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Annual Report 2015
-35-
(19)
Employee share-based payment
For the equity-settled share-based payment arrangements, the employee services received are measured at the fair value of the equity
instruments granted at the grant date, and are recognised as compensation cost over the vesting period, with a corresponding adjustment to
equity. The fair value of the equity instruments granted shall reflect the impact of market vesting conditions and non-market vesting conditions.
Compensation cost is subject to adjustment based on the service conditions that are expected to be satisfied and the estimates of the number
of equity instruments that are expected to vest under the non-market vesting conditions at each balance sheet date. And ultimately, the amount
of compensation cost recognised is based on the number of equity instruments that eventually vest.
(20)
Revenue and expense
Income and expense of the Bank and its subsidiaries are recognised as incurred. Expenses consist of employee benefit expense, depreciation
and amortization expense and other business and administration expenses. Dividend revenues are recognised within ‘Revenues other than
interest, net’ in the consolidated statement of comprehensive income when the right to receive dividends is assured.
A.
Other than those classified as financial assets and liabilities at fair value through profit and loss, all the interest income and interest
expense generated from interest-bearing financial assets are calculated by effective interest rate according to relevant regulations and
recognised as “interest income” and “interest expense” in the consolidated statement of comprehensive income.
B.
Service fee income and expense are recognised upon the completion of services of loans or other services; service fee earned from
performing significant items shall be recognised upon the completion of the service, such as syndication loan service fee received from
sponsor, service fee income and expense of subsequent services of loans are amortized or included in the calculation of effective interest
rate of loans and receivables during the service period. When determining whether the agreed rate of interest should be adjusted to
effective interest rate for interest-earning loans and receivables, the loans and receivables may be measured by the initial amounts if the
effects on discount are insignificant according to the “Regulation Governing the Preparation of Financial Reports by Public Banks”.
(21)
Income tax
The tax expense for the period comprises current and deferred tax. Tax is recognised in profit or loss, except to the extent that it relates to
items recognised in other comprehensive income or items recognised directly in equity, in which cases the tax is recognised in other
comprehensive income or equity.
The current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the
countries where the Bank and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax
returns with respect to situations in accordance with applicable tax regulations. It establishes provisions where appropriate based on the
amounts expected to be paid to the tax authorities. An additional 10% tax is levied on the unappropriated retained earnings and is recorded as
income tax expense in the year the stockholders resolve to retain the earnings.
Deferred income tax is recognised, using the balance sheet liability method, on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the consolidated balance sheet. However, the deferred income tax is not accounted for if it arises
from initial recognition of goodwill or of an asset or liability in a transaction other than a business combination that at the time of the transaction
affects neither accounting nor taxable profit or loss. Deferred income tax is provided on temporary differences arising on investments in
subsidiaries, except where the timing of the reversal of the temporary difference is controlled by the Bank and its subsidiaries and it is probable
that the temporary difference will not reverse in the foreseeable future. Deferred income tax is determined using tax rates (and laws) that have
been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realized
or the deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the
temporary differences can be utilized. At each balance sheet date, unrecognised and recognised deferred income tax assets are reassessed.
Current income tax assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right
to offset the recognised amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously.
Deferred income tax assets and liabilities are offset on the balance sheet when the entity has the legally enforceable right to offset current tax
assets against current tax liabilities and they are levied by the same taxation authority on either the same entity or different entities that intend
to settle on a net basis or realize the asset and settle the liability simultaneously.
(22)
Share capital and dividends
Dividends on ordinary shares are recognised in the financial statements in the period in which they are approved by the shareholders. Cash
dividends are recorded as liabilities. Stock dividends are recorded as stock dividends to be distributed and are reclassified to ordinary shares
on the effective date of new shares issuance; they are not recognised and only disclosed as subsequent event in the notes if the dividend
declaration date is later than the consolidated balance sheet date.
(23)
Operating segments
Information of operating segments of the Bank and its subsidiaries is reported in the same method as the internal management report provided
to the chief operating decision-maker (CODM). The CODM is the person or Group in charge of allocating resources to operating segments
and evaluating their performance. The (CODM) of the Bank and its subsidiaries is the Board of Directors.
5.
CRITICALACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF ASSUMPTION UNCERTAINTY
The preparation of these consolidated financial statements requires management to make critical judgements in applying the Bank and its
subsidiaries’ accounting policies and make critical assumptions and estimates concerning future events. Assumptions and estimates may differ from
the actual results and are continually evaluated and adjusted based on historical experience and other factors.
Management’s critical judgements in applying the Bank and its subsidiaries’ accounting policies that have significant impact on the consolidated
financial statements are outlined below: