Home' Trinidad and Tobago Guardian : December 28th 2016 Contents 8
First Citizens Holdings Limited And Its Subsidiaries
Consolidated Financial Statements
30 September 2016
(Expressed in Trinidad and Tobago dollars)
2 Summary of significant accounting policies (continued)
l. Income tax
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
m. Employee benefits
(i) Pension plans
The Group 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 Group, 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 cash outflows allocated to current or prior periods 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.
(ii) Profit sharing and bonus plans
The Group recognises a liability and an expense for bonuses and profit-sharing, based on a
formula that takes into consideration the profit attributable to the Group's shareholders after
certain adjustments. The Group recognises a provision where contractually obliged or where
there is a past practice that has created a constructive obligation.
n. Cash and cash equivalents
For purposes of the consolidated 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".
o. Interest income and expense
Interest income and interest expense are recognised in the consolidated 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 a loan and receivable is impaired, the Group reduces the carrying amount to its recoverable
amount, being the estimated future cash flow discounted at the original effective interest rate of
the instrument, and continues unwinding the discount as interest income.
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
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 Group 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.
p. 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 Group 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 apportionate 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.
q. Dividend income
Dividends are recognised in the consolidated income statement when the entity's right to receive
payment is established.
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 transaction costs and the redemption value is recognised in the consolidated
income statement over the period of the borrowings using the effective interest method.
Acceptances comprise undertakings by the Group to pay bills of exchange drawn on customers.
The Group 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.
t. Dividend distribution
Dividends on ordinary shares are recognised in equity in the period in which they are approved by
the Bank's Board of Directors. Dividends for the year, which are declared after the year end, are
disclosed in the subsequent events note when applicable.
u. Preference shares
Preference shares that are non-convertible and non-redeemable are classified as equity. Dividends
are declared at the discretion of the directors.
Provisions are recognised when the Group 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.
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.
w. 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
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