Home' Trinidad and Tobago Guardian : December 31st 2014 Contents A38
Guardian www.guardian.co.tt Wednesday, December 31, 2014
30 September 2014
2. Significant Accounting Policies (Continued)
2.10 Investment in associate
Where the Company has the power to participate in (but not control)
the financial and operating policy decisions of another entity, it is
classified as an associate. Associates are initially recognised in the
statement of financial position at cost. The Company's share of
post-acquisition profits and losses is recognised in the statement
of comprehensive income, except that losses in excess of the
Company's investment in the associate are not recognised unless
there is an obligation to make good those losses.
Profits and losses arising on transactions between the Company and
its associates are recognised only to the extent of unrelated investors'
interests in the associate. The investor's share in the associate's
profits and losses resulting from these transactions are eliminated
against the carrying value of the associate.
Any premium paid for an associate above the fair value of the
Company's share of the identifiable assets, liabilities and contingent
liabilities acquired is capitalised and included in the carrying
amount of the associate. Where there is objective evidence that the
investment in an associate has been impaired the carrying amount
of the investment is tested for impairment in the same way as other
If the Company loses significant influence over an associate as a
result of a full or partial disposal, it shall derecognise that associate
and recognise in profit or loss the difference between, the sum of
the proceeds received plus the fair value of any retained interest and
the carrying amount of the investment in the associate at the date
significant influence is lost.
Borrowings are recognised initially at fair value, net of transaction
costs incurred. Borrowings are subsequently stated at amortised
cost; any difference between the proceeds (net of transaction
costs) and the redemption value is recognised in the statement of
comprehensive income in the period of the borrowings using the
effective interest method.
2.12 Share capital
Shares are classified as equity when there is no obligation to transfer
cash or other assets. Incremental costs directly attributable to the
issue of equity instruments are shown in equity as a deduction from
the proceeds, net of tax. Incremental costs directly attributable to the
issue of equity instruments as consideration for the acquisition of a
business are included in the cost of acquisition.
2.13 Reverse repurchase agreements
Securities purchased subject to repurchase agreements ('repos')
are included in the financial statements under Reverse Repurchase
Agreeements. The difference between the purchase price and the
repurchase price is treated as interest and accrued over the life of the
agreement using the effective interest method.
Provisions are recognised when the Company has a present legal
or constructive obligation as a result of past events, it is probable
that an outflow of resources embodying economic benefits will
be required to settle the obligation and a reliable estimate of the
amount of the obligation can be made. Where there are a number of
similar obligations, the likelihood that an outflow will be required in
settlement is determined by considering the class of obligation as a
whole. A provision is recognised even if the likelihood of an outflow
with respect to any one item included in the same class of obligations
may be small.
2.15 Income tax
(a) Current income tax
Income tax payable (receivable) is calculated on the basis of the
applicable tax law in Trinidad and Tobago and is recognised
as an expense (income) for the period except to the extent
that current tax related to items that are charged or credited
in other comprehensive income or directly to equity. In these
circumstances, current tax is charged or credited to other
comprehensive income or to equity (for example, current tax on
unrealised gains on available-for-sale investment).
(b) Deferred income tax
Deferred income tax is provided in full, using the liability method,
on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the financial
statements. Deferred income tax is determined using tax rates
(and laws) that have been enacted or substantially enacted by
the statement of financial position date and are expected to
apply when the related deferred income tax asset is realised or
the deferred income tax liability is settled.
The principal temporary differences arise from accelerated
tax depreciation, revaluation of financial assets and tax losses
Deferred tax assets are recognised where it is probable that
future taxable profit will be available against which the temporary
differences can be utilised.
2.16 Interest income and expenses
Interest income and expense for all interest-bearing financial
instruments are recognised within "interest income" and "interest
expense" in the statement of comprehensive income using the
effective interest method.
The effective interest method is a method of calculating the amortised
cost of a financial asset or a financial liability and of allocating the
interest income and interest expense over the relevant period. The
effective interest rate is the rate that exactly discounts estimated
future cash payments or receipts through the expected life of the
financial instrument or where appropriate, a shorter period to the net
carrying amount of the financial asset or liability. When calculating the
effective interest rate, the Company estimates cash flows considering
all contractual terms of the financial instrument but does not consider
future credit losses.
The calculation includes all fees paid or received between parties
to the contract that are an integral part of the effective interest rate,
transaction costs and all other premiums or discounts.
Once a financial asset or a group of financial assets has been written
down as a result of an impairment loss, interest income is recognised
using the rate of interest used to discount the future cash flows for
the purpose of measuring the impairment loss.
2.17 Fees and commissions
Fees and commissions are generally recognised on an accrual
basis when the service has been provided. Commission and fees
arising from negotiating, or participating in the negotiation of a
transaction for a third party - such as the acquisition of loans, shares
of other financial assets or the purchase or sale of businesses - are
recognised on completion of the underlying transaction. Portfolio and
other management advisory and service fees are recognised rateably
over the period the service is provided.
2.18 Dividend income
Dividends are recognised in the statement of comprehensive income
in "dividend and other income" when the Company's right to receive
payment is established.
2.19 Critical accounting estimates and judgments
The Company's financial statements and its financial results are
influenced by accounting policies, assumptions, estimates and
management judgments, which necessarily have to be made in the
course of preparation of the financial statements.
The Company makes estimates and assumptions that affect the
reported amounts of assets and liabilities within the next financial
year. All estimates and assumptions required in conformity with IFRS
are best estimates undertaken in accordance with the applicable
standard. Estimates and assumptions are evaluated on a continuous
basis, and are based on past experience and other factors, including
expectations with regard to future events.
Accounting policies and management's judgments for certain items
are especially critical for the Company's results and financial situation
due to their materiality.
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