Notes to the Consolidated Financial Statements - ?· Notes to the Consolidated Financial Statements…

Download Notes to the Consolidated Financial Statements - ?· Notes to the Consolidated Financial Statements…

Post on 29-Aug-2018

212 views

Category:

Documents

0 download

Embed Size (px)

TRANSCRIPT

<ul><li><p>Notes to the Consolidated Financial Statements(Amount in millions of Renminbi, unless otherwise stated)</p><p>2013 Annual Report137</p><p>I GENERAL INFORMATION AND PRINCIPAL ACTIVITIESBank of China Limited (the Bank), formerly known as Bank of China, a State-owned joint stock commercial bank, was founded on 5 February 1912. From its formation until 1949, the Bank performed various functions of a central bank, foreign exchange bank and commercial bank specialising in trade fi nance. Following the founding of the Peoples Republic of China (the PRC) in 1949, the Bank was designated as a specialised foreign exchange bank. Since 1994, the Bank has evolved into a State-owned commercial bank. In this regard, in accordance with the Master Implementation Plan for the Joint Stock Reform approved by the State Council of the PRC, the Bank was converted into a joint stock commercial bank on 26 August 2004 and its name was changed from Bank of China to Bank of China Limited. In 2006, the Bank listed on the Stock Exchange of Hong Kong Limited and the Shanghai Stock Exchange.</p><p>The Bank is licensed as a fi nancial institution by the China Banking Regulatory Commission (the CBRC) No. B0003H111000001 and is registered as a business enterprise with the State Administration of Industry and Commerce of the PRC No. 100000000001349, the registered address is No. 1, Fuxingmen Nei Dajie, Beijing, China.</p><p>The Bank and its subsidiaries (together the Group) provide a full range of corporate banking, personal banking, treasury operations, investment banking, insurance and other services to its customers in the Chinese mainland, Hong Kong, Macau, Taiwan and other major international fi nancial centres.</p><p>The Banks principal regulator is the CBRC. The operations in Hong Kong, Macau, Taiwan and other countries and regions of the Group are subject to the supervision of local regulators.</p><p>The parent company is Central Huijin Investment Limited (Huijin), a wholly owned subsidiary of China Investment Corporation (CIC), which owned 67.72% of the ordinary shares of the Bank as at 31 December 2013 (31 December 2012: 67.72%).</p><p>These consolidated fi nancial statements have been approved by the Board of Directors on 26 March 2014.</p></li><li><p>2013 Annual Report 138</p><p>Notes to the Consolidated Financial Statements</p><p>II SUMMARY OF PRINCIPAL ACCOUNTING POLICIES1 Basis of preparation</p><p>The consolidated fi nancial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS). In addition, the consolidated fi nancial statements comply with the disclosure requirements of the Hong Kong Companies Ordinance.</p><p>The consolidated fi nancial statements have been prepared under the historical cost convention, as modifi ed by the revaluation of fi nancial assets available for sale, fi nancial assets and fi nancial liabilities at fair value through profi t or loss (including derivative fi nancial instruments) and investment properties.</p><p>The preparation of fi nancial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Groups accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are signifi cant to the consolidated fi nancial statements are disclosed in Note III.</p><p>1.1 Standards, amendments and interpretations effective in 2013</p><p>On 1 January 2013, the Group adopted the following new standards, amendments and interpretations.</p><p>IAS 1 Amendments Presentation of Financial Statements Other Comprehensive Income</p><p>IAS 19 Amendments Employee Benefi tsIFRS 7 Amendments Financial Instruments: Disclosures</p><p> Offsetting Financial Assets and Financial LiabilitiesIFRS 10 Consolidated Financial StatementsIFRS 11 Joint ArrangementsIFRS 12 Disclosure of Interests in Other EntitiesIAS 27 (Revised) Separate Financial StatementsIAS 28 (Revised) Investment in Associates and Joint VenturesIFRS 13 Fair Value MeasurementIFRS 10, IFRS 11 and IFRS 12 Amendments</p><p>Transition Guidance</p><p>Annual Improvements 20092011 cycle (issued in May 2012)</p><p>The Group adopted the IAS 1 Amendments Presentation of Financial Statements: Other Comprehensive Income in 2013. It requires separate items presented in other comprehensive income into two groups based on whether or not they may be recycled to profi t or loss in the future. The adoption of IAS 1 Amendments does not have any impact on the Groups operating results and fi nancial position.</p><p>The Group adopted the IAS 19 Amendments Employee Benefi ts in 2013. The Group restated the actuarial gains and losses recognised in prior year. For the impact of the retrospective application, refer to Note II.23.</p><p>The adoption of other standards, amendments and interpretations does not have a signifi cant impact on the operating results, fi nancial position or comprehensive income of the Group.</p></li><li><p>2013 Annual Report139</p><p>(Amount in millions of Renminbi, unless otherwise stated)</p><p>II SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (Continued)1 Basis of preparation (Continued)</p><p>1.2 Standards, amendments and interpretations that are not yet effective and have not been early </p><p>adopted by the Group in 2013</p><p>Effective for annual periods </p><p>beginning on or after</p><p>IAS 32 Amendments Financial Instruments: Presentation Offsetting Financial Assets and Financial Liabilities</p><p>1 January 2014</p><p>IAS 36 Amendments Impairment of Assets Recoverable Amount Disclosures for Non-Financial Assets</p><p>1 January 2014</p><p>IAS 39 Amendments Financial Instruments: Recognition and Measurement Novation of Derivatives and Continuation of Hedge Accounting</p><p>1 January 2014</p><p>IFRS 9, IFRS 9 Amendments, IAS 39 Amendments and IFRS 7 Amendment</p><p>Financial Instruments and Financial Instruments: Disclosures</p><p>Non-mandatory </p><p>IFRS 10, IFRS 12 and IAS 27 (Revised) Amendments</p><p>Investment Entities 1 January 2014</p><p>Annual Improvements to IFRSs 2010-2012 cycle and 2011-2013 cycle (issued in December 2013)</p><p>1 July 2014</p><p>IAS 32 Amendments provides additional application guidance to clarify some of the requirements for offsetting fi nancial assets and fi nancial liabilities on the statement of fi nancial position. IFRS 7 Amendment Financial Instruments: Disclosure is also amended to require disclosures to include information that will enable users of an entitys fi nancial statements to evaluate the effect or potential effect of netting arrangements, including rights of set-off associated with the entitys recognised fi nancial assets and recognised fi nancial liabilities, and master netting agreements, etc. on the entitys fi nancial position.</p><p>IAS 36 Amendments restrict the requirement to disclose the recoverable amount of an asset or cash-generating unit (CGU) to periods in which an impairment loss has been recognised or reversed. In addition, the amendments require two additional disclosures when an impairment is recognised or reversed and recoverable amount is based on fair value less costs of disposal: (i) the level of the IFRS 13 fair value hierarchy within which the fair value measurement of the asset or cash-generating unit has been determined; (ii) for fair value measurements at Level 2 and Level 3 of the fair value hierarchy, a description of the valuation techniques used and any changes in that valuation technique, key assumptions used in the measurement of fair value, including the discount rates used in the current measurement and previous measurement if fair value less costs of disposal is measured using a present value technique.</p></li><li><p>2013 Annual Report 140</p><p>Notes to the Consolidated Financial Statements</p><p>II SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (Continued)1 Basis of preparation (Continued)</p><p>1.2 Standards, amendments and interpretations that are not yet effective and have not been early </p><p>adopted by the Group in 2013 (Continued)</p><p>IAS 39 Amendments provide an exception to the requirement to discontinue hedge accounting in certain circumstances in which there is a change in counterparty to a hedging instrument in order to achieve clearing for that instrument. The amendment covers novations: (i) that arise as a consequence of laws or regulations, or the introduction of laws or regulations; (ii) where the parties to the hedging instrument agree that one or more clearing counterparties replace the original counterparty to become the new counterparty to each of the parties; (iii) that did not result in changes to the terms of the original derivative other than changes directly attributable to the change in counterparty to achieve clearing.</p><p>IFRS 9 and IFRS 9 Amendments replace those parts of IAS 39 relating to the classifi cation, measurement and de-recognition of fi nancial assets and liabilities with key changes mainly related to the classifi cation and measurement of fi nancial assets and certain types of fi nancial liabilities. In November 2013, the International Accounting Standards Board issued a revised version of IFRS 9, which introduce a revised hedge accounting model, allow early adoption of the requirement to present fair value changes due to own credit on liabilities designated as at fair value through profi t or loss to be presented in other comprehensive income, and remove the 1 January 2015 mandatory effective date of IFRS 9. Together with the further amendments to IFRS 9, IAS 39 and IFRS 7 are also amended to require additional disclosures.</p><p>IFRS 10, IFRS 12 and IAS 27 Amendments apply to a particular class of business that qualifi es as investment entities. Investment entity refers to an entity whose business purpose is to invest funds solely for returns from capital appreciation, investment income or both. An investment entity must also evaluate the performance of its investments on a fair value basis. The amendments provide an exception to the consolidation requirements in IFRS 10 and require investment entities to measure particular subsidiaries at fair value through profi t or loss, rather than consolidate them. The amendments also set out disclosure requirements for investment entities.</p><p>The Group is in the process of assessing the impact of these new standards and amendments on the consolidated and separate fi nancial statements of the Group and the Bank respectively.</p><p>In addition, Annual Improvements to IFRSs 20102012 cycle and 20112013 cycle were issued in December 2013. The annual improvements process was established to make non-urgent but necessary amendments to IFRSs. The amendments are effective from annual period beginning on or after 1 July 2014. No amendment was early adopted by the Group and no material changes to accounting policies were made in 2013.</p></li><li><p>2013 Annual Report141</p><p>(Amount in millions of Renminbi, unless otherwise stated)</p><p>II SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (Continued)2 Consolidation</p><p>2.1 Subsidiaries</p><p>Subsidiaries are all entities (including structured entities) over which the Group has control. That is the Group controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The existence and effect of potential voting rights that are currently exercisable or convertible and rights arising from other contractual arrangements are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.</p><p>The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifi able assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition by acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interests proportionate share of the acquirees net assets.</p><p>The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifi able net assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the income statement. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. If there is any indication that goodwill is impaired, recoverable amount is estimated and the difference between carrying amount and recoverable amount is recognised as an impairment charge. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.</p><p>All intra-group assets and liabilities, equity, income, expenses and cash fl ows relating to transactions between members of the Group are eliminated in full on consolidation. Where necessary, accounting policies of subsidiaries have been changed to ensure consistency with the policies adopted by the Group.</p><p>In the Banks statement of fi nancial position, investments in subsidiaries are accounted for at cost less impairment. Cost is adjusted to refl ect changes in consideration arising from contingent consideration amendments, but does not include acquisition-related costs, which are expensed as incurred. The results of subsidiaries are accounted for by the Bank on the basis of dividend received and receivable. The Group assesses at each fi nancial reporting date whether there is objective evidence that investment in subsidiaries is impaired. An impairment loss is recognised for the amount by which the investment in subsidiaries carrying amount exceeds its recoverable amount. The recoverable amount is the higher of the investment in subsidiaries fair value less costs to sell and value in use.</p></li><li><p>2013 Annual Report 142</p><p>Notes to the Consolidated Financial Statements</p><p>II SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (Continued)2 Consolidation (Continued)</p><p>2.2 Associates and joint ventures</p><p>Associates are all entities over which the Group has signifi cant infl uence but no control or joint control, generally accompanying a shareholding of between 20% and 50% of the voting rights.</p><p>Joint ventures exist where the Group has a contractual arrangement with one or more parties to undertake economic activities which are subject to joint control.</p><p>Investments in associates and joint ventures are initially recognised at cost and are accounted for...</p></li></ul>