Home' Trinidad and Tobago Guardian : December 23rd 2014 Contents c) Income taxes
The Bank is subject to income tax in various jurisdictions. Management judgment is required in determining
provisions for income taxes and there are many transactions and calculations for which the ultimate tax
determination is uncertain. Where the final tax outcome of these matters is different from the amounts that
were initially recorded, such differences will impact the current and deferred income tax assets and liabilities
in the period in which such determination is made.
When appropriate, particularly where the ultimate tax determination is uncertain, management also
obtains opinions or advice from leading tax advisors and regularly reassesses its strategy in relation to such
d) Retirement benefits
The present value of the retirement benefit obligations depends on a number of factors that are determined
on an actuarial basis using a number of assumptions. Any changes in these assumptions will impact the
carrying amount of pension obligations.
The assumptions used in determining the net cost (income) for pensions include the discount rate, salary
and pension increases. The Bank determines the appropriate discount rate at the end of each year. This is
the interest rate that should be used to determine the present value of estimated future cash outflows
expected to be required to settle the pension obligations. In determining the appropriate discount rate, the
Bank considers the interest rates of high-quality corporate bonds that are denominated in the currency in
which the benefits will be paid and that have terms to maturity approximating the terms of the related
In determining the salary increases, the Bank considered long-term salary inflation, age, merit and
e) Fair valuation of properties
The best evidence of fair value is current prices in an active market for similar lease and other contracts. In
the absence of such information, the Bank determines the amount within a range of reasonable fair value
estimates. In making the judgement, the Bank considers information from a variety of sources including:
i) Current prices in an active market for properties of different nature, condition or location (or subject
to different lease or other contracts), adjusted to reflect those differences
ii) Recent prices of similar properties in less active market, with adjustments to reflect any changes in
economic conditions since the date of the transactions that occurred at those prices and
iii) Discounted cash flow projections based on reliable estimates of future cash flows, derived from the
terms of any existing lease and other contracts and (where possible) from external evidence such as
current market rents for similar properties in the same location and condition, and using discount rates
that reflect current market assessments of the uncertainty in the amount and timing of the cash flows
The valuations are based on current market conditions and thus may change in the future.
5 Segment Analysis
For management purposes, the Bank is organised into five business segments based on products and services as
Retail Banking: includes loans and mortgages, deposit, foreign exchange transactions, credit and debit
cards and card merchant acquiring business with retail and commercial customers
Corporate Banking: loans and credit facilities and deposits and current accounts for corporate and
Treasury Management and Investment Banking: Liquidity management and investment banking
services including corporate finance, and specialised financial trading
Bank Function: Finance, legal, and other centralised functions
As the Bank's segment operations are all financial with a majority of revenues deriving from interest and the
Executive Management relies primarily on net interest revenue to assess the performance of the segment, the total
interest income and expense for all reportable segments is presented on a net basis. There were no changes in the
reportable segments during the year.
Transactions between the business segments are carried out at arm's length. The revenue from external parties
reported to the Group Chief Executive Officer is measured in a manner consistent with that in the unconsolidated
income statement. The segmental information is reported gross and therefore consolidation adjustments have not
Funds are ordinarily allocated between segments, resulting in funding cost transfers disclosed in inter-segment net
interest income. Interest charged for these funds is based on the Bank's average cost of funding. There are no
other material items of income or expense between the business segments.
Internal charges and transfer pricing adjustments have been reflected in the performance of each business.
Revenue-sharing agreements are used to allocate external customer revenues to a business segment on a
The Bank's management reporting is based on a measure of operating profit comprising net interest income, loan
impairment charges, net fee and commission income, other income and non-interest expenses. The information
provided about each segment is based on the internal reports about segment profit or loss, assets and other
information, which are regularly reviewed by the Executive Management.
Segment assets and liabilities comprise operating assets and liabilities, being the majority of the unconsolidated
statement of financial position.
The segment information provided to the Executive Management for the reportable segments for the year ended
30 September 2014 is as follows:
First Citizens Bank Limited
(A Subsidiary of First Citizens Holdings Limited)
Unconsolidated Financial Statements
30 September, 2014
(b ) Fair value hierarchy
IFRS 7 specifies a hierarchy of valuation techniques based on whether the inputs to these valuation
techniques are observable or unobservable. Observable inputs reflect market data obtained from
independent sources; unobservable inputs reflect the Bank's market assumptions. These two types of
inputs have created the following fair value hierarchy:
includes listed equity securities and debt instruments on exchanges.
or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). This level
includes debt instruments.
(unobservable inputs). This level includes equity investments and debt instruments with significant
This hierarchy requires the use of observable market data when available. The Bank considers relevant
and observable market prices in its valuations where possible.
The following table shows an analysis of financial instruments measured at fair value by level of the fair
As at 30 September 2014
Level 1 Level 2
Available-for-sale financial assets:
Total Financial Assets
As at 30 September 2013
Level 1 Level 2
Available-for-sale financial assets:
Total Financial Assets
There were no transfers between Level 1 and Level 2 during the year.
Reconciliation of Level 3 items:
3.7 Deferred day 1 profit/loss
The Bank's policy is not to recognise day 1 gains or losses in the unconsolidated financial statements.
4 Critical Accounting Estimates And Judgements
The Bank makes estimates and assumptions about the future. The resulting accounting estimates will, by
definition, rarely equal the related actual results. The estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amount of assets and liabilities within the next financial year are
a) Fair value of available-for-sale financial instruments
The Bank uses the discounted cash flow method to determine the fair value of available-for-sale financial
assets not traded in active markets. The discounted cash flow method discounts the cash-flows of the
financial assets at an appropriate yield plus a credit spread where applicable. The carrying amount of
available-for-sale financial assets would decrease by $165 million if the discount rate used in the discounted
cash flow analysis is increased by 100 basis points from management's estimates (2013 - $439.9 million).
b) Estimation of the impairment loss on the loan portfolio
The Bank estimates the impairment loss on its loan portfolio by comparing the present value of the future
cash flows to the carrying amounts in the unconsolidated financial statements. The Bank makes
assumptions about the amount and timing of future cash flows as well as the loss experience of the
portfolio. The loss experience considers both the recovery rate on the portfolio as well as the probability of
default by the customer. Management considers both the market and economic conditions at the year end
and may modify the loss experience on the portfolio if necessary, to reflect current conditions.
Future cash flows for the individually significant loans and loans in arrears are estimated based on credit
reviews performed by management and management's estimate of the value of the collateral held.
If the Bank's estimation of the loss experience on the portfolio of loans not considered individually impaired
were adjusted by 100 basis points upwards, the impairment provision for loans and receivables would
increase by $1.0 million (2013 - $1.6 million), and if the historical period is adjusted from 5 years to 3 years,
the provision will increase by $8.6 million (2013 - $14.5 million).
(Expressed in Trinidad and Tobago dollars)
3 Financial Risk Management (continued)
3.6 Fair value of financial assets and liabilities (continued)
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