Home' Trinidad and Tobago Guardian : December 22nd 2015 Contents B9
First Citizens Bank Limited
(A Subsidiary of First Citizens Holdings Limited)
Unconsolidated Financial Statements
30 September 2015
Summary of significant accounting policies (continued)
m. Income tax (continued)
Deferred income tax is recognised on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the unconsolidated financial statements.
However, deferred tax liabilities are not recognised if they arise from the initial recognition of
goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset
or liability in a transaction other than a business combination that at the time of the transaction
affects neither accounting nor taxable profit or loss. Deferred income tax is determined using
tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date
and are expected to apply when the related deferred income tax asset is realised or the deferred
income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable
profit will be available against which the temporary differences can be utilised.
Deferred income tax liabilities are provided on taxable temporary differences arising from
investments in subsidiaries, associates and joint arrangements, except for deferred income tax
liability where the timing of the reversal of the temporary difference is controlled by the Bank and
it is probable that the temporary difference will not reverse in the foreseeable future. Generally the
Bank is unable to control the reversal of the temporary difference for associates. Only where there
is an agreement in place that gives the Bank the ability to control the reversal of the temporary
difference not recognised.
Deferred income tax assets are recognised on deductible temporary differences arising from
investments in subsidiaries, associates and joint arrangements only to the extent that it is probable
the temporary difference will reverse in the foreseeable future and there is sufficient taxable profit
available against which the temporary difference can be utilised.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to
offset current tax assets against current tax liabilities and when the deferred income taxes assets
and liabilities relate to income taxes levied by the same taxation authority on either the same
taxable entity or different taxable entities where there is an intention to settle the balances on a
n. Employee benefits
(i) Pension plans
The Bank operates a defined benefit plan, which is a pension plan that defines an amount
of pension benefits that an employee will receive on retirement, usually dependent on one
or more factors, such as age, years of service and compensation. This pension plan is funded
by payments from employees and by the Bank, taking account of the recommendations of
independent qualified actuaries.
Typically defined benefit plans define an amount of pension benefit that an employee will
receive on retirement, usually dependent on one or more factors such as age, years of service
The liability recognised in the balance sheet in respect of defined benefit pension plans is the
present value of the defined benefit obligation at the end of the reporting period less the fair
value of plan assets. The defined benefit obligation is calculated annually by independent
actuaries using the projected unit credit method. The present value of the defined benefit
obligation is calculated based on allocated to current or prior periods future cash outflows
using 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 to the terms
of the related pension obligation. In countries where there is no deep market in such bonds,
the market rates on government bonds are used.
The Plan is regulated under The Insurance Act 1980 of Trinidad and Tobago.
(ii) Profit sharing and bonus plans
The Bank recognises a liability and an expense for bonuses and profit-sharing, based on a
formula that takes into consideration the profit attributable to the Bank's shareholders after
certain adjustments. The Bank recognises a provision where contractually obliged or where
there is a past practice that has created a constructive obligation.
o. Cash and cash equivalents
For purposes of the statement of cash flows, cash and cash equivalents comprise of cash balances
on hand, deposits with other banks and short-term highly liquid investments with original
maturities of three months or less when purchased net of balances "due to other banks".
p. Interest income and expense
Interest income and interest expense are recognised in the unconsolidated income statement for
all interest bearing instruments on an accrual basis using the effective interest method based on
the initial carrying amount. Interest income includes coupons earned on fixed income investments,
loans and accrued discount and premium on treasury bills and other discounted instruments.
When loans become doubtful of collection, they are written down to their recoverable amounts.
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 or interest expense over the relevant
period. The effective interest rate is the rate that exactly discounts estimated future cash payments
(Expressed in Trinidad and Tobago dollars)
or receipts through the expected life of the financial instrument, or when appropriate, a shorter
period to the net carrying amount of the financial asset or financial liability. When calculating
the effective interest rate, the Bank estimates cash flows considering all contractual terms of
the financial instrument (for example, prepayment options), 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 similar 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.
q. Fee and commission income
Fees and commissions are recognised on an accrual basis, when the service has been provided.
Loan commitment fees for loans that are likely to be drawn down are deferred (together with
related direct cost) and recognised as an adjustment to the effective interest rate on the loan.
Loan syndication fees are recognised as revenue when the syndication has been completed and
the Bank has retained no part of the loan package for itself or has retained part at the same
effective interest rate as the other participants. Commissions and fees arising from negotiating or
participating in the negotiation of a transaction for a third party, such as the arrangement of the
acquisition of shares or other securities 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 based on the applicable service contracts usually on a time appropriate basis.
Asset management fees related to investment funds are recognised rateably over the period the
service is provided and accrued in accordance with pre-approved fee scales. The same principle
is applied for wealth management, financial planning and custody services that are continuously
provided over an extended period of time. Performance linked fees or fee components are
recognised when the performance criteria are fulfilled.
r. Dividend income
Dividends are recognised in the unconsolidated income statement when the entity's right to
receive payment is established.
s. Computer software
Costs associated with maintaining computer software programmes are recognised as an expense
when incurred. However, expenditure that enhances or extends the benefits of computer software
programmes beyond their original specifications and lives is recognised as a capital improvement
and added to the original cost of the software. Computer software development costs recognised
as assets when the following criteria are met:
• It is technically feasible to complete the software and use it
• Management intends to complete the software and use it
• There is an ability to use the software
• Adequate technical, financial and other resources to complete the development and to use it
• The expenditure attributable to the software during its development can be reliably measured.
The software development costs are amortised using the straight-line method over their useful
lives but not exceeding a period of three years.
Borrowings are recognised initially at fair value, being their issue proceeds net of transaction
costs incurred. Subsequently, borrowings are stated at amortised cost and any difference between
proceeds net of transactions costs and the redemption value is recognised in the unconsolidated
income statement over the period of the borrowings using the effective interest method.
Acceptances comprise undertakings by the Bank to pay bills of exchange drawn on customers.
The Bank expects most acceptances to be settled simultaneously with the reimbursement from the
customers. Acceptances are accounted for as off-balance sheet transactions and are disclosed as
contingent liabilities and commitments.
v. Dividend distribution
Dividends on ordinary shares are recognised in equity in the period in which they are approved
by the Company's shareholders. Dividends for the year, which are declared after the year end, are
disclosed in the subsequent events note when applicable.
w. Preference shares
The Preference shares are classified as equity, as these shares are non-convertible and non-
redeemable. Dividends are declared at the discretion of the directors.
Provisions are recognised when the Bank has a present legal or constructive obligation as a result
of past events, it is more likely than not 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 the 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.
Links Archive December 21st 2015 December 23rd 2015 Navigation Previous Page Next Page