FIXED ASSETS OF

THE BANKS
Reporters:
Rizalie Andres
De Ann Bernales
Camilo Fernandez
Madonna Jataas
Christopher Rodriguez

ASSETS
A resources controlled by the enterprise as a result of past transaction
and events and from which future economic benefits are expected to flow to the
enterprise.
Types of assets
Tangible assets.
Intangible assets.

Fixed assets
Also known as tangible assets or property, plant and equipment.

Fixed assets of the banks

Bank premises furniture, fixture and equipment.
Land
It is the cost of the land/lots to be used for the banks offices including
the parking lots intended for the employees, bank officers, and clients. It
also includes the cost incurred in surveying, registration and issuance of
title.
Building
It is the cost of building used or to be used by the bank. It also
includes cost of improvement, architect fees, building permits, inspection
fees, elevators and tellers cages.

Furniture & Fixtures

This refers to the cost of furnitures such as desks, tables, chairs and
fixtures to building. It also includes the major repairs and maintenance
which prolong the life of theses assets beyond their original estimated useful
life.

 Information Technology (IT) Equipments.

This refers to the cost of Information Technology Equipment that has
a primary function related to the collection, transfer, storage and processing
data.
Other office equipment
This refers to the cost of office equipment other than I.T. equipment.
Transportation Equipment
This refers to the cost of transportation equipment that consist of
equipment for moving people and objects.

BANKS PREMISES, FURNITURE, FIXTURES AND EQUIPMENT

UNDER FINANCE LEASE

Bank Premises means all the building and land owned by the bank.
LEASE- a contract allowing someone to use another persons property for a
particular period of time and amount of money. Where;
LESSOR- the person owning the Asset/ Equipment which is being leased.
LESSEE- the person to whom Lessor gives on Lease the Asset Or simply the
user of the equipment being leased.
We can generally distinguish two major types of leasing: FINANCE
LEASING AND OPERATING LEASING
A. Finance Lease
-A source of medium term financing and is ideal if you plan to keep the
asset at the end of the term.

B. Operating Lease
-If you wish to simply pay for the use of the equipment and not its
ownership, you can use this type of lease. This is commonly used to acquire
equipment on a short-term basis. At the end of the term, simply return the
equipment or you may also purchase it for its Fair Market Value (FMV).
Banks that have lease arrangements- e.g property leases as a lessee- would
need to bring leases oon to the Balance Sheet. This would increase the
Banks asset and Liabilities.

LEASEHOLD RIGHTS AND IMPROVEMENT

This refers to the cost of building and/or improvements introduced on
premises leased by the bank, including the cost of leasehold rights and other
expenditures incurred in making the premises ready for use
Leasehold is the right acquired y the lessee by virtue of a contract of lease
to use the specific property owned by the lessor for a definite period of time
in consideration for a certain sum of money.
Leasehold Improvement- are alterations or modifications on the leased
property made by the lessee .
EXAMPLE: Buildings, Walks, Pavements, Landscaping, Driveways and
Other Structures.
Legally, leasehold improvements revert to the lessor upon termination
of the lease contract.

REVALUATION INCREMENT
Revaluation of fixed asset means it is the process of increasing and
decreasing the carrying value of major changes in fair market value required to
accurately know the true value of an asset. Revaluation means a change in the
value or price of an asset or just simply revaluing the specific asset. Incement
means an increase or addition. Thus, revaluation increment mean revaluation
increase (positive asset revaluation) indicates that some assets are understated.
Revaluation Increment Reserves shall comprise of the following sub-accounts:
I. Land
II. Buildings
III. Furniture and Fixtures
IV. Information Technology Equipment
V. Other Office Equipment
VI. Transportaion Equipment
VII. Bank Premises, Furniture, Fixture and Equipment Under Finance

Land

Buildings

Furniture and Fixtures

Information Technology Equipment

Other Office Equipment

Transportation Equipment

Accumulated Depreciation- It is a long-term contra asset account and it is an

asset with a credit balance and reported at the balance sheet under the heading
property, plant and equipment.

BUILDING UNDER CONSTRUCTION

This refers to the total cost of materials, labor, and other capitalizable
expenditures incurred in connection with the building(s) under construction. They
remain in this account until the construction of asset has been completed or put
into service. Upon completion of the building, its cost shall be transferred/closed
to Bank Premises, Furniture, Fixture and Equipment Building account.

Allowance for Losses refers to the cumulative amount of impairment loss

incurred on bank premises, furniture, fixture & equipment, which shall be
accounted for in accordance with PAS 36. Impairment occurs when assets are sold
or abandoned because the company no longer expects them to benefit in the longrun operations.

Real and Other Properties Acquired (ROPA)

These are the properties that the banks acquire from the foreclosure, dation,
etc, in settlement of a loan. For example, if the borrower really failed to pay his
obligation to the bank, the bank will acquire his properties as collateral, and later
on, it will sold to the public auction to bring back to the bank the cash that the
borrower failed to pay.

4 Real Reasons Why Foreclosed Properties Can Be Priced at

Below Market Values
Some people are very interested in foreclosed properties of the bank
because they are really cheap and priced at below market values. But why some
foreclosed properties are so cheap. So here are some reasons why they sell it at a
lower price:
1. Foreclosed properties are owned by motivated sellers -We all know that
banks are not really in the business of selling real estate like buildings and
land, they are in the business of making money through interest earned

through loans. A foreclosed property is a non-performing asset and they

need to get their cash back as soon as possible by selling their properties so
they are motivated enough to sell their properties at below market values.
2. Banks only need to recover the outstanding loan amount plus foreclosure
costs, etc. -Another reason is they, the bank, only need to recover whatever
amount was borrowed to them at the time the property was foreclosed, along
with some expenses like foreclosure costs, legal fees, and other
miscellaneous expenses.
3. Foreclosed properties need a lot of repairs -In selling a foreclosed
properties, a buyer might expect that some of these have damages and need
for repair. Because of the need for repairs, banks would have to sell them at
a lower price compared to others that require little or no repairs. Otherwise,
no one would buy any of their foreclosed properties.
4. The foreclosed property has been left unsold for a long time -If a
foreclosed property is left unsold for many years, then it follows that its
market value might already increased. The property could have also
deteriorated and it would need renovation for it to have the same market
value of comparable properties around it.