203 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2025 06 / FINANCIAL STATEMENTS 01 02 03 04 05 07 08 09 3. ACCOUNTING POLICIES (CONT’D.) 3.4 Material accounting policy information (cont’d.) (s) Income recognition (cont’d.) The Group and the Bank recognise revenue from contracts with customers for the provision of services based on the five-step model as set out below (cont’d.): • Determine the transaction price. The transaction price is the amount of consideration to which the Group and the Bank expect to be entitled in exchange for transferring promised services to a customer, excluding amounts collected on behalf of third parties. • Allocate the transaction price to the performance obligations in the contract. For a contract that has more than one performance obligation, the Group and the Bank allocate the transaction price to each performance obligation in an amount that depicts the amount of consideration to which the Group and the Bank expect to be entitled in exchange for satisfying each performance obligation. • Recognise revenue when (or as) the Group and the Bank satisfy a performance obligation. The Group and the Bank satisfy a performance obligation and recognise revenue over time if the Group’s and the Bank’s performance: • Do not create an asset with an alternative use to the Group and the Bank, and have an enforceable right to payment for performance completed to-date; or • Create or enhance an asset that the customer controls as the asset is created or enhanced; or • Provide benefits that the customer simultaneously receives and consumes as the Group and the Bank perform. For performance obligations where any one of the above conditions is not met, revenue is recognised at the point in time at which the performance obligation is satisfied. (i) The effective interest rate method Interest income is recorded using the effective interest rate method for all financial instruments measured at amortised cost and financial instruments designated at FVTPL. Interest income on interest bearing financial assets measured at FVOCI is also recorded by using the EIR method. The EIR is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument or, when appropriate, a shorter period, to the net carrying amount of the financial asset. The EIR (and therefore, the amortised cost of the asset) is calculated by taking into account any discount or premium on acquisition, fees and costs that are an integral part of the EIR. The Group and the Bank recognise interest income using a rate of return that represents the best estimate of a constant rate of return over the expected life of the loan. Hence, it recognises the effect of potentially different interest rates charged at various stages, and other characteristics of the product life cycle (including prepayments, penalty interest and charges).
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