Home' Trinidad and Tobago Guardian : December 23rd 2015 Contents B13
First Citizens Holdings Limited and its Subsidiaries
Consolidated Financial Statements
30 September 2015
(Expressed in Trinidad and Tobago dollars)
Summary of significant accounting policies (continued)
x. Intangible assets
Intangible assets comprise separately identifiable items arising from business combinations,
computer software licenses and other intangible assets. Intangible assets are recognised at cost.
The cost of an intangible asset acquired in a business combination is its fair value at the date of
acquisition. Intangible assets with a definite useful life are amortised using the straight line method
over the period that the benefits from these assets are expected to be consumed, generally not
exceeding 20 years. Intangible assets with an indefinite useful life are not amortised. At each date
of the consolidated statement of financial position, intangible assets are reviewed for indications
of impairment or changes in estimated future economic benefits. If such indications exist, the
intangible assets are analysed to assess whether their carrying amount is fully recoverable. An
impairment loss is recognised if the carrying amount exceeds the recoverable amount.
The Group chooses to use the cost model for the measurement after recognition.
Intangible assets with indefinite useful life are tested annually for impairment and whenever there
is an indication that the asset may be impaired.
Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration
transferred over the Group's interest in net fair value of the net identifiable assets, liabilities
and contingent liabilities of the acquiree and the fair value of the non-controlling interest in
For the purpose of impairment testing, goodwill acquired in a business combination is
allocated to each of the CGUs, or groups of CGUs, that is expected to benefit from the
synergies of the combination. Each unit or group of units to which the goodwill is allocated
represents the lowest level within the entity at which the goodwill is monitored for internal
management purposes. Goodwill is monitored at the operating segment level.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes
in circumstances indicate a potential impairment. The carrying value of goodwill is compared
to the recoverable amount, which is the higher of value in use and the fair value less costs of
disposal. Any impairment is recognised immediately as an expense and is not subsequently
(ii) Other Intangible assets
Other intangible assets are initially recognised when they are separable or arise from
contractual or other legal rights, the cost can be measured reliably and in the case of
intangible assets not acquired in a business combination, where it is probable that future
economic benefits attributes to the assets with flow from their use. The value of intangible
assets which are acquired in a business combination is generally determined using income
approach methodologies such as the discounted cash flow method.
Other intangible assets are stated at cost less amortisation and provisions for impairment, if
any, plus reversals of impairment, if any. They are amortised over their useful lives in a manner
that reflects the pattern to which they contribute to future cash flow.
y. Fiduciary activities
The Group acts as trustees and in other fiduciary capacities that result in the holding or placing of
assets on behalf of individuals, trusts, retirement benefit plans and other institutions. These assets
and income arising thereon are excluded from these consolidated financial statements, as they are
not assets of the Group (Note 3.4).
z. Earning per share
Earnings per share is calculated by dividing the profit attributable to the equity holders, by the
weighted average number of ordinary shares in issue during the year.
a.a. Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to
the chief operating decision-maker. The chief operating decision-maker, who is responsible for
allocating resources and assessing performance of the operating segments, has been identified as
the steering committee that makes strategic decisions.
Financial risk management
The Group's activities expose it to a variety of financial risks and those activities involve the analysis,
evaluation, acceptance and management of some degree of risk or combination of risks. Taking risk
is core to the financial business, and the operational risks are an inevitable consequence of being in
business. The Group's aim is therefore to achieve an appropriate balance between risk and return and
minimise potential adverse effects on the Group's financial performance.
The Group's risk management policies are designed to identify and analyse these risks, to set
appropriate risk limits and controls, and to monitor the risks and adherence to limits by means of
reliable and up-to-date information systems. The Group regularly reviews its risk management policies
and systems to reflect changes in markets, products and emerging best practice.
Risk management framework
The Board of Directors has overall responsibility for the establishment and oversight of the Group's
risk management framework. To assist the Board of Directors in fulfilling its duties, two Board Sub-
Committees were established to monitor and report to the Board of Directors on the overall risks within
the Group - the Board Enterprise Risk Management Committee and the Board Credit Committee; and
two Senior Management Committees -- the Senior Manager Risk Committee and the Asset Liability
The Group Enterprise Risk Unit, headed by the Group Chief Risk Officer (CRO), reports to both Sub-
Committees of the Board of Directors through the Senior Management Committees. This unit is
responsible for the management, measurement, monitoring and control of operational, market and
credit risk for the Group through the Group Operational Risk Unit, Group Credit and Risk Administration
Unit, Group Market Risk Unit and Group Business Continuity Planning Unit. The Group Enterprise Risk
Unit reports into the Senior Management Risk Committee to allow monitoring of the adherence to risk
limits and the impact of developments in the aforementioned risk areas on strategy and how strategy
should be varied in light of the developments.
The Asset Liability Committee (ALCO) was established to manage and monitor the policies and
procedures that address financial risks associated with changing interest rates, foreign exchange rates
and other factors that can affect the Group's liquidity. The ALCO seeks to limit risk to acceptable levels
by monitoring and anticipating possible pricing differences between assets and liabilities across the
Bank and the Group's various companies via the Treasury and International Trade Centre. The Treasury
and International Trade Centre's primary role and responsibility is to actively manage the Group's
liquidity and market risks. The ALCO is also supported in some specific areas of activity by the Bank's
Market Risk Committee.
As part of its mandate, the Board establishes written principles for overall risk management, as well as
ensuring that policies are in place covering specific areas of risk, such as foreign exchange risk, interest
rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments.
In addition, the Group Internal Audit Department is responsible for the independent review of risk
management and the control environment, and reports its findings and recommendation to the Board
The most important types of risk are credit risk, liquidity risk, market risk and other operational risk.
Market risk includes currency risk, interest rate and other price risk.
a. Credit risk
Credit exposures arise principally in lending activities that lead to loans and advances and in
investment activities that bring debt securities and other bills into the Group's asset portfolio.
Credit risk also occurs in off balance sheet financial instruments such as loan commitments. This
risk relates to the possibility that a counter party will cause a financial loss to the Group by failing
to discharge an obligation. All the Group's lending and investment activities are conducted with
various counter parties and it is in pursuing these activities that the Group becomes exposed to
It is expected that these areas of business will continue to be principal ones for the Group in the
future and with loans and advances currently comprising a significant portion of the Group's
assets and being responsible for a substantial portion of the revenue generated, it is anticipated
that the Group will continue to be exposed to credit risk well into the future. The management
of credit risk is therefore of utmost importance to the Group and an appropriate organisational
structure has been put in place to ensure that this function is effectively discharged for the Group's
business; management therefore carefully manages its exposure to credit risk. Exposure to credit
risk is managed through appropriate credit policies, procedures, practices and audit functions,
together with approved limits. Exposure is also managed by obtaining collateral and corporate
and personal guarantees.
(i) Credit risk management
In its management of credit risks, the Group has established an organisational structure which
supports the lending philosophy of the Group. This structure comprises the Board of Directors,
the Board Credit Committee (BCC), Senior Management Enterprise- Risk Committee (SMERC),
the Chief Risk Officer (CRO), the Credit Administration Department and the Internal Audit
Department. The Board of Directors maintains general oversight to ensure that policies and
procedures are consistent with the strategic direction and credit philosophy of the Group and
that they serve to bring the required level of protection over assets that are exposed to credit
risks. To facilitate day to day decision making and timely implementation of decisions, the
Board has delegated authority for specific areas to specific committees and/or officers with an
appropriate reporting system to the Board. The BCC focuses primarily on credit risk appetite
and in so doing sanctions amendments to credit policies, delegation of lending authority
to senior management and credit requests exceeding the authority of management. The
SMERC together with the CRO monitors the effectiveness of credit procedures and policies
and may direct changes to strategies to improve the effectiveness of policies. The major focus
of the Credit Administration Department is to formulate credit policies, monitor compliance
with them and on a continuous basis to assess their relevance to the changing business
environment. Most of these policies are established and communicated through the Group's
written Credit Policy Manual. This document sets out in detail the current policies governing
the lending function and provides a comprehensive framework for prudent risk management
of the credit function. Major areas of focus are General Credit Criteria, Credit Risk Rating,
Controls Risk Mitigants over the Credit Portfolio and Credit Concentration among others.
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