My first Publication ocbc_ar17_fullreport_english | Page 272

NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 31 December 2017
50. FULL CONVERGENCE WITH INTERNATIONAL FINANCIAL REPORTING
STANDARDS AND ADOPTION OF NEW ACCOUNTING STANDARDS
AND INTERPRETATIONS (continued)
50.1 APPLICABLE TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDING 31 DECEMBER 2018 (continued)
(II) SFRS(I) 9 (continued)
(i) Classification and measurement: financial assets (continued)
Except for transition impact on Great Eastern Holdings Limited and its subsidiaries (“GEH Group”), the application of SFRS(I) 9 is
expected to result in reclassification of certain financial assets recognised by OCBC Group and OCBC Bank as at the date of transition,
as described below:
• Approximately $0.4 billion of government treasury bills and debt securities held by the Group (Bank: $0.4 billion) are expected to be
reclassified from available-for-sale (“AFS”) to amortised cost, as these are held within the business model to collect contractual cash
flows and these cash flows consist solely of payments of principal and interest on principal outstanding;
• Approximately $0.3 billion of loans to customers originated by the Group (Bank: $0.2 billion) are expected to be reclassified from
amortised cost to FVTPL, as the contractual cash flows do not represent solely payments of principal and interest on principal
outstanding;
• Approximately $0.4 billion of equity securities held by the Group (Bank: $0.4 billion) are expected to be reclassified from AFS to
FVTPL. Approximately $0.3 billion of equity securities held by the Group (Bank: $0.2 billion) are expected to be reclassified from AFS
to FVOCI; and
• Approximately $0.1 billion of debt securities recognised by the Group are expected to be reclassified from AFS to FVTPL as the
contractual cash flows do not represent solely payments of principal and interest on principal outstanding. The impact on the Bank
is not expected to be material.
For GEH Group, application of SFRS(I) 9 is expected to result in the following reclassification:
• GEH Group intends to make an election to measure its currently AFS debt securities amounting to approximately $32.9 billion at
FVTPL as doing so eliminates or significantly reduces accounting mismatch;
• AFS debt securities where cash flows do not represent solely payments of principal and interest amounting to approximately
$0.9 billion will be reclassified to FVTPL;
• GEH Group intends to elect to measure its AFS equity securities amounting to approximately $2.2 billion at FVOCI, and AFS equity
securities amounting to approximately $12.1 billion at FVTPL; and
• For collective investment schemes (“CIS”), GEH Group intends to continue to measure CIS currently measured at FVTPL, amounting
to $2.4 billion, at FVTPL. GEH Group intends to measure AFS collective investment schemes amounting to $6.9 billion at FVTPL.
(ii) Impairment
SFRS(I) 9 replaces the existing FRS 39 loan provisioning requirements as modified by MAS Notice 612 with a forward-looking expected
credit loss (“ECL”) model.
Scope
Under SFRS(I) 9, the expected loss model is applied to financial assets classified at amortised cost or FVOCI, and certain off-balance
sheet loan commitments and financial guarantees which were previously provided for under FRS 37 Provisions, Contingent Liabilities
and Contingent Assets.
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OCBC ANNUAL REPORT 2017