Home' Trinidad and Tobago Guardian : October 21st 2015 Contents B18
The Paria Fund
30 June 2015
2.10 Subscriptions and redemptions
Subscriptions and redemptions are accounted for on the accrual basis.
2.11 Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the statement of financial
position where there is a legally enforceable right to set off the recognised amounts and there is
an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.
(a) Tax levied on Unitholders
Distribution income to Trinidad and Tobago residents are not subject to taxation. Tax on
distribution income is withheld on distributions paid to non-resident unitholders at the rates
applicable to the country in which the unitholders reside.
(b) Tax levied on the Fund
Under the provisions of the Corporation Tax Act of Trinidad and Tobago, the Fund is exempt
from taxation on its profits; therefore, no provisions have been made in these financial
statements for taxes.
The Fund is subject to foreign withholding tax on certain interest, dividends and capital gains
Provisions are recognised when the Fund has a present legal or constructive obligation as a result
of past events, it is more likely than not that an outflow of resources will be required to settle the
obligation and the amount has been reliably estimated.
Provisions are measured at the present value of the expenditures expected to be required to settle
the obligation using a pre-tax rate that reflects current market assessments of the time value of
money and the risks specific to the obligation.
2.14 Distributions to unitholders
Distributions to unitholders are recognised in the statement of changes in equity when they are
appropriately authorised as described in Note 1.
3. Critical Accounting Estimates and Judgments
3.1 Critical accounting estimates
Management makes estimates and judgments concerning the future. The resulting accounting
estimates will, by definition, seldom equal the related actual results. The estimates and judgments
that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are outlined below.
Fair value of available-for-sale financial assets not quoted in an active market
The fair value of such assets not quoted in an active market may be determined by the Fund using
reputable pricing sources (such as pricing agencies) or indicative prices from bond/debt market
makers. Broker quotes as obtained from the pricing sources may be indicative and not executable
or binding. The Fund would exercise judgment and estimates on the quantity and quality of
pricing sources used. Where no market data is available, the Fund may price positions using its
own models, which are usually based on valuation methods and techniques generally recognised
as standard within the industry. The inputs into these models are primarily earning multiples and
discounted cash flows. The models used to determine fair values are validated and periodically
reviewed by experienced personnel at First Citizens Asset Management Limited (the "Investment
Manager"). The models used for debt securities are based on net present value of estimated
future cash flows, adjusted as appropriate for liquidity, credit and market risk factors.
Models use observable data, to the extent practicable. However, areas such as credit risk (both own
and counterparty), volatilities and correlations require management to make estimates. Changes
in assumptions about these factors could affect the reported fair value of financial instruments.
The determination of what constitutes 'observable' requires significant judgment by the Fund. The
Fund considers observable data to be market data that is readily available, regularly distributed
or updated, reliable and verifiable, not proprietary, and provided by independent sources that are
actively involved in the relevant market.
(Expressed in United States Dollars)
2. Summary of Significant Accounting Policies (continued)
2.3 Available-for-sale financial assets
Available-for-sale financial assets are those which are intended to be held for an indefinite period
of time, which may be sold in response to needs for liquidity or changes in interest rates, exchange
rates or equity prices.
All purchases and sales of available-for-sale financial assets are recognised on the trade date
which is the date on which the Fund commits to purchase or sell the financial asset. Available-
for-sale financial assets are derecognised when the rights to receive cash flows from the
financial assets have expired or the Fund has transferred substantially all risks and rewards of
Available-for-sale financial assets are initially recognised at purchase price inclusive of
transaction costs, which is equivalent to the fair value at the date of recognition, and are
subsequently re-measured at fair value based on quoted market prices where available or
discounted cash flow models. Unrealised gains and losses arising from changes in the fair
value of available-for-sale financial assets are recognised in the statement of comprehensive
Realised gains and losses on available-for-sale financial assets are recognsed in the statement
of comprehensive income in the period in which they arise.
(c) Fair value estimation
The fair values of quoted financial assets in active markets are based on the last traded prices.
For unlisted financial assets and those where the market is not active, the Fund establishes
fair value by using valuation techniques in good faith. These include the use of recent arm's
length transactions, discounted cash flow analysis and other valuation techniques commonly
used by market participants.
2.4 Due to/due from related party
Due to/due from related party represents the net balance of daily cash redemptions and
subscriptions of redeemable units with related party at year-end. Due to/due from related party
are carried at cost.
2.5 Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with banks and other short-
term highly liquid investments with original maturities of three months or less. Cash and cash
equivalents, are carried at cost.
2.6 Net Assets Attributable to Unitholders
Units are redeemable at the unitholder's option subject to certain restrictions as outlined in Note
1 and are classified as equity. The distribution on these units is recognised in the statement of
changes in equity. The units can be put back to the Fund at any time for cash equal to the Fund's
net asset value per share as determined under the Trust Deed. Units are carried as net assets
attributable to unitholders at the redemption amount that is payable at the statement of financial
position date, if the unitholder exercised its right to put the unit back into the Fund.
2.7 Interest and dividend income
Interest income is recognised in the statement of comprehensive income for all interest bearing
instruments on an accrual basis using the effective interest method. The effective interest
method is a method of calculating the amortised cost of an available-for-sale financial asset and
of allocating the interest income over the relevant period. The effective interest rate is the rate
that exactly discounts estimated future cash payments or receipts over the expected life of the
Dividend income is recognised when the right to receive payment is established.
Expenses are accounted for on the accrual basis.
2.9 Transaction costs
Transaction costs are costs incurred to acquire available-for-sale financial assets. They include the bid-
ask spread, fees and commissions paid to agents, advisers, brokers and dealers. Transaction costs,
when incurred, are capitalised at initial recognition by inclusion in the purchase price of the investment.
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