Home' Trinidad and Tobago Guardian : December 23rd 2015 Contents Wednesday, December 23, 2015 www.guardian.co.tt Guardian
First Citizens Holdings Limited
Unconsolidated Financial Statements
30 September 2015
Notes to the Unconsolidated Financial Statements (continued)
(Expressed in Trinidad and Tobago dollars)
Summary of significant accounting policies (continued)
e. Impairment of financial assets
(i) Assets carried at amortised cost
The Company 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.
The criteria that the Company uses to determine that there is objective evidence of an
impairment loss include:
i) Delinquency in contractual payments of principal or interest;
ii) Cash flow difficulties experienced by the borrower (for example, equity ratio, net income
percentage of sales);
iii) Breach of loan covenants or conditions;
iv) Initiation of bankruptcy proceedings;
v) Deterioration of the borrower's competitive position;
vi) Deterioration in the value of collateral; and
vii) Downgrading below investment grade level.
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 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 Company may measure
impairment on the basis of an instrument's fair value using an observable market price.
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
statement of income.
f. Financial instruments and right of offset
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.
g. Cash and cash equivalents
Cash and cash equivalents comprise of cash balances on hand, deposits with other banks and
short-term highly liquid investments with maturities of three months or less when purchased.
h. Interest income and expense
Interest income and interest expense are recognised in the statement of income for all interest
bearing instruments on an accrual basis using the effective yield method based on the actual
purchase price. 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 and interest
income is thereafter recognised based on the rate of interest that was used to discount the future
cash flows for the purpose of measuring the recoverable amount.
i. Dividend income
Dividends are recognised in the statement of income when the entity's right to receive payment is
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 net
proceeds and the redemption value is recognised in the statement of income over the period of
the borrowings using the effective interest method.
k. Share capital
(i) Dividends on Ordinary Shares
Dividends on ordinary shares are recognised in equity in the period in which they are declared.
Dividends for the year, which are declared after the balance sheet date, are disclosed as
(ii) Capital contributions
Payments made by the Government of the Republic of Trinidad and Tobago (GORTT) on
behalf of the Company towards its loan obligations are treated as capital contributions since
the GORTT has indicated that the Company will not be required to repay these amounts.
Provisions are recognised when the Company has a present legal or constructive obligation as a
result of past events, it is probable that an overflow 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.
Provisions are measured at the present value of the expenditure 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. The increase in the provision due to the passage of
time is recognised as interest expense.
m. Income tax
Current income tax is calculated on the basis of the applicable tax law and is recognised in the
income statement for the period except to the extent it relates to items recognised directly in
equity. Management periodically evaluates positions taken in tax returns with respect to situations
in which applicable tax regulations are subject to interpretation. It establishes provisions where
appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, for all temporary differences
arising between the tax base of assets and liabilities and their carrying values in the financial
statements. Deferred income tax is determined using tax rates that have been enacted or
substantially enacted by at the date of the statement of financial position and are expected to
apply when the related deferred income tax asset is realised or the deferred income tax liability is
However, the 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.
The principal temporary differences arise from tax losses carried forward.
Deferred tax assets relating to the carry forward of unused tax losses are recognised to the extent
that it is probable that future taxable profit will be available against which the unused tax losses
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
Financial risk management
The Company'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 Company's aim is therefore to achieve an appropriate balance between risk and return
and minimise potential adverse effects on the Company's financial performance.
The Company'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 Board provides written principles for overall risk management, as well as written policies covering
specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial
instruments and non-derivative financial instruments. In addition, internal audit is responsible for the
independent review of risk management and the control environment.
The most important types of risk are credit risk, liquidity risk, market risk and other operational risk.
a. Credit risk
This risk relates to the possibility that a counter party will cause a financial loss to the Company by
failing to discharge an obligation.
(a) Maximum exposure to credit risk before collateral held or other credit enhancement
Below shows a table of the various portfolios and there balances:
Credit risk exposures relating to on balance sheet financial
assets are as follows:
Cash and cash equivalents
None of these assets are past due or impaired.
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