My first Publication ocbc_ar17_fullreport_english | Page 178

NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 31 December 2017
2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)
2.19 RECOGNITION OF INCOME AND EXPENSE (continued)
2.19.4 Fees and commissions
The Group earns fees and commissions from a range of services
rendered to its customers. Fees and commissions are generally
recognised upon the completion of a transaction. For services
provided over a period of time or credit risk undertaken, fees and
commissions are amortised over the relevant period. Expenses
are offset against gross fees and commissions in the income
statement only when they are directly related.
2.19.5 Dividends
Dividends from available-for-sale securities, subsidiaries and
associates are recognised when the right to receive payment is
established. Dividends from trading securities are recognised
when received.
2.19.6 Rental
Rental income on tenanted areas of the buildings owned by the
Group is recognised in the income statement on a straight line
basis over the term of the lease. Lease incentives granted are
recognised as an integral part of the total rental income, over the
term of the lease.
2.19.7 Employee benefits
The Group’s compensation package for staff consists of base
salaries, allowances, defined contribution plans such as the
Central Provident Fund, defined benefit plans, commissions,
cash bonuses, and share-based compensation plans. These are
recognised in the income statement when incurred. Employee
leave entitlements are estimated according to the terms of
employment contract and accrued on the balance sheet date.
For defined benefit plans, the liability recognised in the balance
sheet is the present value of the defined benefit obligation at
the balance sheet date less the fair value of plan assets, adjusted
for unrecognised actuarial gains or losses and past service costs.
Remeasurements of defined benefit plans are recognised in
other comprehensive income in the period in which they arise.
Share-based compensation plans include the Bank’s Share Option
Schemes, the Employee Share Purchase Plan (“ESP Plan”) and
the Deferred Share Plan (“DSP”). Equity instruments granted are
recognised as expense in the income statement based on the
fair value of the equity instrument at the date of the grant. The
expense is recognised over the vesting period of the grant, with
corresponding entries to equity.
At each balance sheet date, the Group revises its estimates
of the number of equity instruments expected to be vested,
and the impact of the change to the original estimates, if any,
is recognised in the income statement, with a corresponding
adjustment to equity over the remaining vesting period.
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OCBC ANNUAL REPORT 2017
The Group accrues for interest on the monthly contributions
made by employees to the savings-based ESP Plan. For the
DSP, a trust is set up to administer the shares. The DSP Trust is
consolidated in the Group’s financial statements.
Proceeds received upon the exercise of options and acquisition
rights, net of any directly attributable transaction costs, are
credited to share capital.
2.19.8 Lease payments
Payments made under operating leases (net of any incentives
received from the lessor) are taken to the income statement on
a straight-line basis over the term of the lease. When a lease is
terminated before its expiry, any payment required to be made
to the lessor by way of penalty is recognised as an expense in the
period when the termination takes place.
Minimum lease payments made under finance leases are
apportioned between the finance expense and the reduction of
the outstanding liability. The expense is allocated to each period
over the lease term so as to produce a constant periodic rate of
interest on the remaining balance of the liability.
2.20 INCOME TAX EXPENSE
Income tax expense is recognised in the income statement
except to the extent that it relates to items recognised directly
in equity, in which case it is recognised in equity or in other
comprehensive income.
Current tax is the expected tax payable on the taxable income
for the year, using tax rates enacted or substantively enacted at
the reporting date, and any adjustment to tax payable in respect
of previous years.
Deferred tax is recognised using the balance sheet method, on
temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts
used for tax computation. Deferred tax is not recognised for
the following temporary differences: the initial recognition
of goodwill, the initial recognition of assets or liabilities in
a transaction that is not a business combination and that
does not affect accounting or taxable profit, and differences
relating to investments in subsidiaries, associates and joint
ventures to the extent that they probably will not reverse in the
foreseeable future. Deferred tax is measured at the tax rates
that are expected to be applied to the temporary differences
when they reverse, based on the laws that have been enacted or
substantively enacted by the reporting date.
A deferred tax asset is recognised to the extent that it is probable
that future taxable profits will be available for utilisation against
the temporary differences. Deferred tax assets are reviewed at
each reporting date and are reduced to the extent that it is no
longer probable that the related tax benefit will be realised.