TMA TemplateBased on the latest annual report of a local commercial bank, demonstrate the key components making up the balance sheet (i.e. the assets, the liabilities and equity portions) and discuss how they contribute to the functioning of a bank. Assess the key differences between the commercial banking and investment banking activities in terms of the differences in their balance sheets. (30 marks)

Financial statements DBS Group Holdings Ltd and its Subsidiaries 115 116 117 118 119 Consolidated Income Statement Consolidated Statement of Comprehensive Income Balance Sheets Consolidated Statement of Changes in Equity Consolidated Cash Flow Statement Notes to the Financial Statements 120 Domicile and Activities Summary of Signicant Accounting Policies 126 Critical Accounting Estimates Income Statement 127 Net Interest Income Net Fee and Commission Income Net Trading Income Net Income from Investment Securities Other Income Employee Benets 128 Other Expenses Allowances for Credit and Other Losses 129 Income Tax Expense Earnings per Ordinary Share Balance Sheet: Assets 130 Classication of Financial Instruments 133 Cash and Balances with Central Banks Government Securities and Treasury Bills Bank and Corporate Securities 134 Loans and Advances to Customers 135 Financial Assets Transferred Other Assets 136 Deferred Tax Assets/Liabilities Subsidiaries and Consolidated Structured Entities 137 Associates 138 Unconsolidated Structured Entities Properties and Other Fixed Assets 140 Goodwill and Intangibles 114 DBS Annual Report 2015 Balance Sheet: Liabilities 140 Deposits and Balances from Customers Other Liabilities 141 Other Debt Securities 142 Subordinated Term Debts Balance Sheet: Share Capital and Reserves 143 Share Capital 144 Other Equity Instruments Other Reserves and Revenue Reserves 146 Non-controlling Interests Off-Balance Sheet Information 147 Contingent Liabilities and Commitments Financial Derivatives Additional Information 150 151 152 156 163 166 Share-based Compensation Plans Related Party Transactions Fair Value of Financial Instruments Credit Risk Liquidity Risk Capital Management Segment Reporting DBS Bank Ltd 169 170 171 172 Income Statement Statement of Comprehensive Income Balance Sheet Notes to the Supplementary Financial Statements 174 Directors' Statement 178 Independent Auditor's Report DBS Group Holdings Ltd and its Subsidiaries Consolidated income statement for the year ended 31 December 2015 In $ millions Note Interest income Interest expense 2015 2014 9,644 2,544 8,948 2,627 Net interest income 4 7,100 6,321 Net fee and commission income Net trading income Net income from investment securities Other income 5 6 7 8 2,144 1,204 339 136 2,027 901 274 293 3,823 3,495 10,923 9,816 2,651 2,249 2,294 2,036 4,900 4,330 6,023 743 5,486 667 5,280 14 4,819 79 5,294 727 4,898 713 Net prot 4,567 4,185 Attributable to: Shareholders Non-controlling interests 4,454 113 4,046 139 4,567 4,185 1.77 1.77 1.63 1.61 Non-interest income Total income Employee benets Other expenses 9 10 Total expenses Prot before allowances Allowances for credit and other losses 11 Prot after allowances Share of prots of associates Prot before tax Income tax expense Basic earnings per ordinary share ($) Diluted earnings per ordinary share ($) 12 13 13 (The notes on pages 120 to 168 as well as the Risk management section on pages 81 to 108 form part of these nancial statements) Financial statements 115 DBS Group Holdings Ltd and its Subsidiaries Consolidated statement of comprehensive income for the year ended 31 December 2015 In $ millions Net prot 2015 2014 4,567 4,185 Other comprehensive income(a): Foreign currency translation differences for foreign operations Share of other comprehensive income of associates Available-for-sale nancial assets and others Net valuation taken to equity Transferred to income statement Tax on items taken directly to or transferred from equity 29 2 96 7 (218) 61 7 467 (165) (14) Other comprehensive income, net of tax (119) 391 Total comprehensive income 4,448 4,576 Attributable to: Shareholders Non-controlling interests 4,327 121 4,432 144 4,448 4,576 (a) Items recorded in \"Other comprehensive income\" above will be reclassied subsequently to the income statement when specic conditions are met e.g. when foreign operations or available-for-sale nancial assets are disposed of (The notes on pages 120 to 168 as well as the Risk management section on pages 81 to 108 form part of these nancial statements) 116 DBS Annual Report 2015 DBS Group Holdings Ltd and its Subsidiaries Balance sheets as at 31 December 2015 In $ millions Assets Cash and balances with central banks Government securities and treasury bills Due from banks Derivatives Bank and corporate securities Loans and advances to customers Other assets Associates Subsidiaries Properties and other xed assets Goodwill and intangibles Note 15 16 36 17 18 20 23 22 25 26 Total assets Liabilities Due to banks Deposits and balances from customers Derivatives Other liabilities Other debt securities Subordinated term debts 27 36 28 29 30 Total liabilities Net assets Equity Share capital Other equity instruments Other reserves Revenue reserves 31 32 33 33 Shareholders' funds Non-controlling interests Total equity 34 The Group 2015 2014 The Company 2015 2014 18,829 34,501 38,285 23,631 40,073 283,289 11,562 1,000 - 1,547 5,117 19,517 29,694 42,263 16,995 37,763 275,588 11,249 995 - 1,485 5,117 457,834 440,666 18,251 320,134 22,145 12,404 38,078 4,026 16,176 317,173 18,755 11,728 31,963 4,665 415,038 400,460 1,908 1,678 42,796 40,206 17,695 17,765 10,114 803 6,705 22,752 10,171 803 6,894 19,840 10,144 803 168 6,580 10,194 803 152 6,616 40,374 37,708 17,695 17,765 17,695 17,765 2,422 2,498 42,796 40,206 10 46 13 14 19,547 19,416 19,603 19,443 24 1,884 17 1,661 (The notes on pages 120 to 168 as well as the Risk management section on pages 81 to 108 form part of these nancial statements) Financial statements 117 DBS Group Holdings Ltd and its Subsidiaries Consolidated statement of changes in equity for the year ended 31 December 2015 In $ millions 2015 Balance at 1 January Issue of shares upon exercise of share options Cost of share-based payments Reclassication of reserves upon exercise of share options Draw-down of reserves upon vesting of performance shares Issue of shares pursuant to Scrip Dividend Scheme Purchase of treasury shares Dividends paid to shareholders Dividends paid to non-controlling interests Acquisition of non-controlling interests Total comprehensive income Balance at 31 December 2014 Balance at 1 January Issue of shares upon exercise of share options Cost of share-based payments Reclassication of reserves upon exercise of share options Draw-down of reserves upon vesting of performance shares Issue of shares pursuant to Scrip Dividend Scheme Purchase of treasury shares Redemption of preference shares of a subsidiary Dividends paid to shareholders Dividends paid to non-controlling interests Change in non-controlling interests Total comprehensive income Balance at 31 December Share capital Other equity instruments Other reserves Revenue reserves 10,171 4 803 6,894 19,840 Noncontrolling Total interests 1 103 (1) 37,708 4 103 - 86 (86) - 110 (258) 4,454 110 (258) (1,542) - (78) 4,327 (1,542) (78) (127) 2,498 DBS Annual Report 2015 40,206 4 103 - - (125) (72) 121 110 (258) (1,542) (125) (150) 4,448 10,114 803 6,705 22,752 40,374 2,422 42,796 9,676 13 803 6,492 17,262 3,453 37,686 13 88 - 4 88 (4) 34,233 13 88 - 68 (68) - - 386 4,046 489 (79) - (1,468) - - 4,432 (141) (63) 144 489 (79) (895) (1,468) (141) (63) 4,576 6,894 19,840 37,708 2,498 40,206 489 (79) (1,468) 10,171 803 (895) (The notes on pages 120 to 168 as well as the Risk management section on pages 81 to 108 form part of these nancial statements) 118 Total equity DBS Group Holdings Ltd and its Subsidiaries Consolidated cash ow statement for the year ended 31 December 2015 In $ millions Cash ows from operating activities Net prot Adjustments for non-cash items: Allowances for credit and other losses Depreciation of properties and other xed assets Share of prots of associates Net gain on disposal (net of write-off) of properties and other xed assets Net income from investment securities Net gain on disposal of associate Cost of share-based payments Income tax expense Fair value gain on acquisition of interest in joint venture Prot before changes in operating assets and liabilities 2015 2014 4,567 4,185 743 251 (14) (82) (339) - 103 727 - 667 220 (79) (35) (274) (223) 88 713 (3) 5,956 5,259 Increase/(Decrease) in: Due to banks Deposits and balances from customers Other liabilities Other debt securities and borrowings 1,858 (1,592) 1,632 5,958 2,604 24,808 1,306 8,643 (Increase)/Decrease in: Restricted balances with central banks Government securities and treasury bills Due from banks Loans and advances to customers Bank and corporate securities Other assets Tax paid 960 (4,350) 4,361 (4,076) (1,911) (5,192) (730) 111 (1,986) (2,446) (27,558) (3,865) (2,167) (733) 2,874 3,976 Net cash generated from operating activities (1) Cash ows from investing activities Proceeds from disposal of interest in associate Acquisition of interest in associate and joint venture Dividends from associates Purchase of properties and other xed assets Proceeds from disposal of properties and other xed assets Acquisition of non-controlling interests Acquisition of business - (21) 32 (334) 140 (150) - 435 (88) 98 (263) 55 - (281) Net cash used in investing activities (2) (333) (44) Cash ows from nancing activities Increase in share capital Purchase of treasury shares Dividends paid to shareholders of the Company, net of scrip dividends Dividends paid to non-controlling interests Payment upon redemption of subordinated term debts Purchase of subordinated term debts Redemption of preference shares of a subsidiary Change in non-controlling interests 4 (258) (1,432) (125) - (743) - - 13 (79) (979) (141) (977) - (895) (63) Net cash used in nancing activities (3) (2,554) (3,121) Exchange translation adjustments (4) 240 91 Net change in cash and cash equivalents (1)+(2)+(3)+(4) Cash and cash equivalents at 1 January 227 11,851 902 10,949 Cash and cash equivalents at 31 December (Note 15) 12,078 11,851 (The notes on pages 120 to 168 as well as the Risk management section on pages 81 to 108 form part of these nancial statements) Financial statements 119 DBS Group Holdings Ltd and its Subsidiaries Notes to the nancial statements for the year ended 31 December 2015 These Notes are integral to the nancial statements. The consolidated nancial statements for the year ended 31 December 2015 were authorised for issue by the Directors on 19 February 2016. 1 Domicile and Activities 2.3 Adoption of new and revised accounting standards The Company, DBS Group Holdings Ltd, is incorporated and domiciled in the Republic of Singapore and has its registered ofce at 12 Marina Boulevard, Marina Bay Financial Centre Tower Three, Singapore 018982. On 1 January 2015, the Group adopted the following new or revised FRS that are issued by the ASC and relevant for the Group: The Company is listed on the Singapore Exchange. s\u0000 )MPROVEMENTS\u0000TO\u0000&23S\u0000\u0012\u0010\u0011\u0014 The Company is an investment holding, treasury and funding vehicle for the group. Its main subsidiary is DBS Bank Ltd (the Bank), which is wholly owned and engaged in a range of commercial banking and nancial services, principally in Asia. The adoption of these FRS has no signicant impact on the nancial statements of the Group. The nancial statements relate to the Company and its subsidiaries (the Group) and the Group's interests in associates. 2 2.1 Summary of Signicant Accounting Policies Basis of preparation Compliance with Singapore Financial Reporting Standards (FRS) The nancial statements of the Company and the consolidated nancial statements of the Group are prepared in accordance with Singapore Financial Reporting Standards (FRS) and related Interpretations promulgated by the Accounting Standards Council (ASC). In accordance with Section 201(18) of the Companies Act (the Act), the requirements of FRS 39 Financial Instruments: Recognition and Measurement in respect of loan loss provisioning are modied by the requirements of Notice to Banks No. 612 \"Credit Files, Grading and Provisioning\" (MAS Notice 612) issued by the Monetary Authority of Singapore. As permitted by Section 201(10)(b) of the Act, the Company's income statement has not been included in these nancial statements. The nancial statements are presented in Singapore dollars and rounded to the nearest million, unless otherwise stated. Differences between International Financial Reporting Standards (IFRS) and FRS Beyond the above modication to FRS related to MAS Notice 612, there are no signicant differences between IFRS and FRS in terms of their application to the Group. The consolidated nancial statements and the notes thereon satisfy all necessary disclosures under IFRS and FRS. 2.2 Signicant estimates and judgement The preparation of nancial statements requires management to exercise judgement, use estimates and make assumptions in the application of policies and in reporting the amounts in the nancial 120 statements. Although these estimates are based on management's best knowledge of current events and actions, actual results may differ from these estimates. Critical accounting estimates and assumptions used that are signicant to the nancial statements, and areas involving a higher degree of judgement and complexity, are disclosed in Note 3. DBS Annual Report 2015 In addition to the above, a number of new standards and amendments to standards are effective for annual periods beginning after 1 January 2015. The Group has not applied these standards or amended standards in preparing these nancial statements. None of them is expected to have a signicant effect on the nancial statements of the Group and the Company other than FRS 109. FRS109: Financial Instruments FRS 109 replaces the existing guidance in FRS 39 Financial Instruments: Recognition and Measurement. It includes revised guidance on the classication and measurement of nancial instruments and introduces a new expected credit loss model for impairment of nancial assets as well as new requirements for general hedge accounting. The standard is effective for annual reporting periods beginning on or after 1 January 2018. Early adoption is permitted. A summary of the most signicant group accounting policies is described further below starting with those relating to the entire nancial statements followed by those relating to the income statement, the balance sheet and other specic topics. This does not reect the relative importance of these policies to the Group. A) General Accounting Policies 2.4 Group Accounting Subsidiaries Subsidiaries are entities (including structured entities) over which the Group has control. The Group controls an entity when it is exposed to, 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. Subsidiaries are consolidated from the date control is transferred to the Group to the date control ceases. The acquisition method is used to account for business combinations. Refer to Note 2.12 for the Group's accounting policy on goodwill. All intra-group transactions and balances are eliminated on consolidation. Associates Associates are entities over which the Group has signicant inuence, but no control where the Group generally holds a shareholding of between and including 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method. 2.5 Foreign currency treatment Functional and presentation currency Items in the nancial statements are measured using the functional currency of each entity in the Group, this being the currency of the primary economic environment in which the entity operates. The Group's nancial statements are presented in Singapore dollars, which is the functional currency of the Company. 2.6 Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to management. In preparing the segment information, amounts for each business segment are shown after the allocation of certain centralised costs, funding income and the application of transfer pricing, where appropriate. Transactions between segments are recorded within the segment as if they are third party transactions and are eliminated on consolidation. Please refer to Note 43 for further details on business and geographical segment reporting. Foreign currency transactions and balances Transactions in foreign currencies are measured using the exchange rate at the date of the transaction. B) Income Statement 2.7 Income recognition Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency of the entity undertaking the transaction at the exchange rates at the balance sheet date. Foreign exchange differences arising from this translation are recognised in the income statement within \"Net trading income\". Interest income and interest expense Interest income and interest expense as presented in Note 4 arise from all interest-bearing nancial assets and nancial liabilities regardless of their classication and measurement, with the exception of the Group's structured investment deposits which are carried at fair value through prot or loss. Interest expense on such structured investment deposits is presented together with other fair value changes in trading income. Non-monetary assets and liabilities measured at cost in a foreign currency are translated using the exchange rates at the date of the transaction. Non-monetary assets and liabilities measured at fair values in foreign currencies are translated using the exchange rates at the date when the fair values are determined, which is generally the balance sheet date. Interest income and interest expense are recognised on a timeproportionate basis using the effective interest method. The calculation includes signicant fees and transaction costs that are integral to the effective interest rate, as well as premiums or discounts. Unrealised foreign exchange differences arising from non-monetary nancial assets and liabilities classied as fair value through prot or loss are recognised in the income statement as trading income. For non-monetary nancial assets such as equity investments classied as available-for-sale, unrealised foreign exchange differences are recorded in other comprehensive income and accumulated in equity until the assets are disposed of or become impaired, upon which they are reclassied to the income statement. Fee and commission income The Group earns fee and commission income from a diverse range of products and services provided to its customers. Subsidiaries and branches The results and nancial position of subsidiaries and branches whose functional currency is not Singapore dollars (\"foreign operations\") are translated into Singapore dollars in the following manner: For a service that is provided over a period of time, fee and commission income is recognised over the period during which the related service is provided or credit risk is undertaken. Such fees include the income from issuance of nancial guarantees and bancassurance xed service fees. s\u0000 ! \u0000 SSETS\u0000AND\u0000LIABILITIES\u0000ARE\u0000TRANSLATED\u0000AT\u0000THE\u0000EXCHANGE\u0000RATES\u0000AT\u0000THE\u0000 balance sheet date; s\u0000 )\u0000NCOME\u0000AND\u0000EXPENSES\u0000IN\u0000THE\u0000INCOME\u0000STATEMENT\u0000ARE\u0000TRANSLATED\u0000AT\u0000 exchange rates prevailing at each month-end, approximating the exchange rates at the dates of the transactions; and s\u0000 ! \u0000 LL\u0000RESULTING\u0000EXCHANGE\u0000DIFFERENCES\u0000ARE\u0000RECOGNISED\u0000IN\u0000OTHER\u0000 comprehensive income and accumulated under capital reserves in equity. When a foreign operation is disposed of, such exchange differences are recognised in the income statement as part of the gain or loss on disposal. For acquisitions prior to 1 January 2005, the foreign exchange rates at the respective dates of acquisition were used. Please refer to Note 26 for an overview of goodwill recorded. Goodwill and fair value adjustments arising on the acquisition of a foreign operation on or after 1 January 2005 are treated as assets and liabilities of the foreign operation and translated at the closing rate. Fee and commission income is generally recognised on the completion of a transaction. Such fees include underwriting fees, brokerage fees and fees related to completion of corporate nance transactions. Fee and commission income is recorded net of expenses directly related to it. These expenses typically include brokerage fees paid, card-related expenses and sales commissions, but do not include expenses for services delivered over a period (such as service contracts) and other expenses that are not specically related to fee and commission income transactions. Dividend income Dividend income is recognised when the right to receive payment is established. This is generally the ex-dividend date for listed equity securities, and the date when shareholders approve the dividend for unlisted equity securities. Dividend income arising from held-fortrading nancial assets is recognised in \"Net trading income\