My first Publication ocbc_ar17_fullreport_english | Page 170

NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 31 December 2017
2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)
2.3
CURRENCY TRANSLATION (continued)
2.3.2 Foreign operations
The assets and liabilities of foreign operations are translated
to Singapore Dollar at exchange rates prevailing at the balance
sheet date. The income and expenses of foreign operations are
translated to Singapore Dollar at average exchange rates for the
year, which approximate the exchange rates at the dates of the
transactions. Goodwill and fair value adjustments arising on
the acquisition of a foreign operation on or after 1 January 2005
are treated as assets and liabilities of the foreign operation and
translated at the closing rate.
Foreign currency differences arising from the translation of a
foreign operation are recognised in other comprehensive income
and presented in the currency translation reserve within equity.
When a foreign operation is disposed of, in part or in full, the
relevant amount in the currency translation reserve is included in
the gain or loss on disposal of the operation.
2.4
CASH AND CASH EQUIVALENTS
In the consolidated cash flow statement, cash and cash equivalents
comprise cash on hand, balances, money market placements and
reverse repo transactions with central banks which are generally
short-term financial instruments or repayable on demand.
2.5
FINANCIAL INSTRUMENTS
2.5.1 Recognition
The Group initially recognises loans and advances, deposits and
debts issued on the date of origination. All regular way purchases
and sales of financial assets with delivery of assets within the
time period established by regulation or market convention are
recognised on the settlement date.
2.5.2 De-recognition
Financial assets are de-recognised when the Group’s contractual
rights to the cash flows from the financial assets expire or
when the Group transfers the financial asset to another party
without retaining control or transfers substantially all the risks
and rewards of ownership of the asset. Financial liabilities are
de-recognised when the Group’s obligations specified in the
contract expire or are discharged or cancelled.
2.5.3 Offsetting
Financial assets and liabilities are offset and the net amount
presented in the balance sheet when there is a legally
enforceable right to offset the amounts and an intention to
settle on a net basis or realise the asset and settle the liability
simultaneously. Income and expenses are presented on a net
basis only when permitted by the accounting standards.
2.5.4 Sale and repurchase agreements (including securities
lending and borrowing)
Repurchase agreements (“repos”) are regarded as collateralised
borrowing. The securities sold under repos are treated as pledged
assets and remain as assets on the balance sheets. The amount
borrowed is recorded as a liability. Reverse repos are treated as
collateralised lending and the amount of securities purchased is
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OCBC ANNUAL REPORT 2017
included in placements with central banks, loans to banks and
non-bank customers. The difference between the amount received
and the amount paid under repos and reverse repos is amortised
as interest expense and interest income respectively.
Securities lending and borrowing transactions are generally
secured, with collaterals taking the form of securities or cash.
The transfer of securities to or from counterparties is not
reflected on the balance sheet. Cash collateral advanced
or received is recorded as an asset or a liability respectively.
2.6
NON-DERIVATIVE FINANCIAL ASSETS
Non-derivative financial assets are classified according to the
purpose for which the assets were acquired. Management
determines the classification of its financial assets at initial
recognition and evaluates this designation at every reporting date.
2.6.1 Loans and receivables
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. They are initially recognised at acquisition cost and
subsequently measured at amortised cost using the effective
interest method, less impairment allowance.
2.6.2 Available-for-sale financial assets
Available-for-sale financial assets are intended to be held for
an indefinite period of time, and may be sold in response to
needs for liquidity or changes in interest rates, exchange rates or
market prices.
At the balance sheet date, the Group recognises unrealised
gains and losses on revaluing unsettled contracts in other
comprehensive income. Upon settlement, available-for-sale
assets are carried at fair value (including transaction costs) on
the balance sheet, with cumulative fair value changes taken to
other comprehensive income and presented in fair value reserve
within equity, and recognised in the income statement when
the asset is disposed of, collected or otherwise sold, or when the
asset is assessed to be impaired.
The fair value for quoted investments is derived from market bid
prices. For unquoted securities, fair value is determined based on
quotes from brokers and market makers, discounted cash flow and
other valuation techniques commonly used by market participants.
2.6.3 Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are acquired
by the trading business units of the Group for the purpose of
selling them in the near term. The Group may also designate
financial assets under the fair value option if they are managed
on a fair value basis, contain embedded derivatives that would
otherwise be required to be separately accounted for or if by
doing so would eliminate or significantly reduce accounting
mismatch that would otherwise arise.
At the balance sheet date, unrealised profits and losses on
revaluing unsettled contracts are recognised in the income
statement. Upon settlement, these assets are carried at fair
value on the balance sheet, with subsequent fair value changes
recognised in the income statement.