Home' Trinidad and Tobago Guardian : January 26th 2017 Contents FirstCaribbean International Bank
(Trinidad and Tobago) Limited
For the year ended October 31, 2016 (Expressed in TT Dollars)
NOTES TO THE FINANCIAL STATEMENTS (continued)
2. Basis of preparation and summary of significant accounting policies (continued)
2.4 Summary of significant accounting policies (continued)
5. Financial instruments (continued)
(iii) Available-for-sale financial assets (continued)
Unquoted equity instruments for which fair values cannot be measured reliably are recognised at
cost less impairment.
All gains and losses from disposals and/or changes in the fair value of financial assets at fair value
through statement of income and derivatives held for trading are included in operating income as
net trading gains or losses. All gains and losses from disposals of investment securities available for
sale are included in operating income as net investment securities gain and losses. Where certain
financial assets are hedged and there is ineffectiveness, this is included in operating income as net
hedge relationship losses. Dividends are recorded on the accrual basis when declared and are
included in investment securities interest and similar income.
During the normal course of business, financial assets carried at amortised cost may be restructured
with the mutual agreement of the Bank and the counterparty. When this occurs for reasons other
than those which could be considered indicators of impairment (see 'impairment of assets'), the
Bank assesses whether the restructured or renegotiated financial asset is significantly different
from the original one by comparing the present value of the restructured cash flows discounted at
the original instruments interest rate. If the restructured terms are significantly different, the Bank
derecognises the original financial asset and recognises a new one at fair value, with any difference
recognised in the statement of income.
6. Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the statement of financial
position when there is a legally enforceable right to offset the recognised amounts and there is an
intention to settle on a net basis, or realise the asset and settle the liability simultaneously.
7. Sale and repurchase agreements
Securities sold subject to linked repurchase agreements ("repos") are retained in the financial
statements as investment securities and the counterparty liability is included in other borrowed funds.
Securities purchased under agreements to resell are recorded as loans and advances to other banks or
customers as appropriate. The difference between sale and repurchase price is treated as interest and
accrued over the life of repurchase agreements using the effective interest yield method.
8. Impairment of financial assests
The Bank 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 if, and 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 future cash flows of the financial asset or group of financial assets that
can be reliably estimated. Objective evidence that a financial asset or group of financial assets is
impaired includes observable data that comes to the attention of the Bank about the following loss
(a) significant financial difficulty of the issuer or obligor;
(b) a breach of contract, such as a default or delinquency in interest or principal payments;
(c) the Bank granting to a borrower, for economic or legal reasons relating to the borrower's financial
difficulty, a concession that the Bank would not otherwise consider;
(d) it becoming probable that the borrower will enter bankruptcy or other financial reorganisation;
(e) the disappearance of an active market for that financial asset because of financial difficulties; or
(f) observable data indicating that there is a measurable decrease in the estimated future cash flows
from a group of financial assets since the initial recognition of those assets, although the decrease
cannot yet be identified with the individual financial assets in the group, including:
- adverse changes in the payment status of borrowers in the group; or
- national or local economic conditions that correlate with default on the assets in the group.
If there is objective evidence that an impairment loss on loans and advances carried at amortised cost
has been incurred, the amount of the loss is measured as the difference between the carrying amount
and the recoverable amount, being the estimated present value of expected cash flows, including
amounts recoverable from guarantees and collateral, discounted based on the current effective interest
In certain instances, the terms of advances to customers are restructured or renegotiated. These facilities
are subject to the impairment review noted above, and where there is objective evidence of impairment,
the amount of any impairment loss is measured as the difference between the carrying value of the
facility and the present value of estimated future cash flows based on the renegotiated terms and
conditions discounted at the original effective interest rate before restructuring.
Loans are written off, in whole or in part, against the related allowance for credit losses upon settlement
(realisation) of collateral or in advance of settlement (no realisation) where the determination of the
recoverable value is completed and there is no realistic prospect of recovery above the recoverable value.
Any subsequent recoveries are credited to the statement of income. If the amount of the impairment
subsequently decreases due to an event occurring after the write-down, the release of the provision is
credited to the statement of income.
In circumstances where Central Bank guidelines and regulatory rules require provisions in excess of those
calculated under IFRS, these are disclosed as an appropriation of retained earnings and are included in a
non-distributable general banking reserve.
When assets are held subject to a finance lease, the present value of the lease payments is recognised as
a receivable. The difference between the gross receivable and the present value of the receivable is
recognised as unearned finance income. Lease income is recognised over the term of the lease using the
effective interest method, which reflects a constant periodic rate of return.
10. Property and equipment
Property and equipment are stated at historical cost less accumulated depreciation. Historical cost
includes expenditures that are directly attributable to the acquisition of the items.
Subsequent costs are included in the asset's carrying amount or are recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to
the Bank and the cost of the item can be measured reliably. All other repairs and maintenance are charged
to the statement of income during the financial period in which they are incurred.
Tangible leasehold improvements and furniture, fittings and equipment are depreciated on a straight line
basis, while computer equipment is depreciated on the reducing balance method at rates expected to
apportion the cost of the assets over their estimated useful lives. The rates used are as follows:
Furniture, fittings and equipment
Assets that are subject to depreciation are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. Where the carrying amount of
an asset is greater than its estimated recoverable amount, it is written down immediately to its
recoverable amount. The asset's recoverable amount is the higher of the asset's fair value less costs to sell
and the value in use.
Gains and losses on disposal of property and equipment are determined by reference to its carrying
amount and are taken into account in determining net income.
11. Financial guarantees
Financial guarantees are financial contracts that require the issuer to make specified payments to reimburse
the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance
with the original or modified terms of a debt instruments.
Financial guarantee contracts issued by the Bank that are not classified as insurance contracts are initially
recognised as a liability at fair value, adjusted for transaction costs that are directly attributable to the
issuance of the guarantees, which is generally the premium received or receivable on the date the guarantee
was given. Subsequently, financial guarantee liabilities are measured at the higher of the initial fair value
less cumulative amortisation, and the present value of any expected payment when a payment under the
guarantee has become probable. A financial guarantee that qualifies as a derivative is re-measured at fair
value as at each reporting date and reported as derivative instruments in assets or liabilities, as appropriate.
12. Cash and cash equivalents
For the purposes of the statement of cash flows, cash and cash equivalents comprise balances with less
than 90 days maturity from the date of acquisition including cash balances, non-restricted deposits with
Central Banks (excluding mandatory reserve deposits), treasury bills and other money market placements.
Provisions are recognised when the Bank has a present legal or constructive obligation as a result of past
events and it is probable 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.
14. Retirement benefit obligations
The Bank operates a defined contribution plan which covers all of its eligible employees. The Bank's
contribution expense in relation to this plan for the current period amounts to $881 (2014: $1,045).
15. Deferred taxation
Deferred tax is provided in full, using the liability method, on temporary differences arising between the
tax bases of assets and liabilities and their carrying amounts in the financial statements.
The principal temporary differences arise from depreciation on property and equipment, loan fee deferral,
revaluation of certain financial assets and liabilities, provisions for pensions and tax losses carried
forward; and, in relation to acquisitions, on the difference between the fair values of the net assets
acquired and their tax base. Currently enacted tax rates are used to determine deferred taxes.
Tax payable on profits, is recognised as an expense in the period in which profits arise. 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 tax losses can be utilised.
Deferred tax related to fair value re-measurement of available-for-sale investments, which are charged or
credited directly to other comprehensive income, is also credited or charged directly to other
comprehensive income and is subsequently recognised in the statement of income together with the
realised gain or loss.
Borrowings are recognised initially at fair value less transaction costs and are subsequently 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.
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