2004 - Asianbanks.net

Deferred income tax assets and liabilities are measured at the tax rates that are applicable to the period when theasset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantivelyenacted at the statement of condition date.Investments in Real EstateInvestments in real estate (included under Other Resources) are real properties owned by certain subsidiaries whichare for sale or for lease to others. These are carried at cost less any accumulated depreciation and any impairmentin value.Impairment of AssetsAn assessment is made at each statement of condition date as to whether there is any indication of impairment ofany asset, or whether there is any indication that an impairment loss previously recognized for an asset in prior yearsmay no longer exist or may have decreased. If any such indication exists, the asset’s recoverable amount isestimated. An asset’s recoverable amount is calculated at the higher of the asset’s value in use or its net sellingprice.An impairment loss is recognized by a charge against current operations for the excess of the carrying amount of anasset over its recoverable amount, unless the asset is carried at a revalued amount, in which case the impairmentloss is charged to the revaluation increment of the said asset. An impairment loss is charged to operations or torevaluation increment, appropriate, in the year in which it arises.A previously recognized impairment loss is reversed by a credit to current operations, unless the asset is carried at arevalued amount in which case the reversal of the impairment loss is credited to the revaluation increment of thesame asset, to the extent that it does not restate the asset to a carrying amount in excess of what would have beendetermined (net of any accumulated depreciation and amortization) had no impairment loss been recognized for theasset in prior years.Provisions and ContingenciesProvisions are recognized when an obligation (legal or constructive) is incurred as a result of a past event and whereit is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and areliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material,provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current marketassessments of the time value of money and, where appropriate, the risks specific to the liability. Where discountingis used, the increase in the provision due to the passage of time is recognized as an Interest Expense.Contingent liabilities are not recognized in the financial statements but are disclosed unless the possibility of anoutflow of resources embodying economic benefits is remote. Contingent assets are not recognized but aredisclosed in the financial statements when an inflow of economic benefits is probable.Income RecognitionIncome is recognized to the extent that it is probable that economic benefits will flow to the Group and the incomecan be reliably measured. The following specific recognition criteria must also be met before income is recognized:Interest incomeInterest income on receivables from customers is accrued monthly as earned, except in the case of nonperformingreceivables where interest income on these receivables is recognized only to the extent of cash collections received.Unearned discount is recognized as income over the terms of the receivables using the effective interest method.Capitalized interest income on restructured loans is deferred and shown as deduction from Receivables fromCustomers.Loan fees and service chargesLoan commitment fees are recognized as income over the terms of the related credit lines granted to each borrower.Loan syndication fees are recognized upon completion of all syndication activities and where the Group does nothave further obligations to perform under the syndication agreement.- 51-