My first Publication ocbc_ar17_fullreport_english | Page 171

2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)
For hedges of net investments in foreign operations which are
accounted in a similar way as cash flow hedges, the gain or
loss relating to the effective portion of the hedging instrument
is recognised in equity and that relating to the ineffective
portion is recognised in the income statement. Gains and losses
accumulated in equity are transferred to income statement on
disposal of the foreign operations.
2.6
NON-DERIVATIVE FINANCIAL ASSETS (continued)
2.6.3 Financial assets at fair value through profit or loss
(continued)
Fair value is derived from quoted market bid prices. All realised
and unrealised gains and losses are included in net trading
income in the income statement. Interest earned whilst holding
trading assets is included in interest income.
2.6.4 Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets
with fixed or determinable payments and fixed maturities that the
Group’s management has the positive intention and ability to hold
to maturity. These assets are carried at amortised cost using the
effective interest method, less any impairment loss.
2.7
DERIVATIVE FINANCIAL INSTRUMENTS
All derivative financial instruments are recognised at fair value
on the balance sheet and classified as derivative receivables
when their fair value is favourable and as derivative payables
when their fair value is unfavourable.
The Group enters into derivative transactions for trading purposes,
and the realised and unrealised gains and losses are recognised
in the income statement. The Group also enters into hedging
derivative transactions to manage exposures to interest rate,
foreign currency and credit risks arising from its core banking
activities of lending and accepting deposits. The Group applies fair
value, cash flow or net investment hedge accounting when the
transactions meet the specified criteria for hedge accounting.
For qualifying fair value hedges, changes in the fair values of the
derivative and of the hedged item relating to the hedged risk are
recognised in the income statement. If the hedge relationship
is terminated, the fair value adjustment to the hedged item
continues to be reported as part of the carrying value of the
asset or liability and is amortised to the income statement as
a yield adjustment over the remaining maturity of the asset or
liability. For fair value portfolio hedge of interest rate exposure,
adjustment will be on the straight-line method if amortisation
using a re-calculated effective interest rate is not practicable.
2.8
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost less
accumulated depreciation and impairment losses. The cost of
an item of property, plant and equipment includes the purchase
price and costs directly attributable to bringing the asset to the
location and condition necessary for it to be capable of operating
in the manner intended by management.
Subsequent expenditure relating to property, plant and
equipment is added to the carrying amount of the asset when
it is probable that future economic benefits, in excess of the
standard of performance of the asset before the expenditure
was made, will flow to the Group and the cost can be reliably
measured. Other subsequent expenditure is recognised in
the income statement during the financial year in which the
expenditure is incurred.
The residual values, useful lives and depreciation methods
of property, plant and equipment are reviewed and adjusted
as appropriate, at each balance sheet date, to ensure that
they reflect the expected economic benefits derived from
these assets.
Property, plant and equipment are depreciated on a straight-line
basis over their estimated useful lives as follows:
Furniture and fixtures – 5 to 10 years
Office equipment – 5 to 10 years
Computers – 3 to 10 years
Renovation – 3 to 5 years
Motor vehicles – 5 years
Freehold land and leasehold land with leases of more than 100
years to expiry are not depreciated. Buildings and other leasehold
land are depreciated over 50 years or the period of the lease,
whichever is shorter.
“Hedge ineffectiveness” represents the amount by which the changes
in the fair value of the hedging derivative differ from changes in
the fair value of the hedged item. The amount of ineffectiveness,
provided it is not so significant as to disqualify the entire hedge for
hedge accounting, is recorded in the income statement.
For qualifying cash flow hedges, the effective portion of the
change in fair value of the derivative is taken to the hedge reserve
in equity. The gain or loss relating to the ineffective portion is
recognised immediately in the income statement. Amounts
accumulated in the hedge reserve remain in equity until the
forecasted transaction is recognised in the income statement.
When the forecasted transaction is no longer expected to occur,
the cumulative gain or loss in the hedge reserve is immediately
transferred to the income statement.
An item of property, plant and equipment is de-recognised
upon disposal or when no future economic benefit is expected
from its use. Any gain or loss arising on de-recognition of the
asset is included in the income statement in the year the asset
is de-recognised.
2.9
INVESTMENT PROPERTY
Investment property is property held either for rental income
or for capital appreciation or for both. Investment properties,
other than those held under the Group’s life assurance funds, are
stated at cost less accumulated depreciation and impairment
losses. Freehold land and leasehold land with leases of more
than 100 years to expiry are not depreciated. Buildings and other
leasehold land are depreciated over 50 years or the period of the
lease, whichever is shorter.
BUILDING ON OUR CORPORATE STRATEGY FOR SUSTAINABLE GROWTH
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