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65
1 Basis of preparation (continued)
e Changes in accounting policy during 2013
On 1 January 2013, the bank adopted the following new accounting standards and amendments to standards
retrospectively, with exception of IFRS 13 which was applied prospectively:
Amendments to IAS 1 ‘Items of Other Comprehensive Income’ (‘IAS 1’)
As a result of the adoption of changes within IAS 1, items presented within the consolidated statement of
comprehensive income are grouped into those that will and those that will not be subsequently reclassified to income.
Amendments to IAS 19 ‘Employee Benefits’ (‘IAS 19 revised’)
IAS 19 revised replaces the interest cost on the plan liability and the expected return on plan assets with a finance cost
comprising the net interest on the net defined benefit liability or asset. This finance cost is determined by applying
to the net defined benefit liability or asset the same discount rate used to measure the defined benefit obligation.
The difference between the actual return on plan assets and the return included in the finance cost component in the
income statement is presented in other comprehensive income. The effect of this change is to increase or decrease
the pension expense by the difference between the current expected return on plan assets and the return calculated
by applying the relevant discount rate.
In addition, unvested amounts related to past service events are no longer amortized and recognized in the income
statement over the vesting period, but recognized in full on the date of the past service event as a charge or a credit
to income.
The estimated effect of the adoption of this standard is an increase in total operating expenses for fiscal 2013 of
approximately $10m. In addition, as the standard is to be applied retrospectively, there is an increase in retained
earnings on 1 January 2013 of $14m, net of income taxes, relating to past service gains recorded in previous years
that were previously deferred and not yet recognized as a reduction of costs. The financial statements for 2012 have
been restated through an adjustment to increase retained earnings at 1 January 2012 of $16m, net of taxes, an increase
of costs for 2012 of $9m and an increase in other comprehensive income of $7m ($5m after tax).
The impact on retained earnings at 1 January is as follows:
2013
$m
2012
$m
Retained earnings as previously reported ................................................................... 2,680 2,363
Change in accounting policy ....................................................................................... 14 16
Retained earnings as restated ..................................................................................... 2,694 2,379
Amendments to IFRS 7 ‘Disclosures – Offsetting Financial Assets and Financial Liabilities’ (‘IFRS 7’)
IFRS 7 requires disclosure of the effect or potential effects of netting arrangements on an entity’s financial position.
The amendment requires disclosure of recognized financial instruments that are subject to an enforceable master
netting arrangement or similar agreement. New disclosures relating to IFRS 7 are provided in note 32.
IFRS 10 ‘Consolidated Financial Statements’ (‘IFRS 10’)
Under IFRS 10, there is one approach for determining if an investor controls an investee for all entities, based on the
concept of power, variability of returns and their linkage. This replaced the previous approach which emphasizes legal
control or exposure to risks and rewards, depending on the nature of the entity. The bank controls and consequently
consolidates 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.
In accordance with the transitional provisions of IFRS 10, we reviewed the population of investments in entities as
at 1 January 2013 to determine whether entities previously consolidated or unconsolidated in accordance with IAS
27 ‘Consolidated and Separate Financial Statements’ and SIC 12 ‘Consolidation – Special Purpose Entities’ changed
their consolidation status as a result of applying IFRS 10. The result of this review was that the effect of applying the
requirements of IFRS 10 did not have a material effect on these consolidated financial statements.