Home' Trinidad and Tobago Guardian : December 23rd 2015 Contents B10
Guardian www.guardian.co.tt Wednesday, December 23, 2015
First Citizens Holdings Limited and its Subsidiaries
Consolidated Financial Statements
30 September 2015
Summary of significant accounting policies (continued)
e. Financial assets and financial liabilities (continued)
(i) Financial assets (continued)
(b) Available-for-sale financial assets
Available-for-sale financial assets are those 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 or that are not classified as loans and receivables, held to
maturity investments or financial assets at fair value through profit or loss.
(c) Financial assets at fair value through profit or loss
This category includes financial assets designated by the Group as fair value through
profit or loss upon initial recognition.
(d) Held to maturity
Held-to-maturity investments are financial assets with fixed or determinable payments
and fixed maturity dates where management has the positive intention and the ability to
hold to maturity.
(ii) Recognition and measurement
Regular purchases and sales of financial assets are recognised on the trade-date -- the date on
which the Group commits to purchase or sell the asset. Investments are initially recognised at
fair value plus transaction costs for all financial assets not carried at fair value through profit
or loss. Financial assets carried at fair value through profit or loss are initially recognised at
fair value, and transaction costs are expensed in the consolidated income statement. Financial
assets are de-recognised when the rights to receive cash flows from the investments have
expired or have been transferred and the Group has transferred substantially all risks and
rewards of ownership. Available-for-sale financial assets and financial assets at fair value
through profit or loss are subsequently carried at fair value. Loans and receivables and held
to maturity investments are subsequently carried at amortised cost using the effective interest
Gains or losses arising from changes in the fair value of the 'financial assets at fair value
through profit or loss' category are presented in the consolidated income statement within
'Other (losses)/gains -- net' in the period in which they arise. Dividend income from financial
assets at fair value through profit or loss is recognised in the consolidated income statement
as part of other income when the Group's right to receive payments is established.
Changes in the fair value of monetary and non-monetary securities classified as available-for-
sale are recognised in other comprehensive income.
When securities classified as available-for-sale are sold or impaired, the accumulated fair value
adjustments recognised in equity are included in the consolidated income statement as 'Gains
and losses from investment securities'.
(iii) Financial liabilities
The Group measures financial liabilities at amortised cost. Financial liabilities measured at
amortised cost include deposits from banks or customers, bonds payables, other funding
instruments and notes due to related parties.
(iv) Recognition and de-recognition of financial instruments
The Group uses trade date accounting for regular way contracts when recording financial
assets transactions. Financial assets that are transferred to third parties but do not qualify for
derecognition are presented as assets pledged as collateral if the transferee has the right to
sell or re-pledge them.
Financial assets are de-recognised when the contractual right to receive the cashflows from
these assets have ceased to exist or the assets have been transferred and substantially all the
risks and rewards of ownership of the assets are also transferred.
Financial liabilities are de-recognised when they have been redeemed or otherwise
(v) Determination of fair value
For financial instruments traded in an active market, the determination of fair values of
financial assets and liabilities is based on quoted market prices or dealer price quotations.
A financial instrument is regarded as quoted in an active market if quoted prices are readily
and regularly available from an exchange, dealer, broker, industry group, pricing service or
regulatory agency, and these prices represent actual and regular occurring market transactions
on an arm's length basis. If the above criteria are not met, the market is regarded as being
inactive. Indicators that a market is inactive are when there is a wide bid-offer spread or
significant increase in the bid-offer spread or there are few recent transactions. When a
market becomes inactive, the valuation technique is the Group's internally developed model
which is based on discounted cashflow analysis.
For all other financial instruments, fair value is determined using valuation techniques. In
these techniques, fair values are estimated from observable data in respect of similar financial
instruments, using models to estimate the present value of expected future cash flows or
other valuation techniques using input existing at the year end.
The Group uses an internally developed model which is generally consistent with other
valuation models used in the industry. Valuation models are used to value unlisted debt
securities and other debt securities for which the market has become or is illiquid. Some of the
inputs of this model may not be market observable and are therefore based on assumptions.
f. Impairment of financial assets
(i) Assets carried at amortised cost
The Group assesses at each reporting date whether there is objective evidence that a financial
asset or group of financial assets is impaired. A financial asset or a group of financial assets is
impaired and impairment losses are incurred only if there is objective evidence of impairment
as a result of one or more events that occurred after the initial recognition of the asset (a 'loss
event') and that loss event (or events) has an impact on the estimated future cash flows of the
financial asset or group of financial assets that can be reliably estimated.
Evidence of impairment may include indications that the debtors or a group of debtors is
experiencing significant financial difficulty, default or delinquency in interest or principal
payments, the probability that they will enter bankruptcy or other financial reorganisation,
and where observable data indicate that there is a measurable decrease in the estimated
future cash flows, such as changes in arrears or economic conditions that correlate with
The Group first assesses whether objective evidence of impairment exists individually for
financial assets that are individually significant, and individually or collectively for financial
assets that are not individually significant. If the Group determines that no objective evidence
of impairment exists for an individually assessed financial asset, whether significant or not,
it includes the asset in a group of financial assets with similar credit risk characteristics and
collectively assesses them for impairment. Assets that are individually assessed for impairment
and for which an impairment loss is or continues to be recognised are not included in a
collective assessment of impairment. Additionally, no provisioning is required for Assets that
are supports by government guarantees even if the exposure is classified as "Non Performing".
The amount of the loss is measured as the difference between the asset's carrying amount
and the present value of estimated future cash flows (excluding future credit losses that
have not been incurred) discounted at the financial asset's original effective interest rate. The
carrying amount of the asset is reduced through the use of an allowance account and the
amount of the loss is recognised in the consolidated income statement. If a loan has a variable
interest rate, the discount rate for measuring any impairment loss is the current effective
interest rate determined under the contract. As a practical expedient, the Group may measure
impairment on the basis of an instrument's fair value using an observable market price.
The calculation of the present value of the estimated future cash flows of a collateralised
financial asset reflects the cash flows that may result from foreclosure less costs for obtaining
and selling the collateral, whether or not foreclosure is probable.
For the purposes of a collective evaluation of impairment, financial assets are grouped on
the basis of similar credit risk characteristics (i.e. on the basis of the Group's grading process
that considers asset type, industry, geographical location, collateral type, past-due status and
other relevant factors). Those characteristics are relevant to the estimation of future cash
flows for groups of such assets by being indicative of the debtors' ability to pay all amounts
due according to the contractual terms of the assets being evaluated.
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 Group and their
magnitude). The methodology and assumptions used for estimating future cash flows are
reviewed regularly by the Group to reduce any differences between loss estimates and actual
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 consolidated income statement in impairment
loss on loans net of recoveries.
Notes to the Consolidated Financial Statements (continued)
(Expressed in Trinidad and Tobago dollars)
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