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Mega ICBC
-36-
(1)
Financial instruments (including derivative instruments) valuation
If there is no quoted market price available in an active market for financial instruments, a valuation technique will be adopted to measure the
fair value. If there are observable data of similar financial instruments in the market, then the fair value of the underlying financial instruments
is estimated by reference to the observable data; otherwise, the fair value is estimated using the appropriate pricing models which are
commonly used in the market. The assumptions used in the pricing models should refer to the observable data in the market. However,
when those data are not observable from the market and/or the assumptions used in the pricing models are more subjective, the fair value of
the financial instruments may be estimated based on historical data or other information. The pricing models used by the Bank and its
subsidiaries are all evaluated and tested periodically to ensure the outputs may reflect the actual data and market prices. The primary
assumptions used in determining the fair values of financial instruments are provided in Note 7. The management believes the pricing models
and assumptions used have appropriately determined the fair values of financial instruments.
(2)
Loan impairment
The Bank and its subsidiaries’ impairment evaluations are in compliance with the regulations of regulatory authorities. The Bank and its
subsidiaries evaluates cash flows and impairment amounts, through model analysis and individual case assessment, on a monthly basis based
on several factors, such as nature of client risk and security coverage. The Bank and its subsidiaries recognize impairment loss whenever there
is observable evidence showing that impairment has occurred. This evidence includes repayment status of debtor, event that would cause
delinquency in payments, and any significantly unfavorable changes in national or local economic circumstance. Future cash flows are
estimated primarily based on the length of overdue time, the status of debtors, security coverage, guarantee of external institution and historical
experiences. The incidence of impairment and subsequent collectability rate used in impairment evaluations are estimated based on the types
of products and historical data. The Bank and its subsidiaries review the assumptions and inputs used in impairment evaluations periodically
to ensure they are all reasonable
(3)
Financial assets-impairment of equity investments
The Bank and its subsidiaries follow the guidance of IAS 39 to determine whether a financial asset—equity investment is impaired. This
determination requires significant judgement. In making this judgement, the Bank and its subsidiaries evaluate, among other factors, the
duration and extent to which the fair value of an equity investment is less than its cost and the financial health of and short-term business
outlook for the investee, including factors such as industry and sector performance, changes in technology and operational and financing cash
flow.
If the decline of the fair value of an individual equity investment below cost was considered significant or prolonged, the Bank and its
subsidiaries would suffer a loss in its financial statements, being the transfer of the accumulated fair value adjustments recognised in other
comprehensive income on the impaired available-for-sale financial assets to profit or loss or being the recognition of the impairment loss on
the impaired financial assets measured at cost in profit or loss.
(4)
Post-employment benefit
The present value of post-employment benefit obligations are estimated based on several assumptions. Any changes in those assumptions will
affect the carrying amounts of post-employment benefit obligations.
The assumptions used to determine net pension cost (revenue) comprise discount rate. The Bank and its subsidiaries determine the appropriate
discount rate at the end of each year, and uses the discount rate in calculating the present value of future cash outflow of post-employment
benefit obligations. The discount rate is chosen by reference to the rate of government bonds where the currency and maturity date of
government bonds are in agreement with those of post-employment benefit obligations. Any changes in these assumptions could significantly
impact the carrying amount of defined pension obligations.
6.
DETAILS OF SIGNIFICANT ACCOUNTS
(1)
Cash and cash equivalents
December 31, 2015
December 31, 2014
NT$
US$
NT$
Cash on hand and petty cash
$
16,728,085 $
508,638 $
14,842,201
Checks for clearance
1,234,149
37,526
1,112,024
Due from banks
127,064,637
3,863,556
148,453,306
Total
$
145,026,871 $
4,409,720 $
164,407,531
(2)
Due from the Central Bank and call loans to banks
December 31, 2015
December 31, 2014
NT$
US$
NT$
Reserve for deposits-category A
$
22,045,377
$
670,317
$
21,885,736
Reserve for deposits-category B
37,720,741
1,146,946
36,566,092
Reserve for deposits-general
312
9
5,700,300
Reserve for deposits-foreign currency
729,572
22,184
431,340
Deposits of overseas branches with foreign
Central Banks
255,814,519
7,778,354
239,979,957
Call loans to banks and bank overdrafts
176,850,399
5,377,353
87,926,666
Import and export loans from banks
3,121,533
94,914
71,463,911
Participate in interbank financing with risk
5,780,241
175,755
2,782,450
Subtotal
502,062,694
15,265,832
466,736,452
Less: allowance for doubtful accounts –
import and export loans from banks
(
-
) (
-
) (
750,371
)
Total
$
502,062,694
$
15,265,832
$
465,986,081
As required by relevant laws, the reserves for deposits are calculated at required reserve ratios based on the monthly average balances of
various deposit accounts. Reserve for deposits - category B cannot be used except upon the monthly adjustment of the reserve.