Home' Trinidad and Tobago Guardian : December 22nd 2015 Contents B8
First Citizens Bank Limited
(A Subsidiary of First Citizens Holdings Limited)
Unconsolidated Financial Statements
30 September 2015
Summary of significant accounting policies (continued)
h. Impairment of financial assets (continued)
(i) Assets carried at amortised cost (continued)
Future cash flows in a group of financial assets that are collectively evaluated for impairment
are estimated on the basis of the contractual cash flows of the assets in the group and
historical loss experience for assets with credit risk characteristics similar to those in the
group. Historical loss experience is adjusted on the basis of current observable data to reflect
the effects of current conditions that did not affect the period on which the historical loss
experience is based and to remove the effects of conditions in the historical period that do not
currently exist. Estimates of changes in future cash flows for groups of assets should reflect
and be directionally consistent with changes in related observable data from period to period
(for example, changes in unemployment rates, property prices, payment status, or other
factors indicative of changes in the probability of losses to the Bank and their magnitude). The
methodology and assumptions used for estimating future cash flows are reviewed regularly
by the Bank to reduce any differences between loss estimates and actual loss experience.
When a loan is uncollectible, it is written off against the related provision for loan impairment.
Such loans are written off after all the necessary procedures have been completed and the
amount of the loss has been determined.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease
can be related objectively to an event occurring after the impairment was recognised (such as
an improvement in the debtor's credit rating), the amount of the reversal is recognised in the
unconsolidated income statement in impairment loss on loans net of recoveries.
(ii) Assets classified as available-for-sale
The Bank assesses at the year-end whether there is objective evidence that a financial asset
or a group of financial assets is impaired. In the case of equity investments classified as
available-for-sale, a significant or prolonged decline in the fair value of the security below
its cost is considered in determining whether the assets are impaired. If any such evidence
exists for available-for-sale financial assets, the cumulative loss -- measured as the difference
between the acquisition cost and the current fair value, less any impairment loss on that
financial asset previously recognised in profit or loss -- is removed from equity and recognised
in the unconsolidated income statement. Impairment losses recognised in the unconsolidated
income statement on equity instruments are not reversed through the unconsolidated income
Debt securities are classified based on the criteria in Note 2.g (i). If, in a subsequent period,
the fair value of a debt instrument classified as available-for-sale increases and the increase
can be objectively related to an event occurring after the impairment loss was recognised in
profit or loss, the impairment loss is reversed through the unconsolidated income statement.
(iii) Renegotiated loans
Loans that are either subject to collective impairment assessment or individually significant
and whose terms have been negotiated are no longer considered to be past due but are
treated as new loans. In subsequent years the asset is considered to be past due and disclosed
only if renegotiated again.
i. Impairment of non-financial assets
Assets that have an indefinite useful life are not subject to amortisation and are tested annually
for impairment. Assets that are subject to amortisation are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be recoverable. An
impairment loss is recognised for the amount by which the asset's carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell
and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels
for which there are separately identifiable cash flows (cash-generating units). Non-financial assets
other than goodwill that suffered impairment are reviewed for possible reversal of the impairment
at each reporting date.
j. Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the unconsolidated
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
k. Lease transactions
Leases are accounted for in accordance with IAS 17 and IFRIC 4. They are divided into finance
leases and operating leases.
Leases in which a significant portion of the risks and methods of ownership are retained by
another party, the lessor, are classified as operating leases. Leases of assets where the Bank has
substantially all the risk and rewards of ownership are classified as finance leases.
(i) The Bank as the lessee
The Bank has entered into operating leases where the total payments made under operating
leases are charged to the unconsolidated income statement on a straight-line basis over the
period of the lease. When an operating lease is terminated before the period has expired,
any penalty payment made to the lessor is recognised as an expense in the period in which
termination takes place.
When assets are held subject to a finance lease, an asset and liability is recognised in the
unconsolidated statement of financial position at amounts equal at inception to the fair value
of the leased asset or, if lower, the present value of the minimum lease payments. Lease
payments are apportioned between the finance charge and the outstanding liability so as to
achieve a constant rate on the finance balance outstanding.
The interest element of the finance cost is charged to the unconsolidated income statement
over the lease period so as to produce a constant periodic rate of interest on the remaining
balance of the liability for each period. The plant and equipment acquired under finance
leases is depreciated over the shorter of the useful life of the asset and the lease term.
(ii) The Bank as the lessor
When assets are held subject to a finance lease, the present value of the lease payments is
recognised as a receivable. The difference between the gross receivable and the present value
of the receivable is recognised as unearned finance income. Lease income is recognised over
the term of the lease using the net investment method (before tax), which reflects a constant
periodic rate of return.
l. Property, plant and equipment
Freehold premises are shown at fair value based on assessments performed by management or by
independent valuators every three years, less subsequent depreciation for buildings. Valuations are
performed with sufficient regularity to ensure that the fair value of a revalued asset does not differ
materially from its carrying amount. Any accumulated depreciation at the date of revaluation is
eliminated against the gross carrying amount of the assets and the net amount is restated to the
revalued amount of the asset.
All other property, plant and equipment are stated at historical cost less depreciation. The
valuation of freehold premises is reviewed annually to ensure it approximately equates to fair
value. The valuations of freehold premises are re-assessed when circumstances indicate there may
be a material change in value.
Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset,
as appropriate, only when it is probable that future economic benefits associated with the item
will flow to the Bank and the cost of the item can be measured reliably. All other repairs and
maintenance are charged to the unconsolidated income statement during the financial period in
which they are incurred.
Increases in the carrying amount arising on revaluation of freehold premises are credited to fair
value reserves in shareholders' equity. Decreases that affect previous increases of the same assets
are charged against fair value reserves directly in equity; all other decreases are charged to the
unconsolidated income statement. Any accumulated depreciation at the date of revaluation is
eliminated against the gross carrying amount of the asset, and the net amount is restated to the
revalued amount of the asset.
Leasehold improvements and equipment are recorded at cost less accumulated depreciation.
Depreciation and amortisation are computed on all assets except land.
The provision for depreciation and amortisation is computed using the straight line method to
allocate their cost or revalued amounts to their residual values over their estimated useful lives, as
Equipment and furniture
Computer equipment and motor vehicles 3-5 years
Amortised over the life of the lease
The assets' useful lives are reviewed and adjusted if appropriate at each reporting date. Assets
that are subject to amortisation are reviewed for impairment whenever events or changes in
circumstances indicate the carrying amount may not be recoverable.
Where the carrying amount of an asset is greater than its estimated recoverable amount, it is
written down immediately to its recoverable amount. The recoverable amount is the higher of the
assets fair value less cost to sell and value in use. Gains and losses on disposal of property, plant
and equipment are determined by reference to their carrying amount and are recognised within
the income statement. When revalued assets are sold, the amounts included in fair value reserves
are transferred to retained earnings.
m. Income tax
The tax expense for the period comprises current and deferred tax. Tax is recognised in the income
statement, except to the extent that it relates to items recognised in other comprehensive income
or directly in equity. In this case, the tax is also recognised in other comprehensive income or
directly in equity, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively
enacted at the balance sheet date in the countries where the company and its subsidiaries operate
and generate taxable income. Management periodically evaluates positions taken in tax returns
with respect to situations in which applicable tax regulation is subject to interpretation. It establishes
provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
(Expressed in Trinidad and Tobago dollars)
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