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Our Performance Sustainability Statement Governance Our Numbers Other Information

2. SIGNIFICANT ACCOuNTING POLICIES (CONT’D.)
2.3 Summary of significant accounting policies (cont’d.)

(b) Financial assets (cont’d.)
(i) Initial recognition and subsequent measurement (cont’d.)
(1) Financial assets at amortised cost (cont’d.)

The details of these conditions are outlined below: (cont’d.)
(i) The SPPP test (cont’d.)

The most significant elements of profit within a financing arrangement are typically the
consideration for the time value of money and credit risk. To make the SPPP assessment, the
Group and the Bank apply judgement and consider relevant factors such as the currency in which
the financial asset is denominated, and the period for which the profit rate is set.
In contrast, contractual terms that introduce a more than de minimis exposure to risks or volatility
in the contractual cash flows that are unrelated to a basic financing arrangement do not give rise to
contractual cash flows that are solely payments of principal and profit on the amount outstanding.
In such cases, the financial asset is required to be measured at FVTPL.

(ii) Business model assessment
The Group and the Bank determine its business model at the level that best reflects how groups of
financial assets are managed to achieve its business objective.
The Group and the Bank’s business model is not assessed on an instrument-by-instrument basis,
but at a higher level of aggregated portfolios and is based on observable factors such as:

• The way the performance of the business model and the financial assets held within that
business model are evaluated and reported to the key management personnel.

• The risks that affect the performance of the business model (and the financial assets held
within that business model) and, in particular, the way those risks are managed.
• The way the managers of the business are compensated (for example, whether the
compensation is based on the fair value of the assets managed or on the contractual cash
flows collected).

• The expected frequency, value and timing of sales which are also important aspects of the
Group’s and the Bank’s assessment.

• The business model assessment is based on reasonably expected scenarios without taking
‘worst case’ or ‘stress case’ scenarios into account. If cash flows after initial recognition are
realised in a way that is different from the Group’s and the Bank’s original expectations, the
Group and the Bank do not change the classification of the remaining financial assets held in
that business model, but incorporate such information when assessing newly originated or
newly purchased financial assets going forward.

Included in financial assets at amortised cost are cash and short-term funds, cash and placements
with financial institutions, financial investments, financing of customers, statutory deposits and a
portion of other assets as disclosed in the respective notes to the financial statements.