My first Publication ocbc_ar17_fullreport_english | Page 169

2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)
ventures are eliminated to the extent of the Group’s interests in
these entities. Unrealised losses are also eliminated unless
the transaction provides evidence of an impairment of the
asset transferred. Where necessary, adjustments are made to
the financial statements of associates and joint ventures
to ensure consistency of accounting policies with those of
the Group.
2.2
BASIS OF CONSOLIDATION (continued)
2.2.1 Subsidiaries (continued)
Business combinations arising from transfers of interests in
entities that are under the control of the shareholder that
controls the Group are accounted for as if the acquisition has
occurred at the beginning of the earliest comparative year
presented or, if later, at the date that common control was
established; for this purpose comparatives are restated. The
assets and liabilities acquired are recognised at the carrying
amounts recognised previously in the Group controlling
shareholder’s consolidated financial statements. The
components of equity of the acquired entities are added
to the same components within the Group’s equity and
any gain/loss arising is recognised directly in equity.
The results of associates and joint ventures are taken from audited
financial statements or unaudited management accounts of
the entities concerned, made up to dates of not more than three
months prior to the reporting date of the Group.
The investment in an associate or joint venture is derecognised
when the Group ceases to have significant influence or joint
control over the investee. Amounts previously recognised in
other comprehensive income in respect of the investee are
transferred to the income statement. Any retained interest
in the entity is re-measured at its fair value. The difference
between the carrying amount of the retained interest at the
date when significant influence or joint control ceases, and its
corresponding fair value, is recognised in the income statement.
2.2.2 Structured entities
A structured entity is an entity in which voting or similar rights
are not the dominant factor in deciding control and is generally
established for a narrow and well-defined objective.
2.2.4 Life assurance companies
Certain subsidiaries of the Group engaged in life assurance
business are structured into one or more long-term life assurance
funds, and shareholders’ fund. All premiums received, investment
returns, claims and expenses, and changes in liabilities to
policyholders are accounted for within the related life assurance
fund. Any surplus, which is determined by the appointed
Actuary after taking into account these items, may either be
distributed between the shareholders and the policyholders
according to a predetermined formula or retained within the
life assurance funds. The amount distributed to shareholders
is reported as “Profit from life assurance” in the consolidated
income statement.
For the purpose of disclosure, the Group would be considered to
sponsor a structured entity if it has a key role in establishing the
structured entity or its name appears in the overall structure of
the structured entity.
2.2.3 Associates and joint ventures
The Group applies FRS 28 Investments in Associates and Joint
Ventures and FRS 111 Joint Arrangements for its investments
in associates and joint ventures.
Associates are entities over which the Bank has significant
influence, but not control or joint control, over the financial
and operating policies of these entities. Significant influence
is presumed to exist when the Group holds 20% or more of
the voting power of another entity.
2.2.5 Accounting for subsidiaries and associates by the Bank
Investments in subsidiaries and associates are stated in the
Bank’s balance sheet at cost less any impairment in value after
the date of acquisition.
Joint ventures are arrangements to undertake economic
activities in which the Group has joint control and rights to the
net assets of the entity.
Investments in associates and joint ventures are accounted for in
the consolidated financial statements using the equity method
of accounting. Under equity accounting, the investment is
initially recognised at cost, and the carrying amount is adjusted
for post-acquisition changes of the Group’s share of the net
assets of the entity until the date the significant influence or
joint control ceases. The Group’s investment in associates and
joint ventures includes goodwill identified on acquisition, where
applicable. When the Group’s share of losses equals or exceeds its
interests in the associates and joint ventures, including any other
unsecured receivables, the Group does not recognise further
losses, unless it has incurred obligations or made payments on
behalf of the entities.
In applying the equity method of accounting, unrealised gains
on transactions between the Group and its associates and joint
2.3
CURRENCY TRANSLATION
2.3.1 Foreign currency transactions
Transactions in foreign currencies are recorded in the respective
functional currencies of the Bank and its subsidiaries at the
exchange rates prevailing on the transaction dates. Monetary
items denominated in foreign currencies are translated to the
respective entities’ functional currencies at the exchange rates
prevailing at the balance sheet date. Exchange differences arising
on settlement and translation of such items are recognised in the
income statement.
Non-monetary items denominated in foreign currencies that
are measured at fair value are translated at the exchange rate
on the date the fair value is determined. Exchange differences
on non-monetary items such as equity investments classified
as available-for-sale financial assets are recognised in other
comprehensive income and presented in the fair value reserve
within equity.
BUILDING ON OUR CORPORATE STRATEGY FOR SUSTAINABLE GROWTH
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