Other Debt InstrumentsIBODI are debt securities where the Group has the positive intent and ability to hold to maturity. These securities arecarried at amortized cost; realized gains and losses are included in Trading Gains - net in the statements of income.The allowance for probable losses is established by a charge against income to reflect other-than-temporaryimpairment in value. Under current bank regulations, IBODI shall not exceed 50% of adjusted statutory net worthplus 40% of total deposit liabilities.When a debt security is transferred to IBODI from ASS, the unrealized holding gain or loss at the date of transfer ismaintained as a separate component of capital funds and amortized over the remaining life of the security as anadjustment of yield in a manner consistent with the amortization of premium or discount.Receivables from CustomersReceivables from customers are stated at the outstanding balance, reduced by unearned discounts and capitalizedinterest on restructured loans and allowance for probable losses.Receivables from customers include receivables arising from transactions on credit cards issued directly by ECN andby other banks which have tie-up arrangements with ECN. Collection of receivables from credit cardholders of otherbanks is guaranteed by those banks with tie-up arrangements with ECN.- 47-