2004 - Asianbanks.net

Receivables from customers also include the aggregate rental on finance lease transactions. Unearned income onfinance lease transactions is shown as a deduction from Receivables from Customers (included in UnearnedDiscount and Capitalized Interest).Receivables are classified as nonperforming in accordance with existing BSP regulations, or when, in the opinion ofmanagement, collection of interest or principal is doubtful. Receivables are not reclassified as performing untilinterest and principal payments are brought current or the receivable is restructured in accordance with existing BSPregulations, and future payments appear assured.Residual Value of Leased Assets and Deposits on Finance LeasesThe residual value of leased assets, which approximates the amount of guaranty deposit paid by the lessee at theinception of the lease, is the estimated proceeds from the disposal of the leased asset at the end of the lease term.At the end of the lease term, the residual value of the leased asset is generally applied against the guaranty depositof the lessee.Receivables from Special Purpose VehicleReceivables from SPV is stated at the face value of the related note reduced by allowance for probable losses.Allowance for probable losses is determined based on the difference between the outstanding principal amount andthe recoverable amount which is the present value of the future cash flow expected to be received in payment of thereceivable.Allowance for Probable LossesThe allowance for probable losses is the estimated amount of probable losses in the Group’s loan portfolio based onmanagement’s evaluation of the collectibility of the loans, after consideration of prevailing and anticipated economicconditions, collection and credit experience with specific accounts, fair market value of collateral, financialcapabilities of guarantors, present value of estimated future cash collections and on evaluations made by the BSP.The BSP observes certain criteria and guidelines based largely on the classification of receivables in establishingspecific loan loss reserves.Receivables arising from transactions with credit cardholders are provided with allowance for probable losses basedon the review and evaluation of the status of the receivables from cardholders and guidelines issued by the BSP.The MB, through BSP Circular 398 issued on August 21, 2003, provides general guidelines governing credit cardoperations, including the set up of loss on the basis of the aging/classification of the credit card receivables.The allowance for probable losses is established through provisions for probable losses charged to currentoperations. Receivables are written off against the allowance when management believes that the collectibility of theprincipal is unlikely.Property and EquipmentProperty and equipment other than land are stated at cost, less any impairment in value. Land is stated at appraisedvalue. The appraisal values are determined by qualified, independent appraisers. The revaluation incrementresulting from revaluation is credited to Revaluation Increment on Property under capital funds.Depreciable properties including buildings, leasehold improvements, and furniture, fixture and equipment are statedat cost less accumulated depreciation and amortization, and any impairment in value.The initial cost of property and equipment comprises its purchase price and any directly attributable costs of bringingthe asset to its working condition and location for its intended use. Expenditures incurred after the property andequipment have been put into operation, such as repairs and maintenance, are charged against current operations.In situations where it can be clearly demonstrated that the expenditures have resulted in an increase in the futureeconomic benefits expected to be obtained from the use of an item of property and equipment beyond its originallyassessed standard of performance, the expenditures are capitalized as an additional cost of property and equipment.When assets are retired or otherwise disposed of, the cost and the related accumulated depreciation andamortization and any resulting gain or loss is credited to or charged against current operations.- 48-