Home' Trinidad and Tobago Guardian : November 21st 2013 Contents BG4 | COVER STORY
BUSINESS GUARDIAN www.guardian.co.tt NOVEMBER 2013 • WEEK THREE
Unit Trust Corporation (UTC) executive director,
Ian Chinapoo, says the institution's adoption
of accounting adjustments and definitions is as
a result of prudence, transparency and conser-
vatism as the UTC seeks to position itself for
the next stage.
"We are moving to improve our reporting standards to
ensure that we are in line with worldclass norms," said Chinapoo
in an interview on Monday.
The Unit Trust Corporation (UTC) decided to recognize an
adjustment of $18.2 billion that reclassifies the interests of
unitholders in the net assets of the locally domiciled funds
to non-controlling interest.
The adjustment, which is mandated by a new International
Financial Reporting Standard (IFRS 10), was reported in the
UTC's interim condensed consolidated financial statement for
the nine-month period ending September 30, 2013, which
was uploaded to the institution's website on Friday night.
In the financial statement, the UTC also reported that two
of its locally domiciled funds "omitted to impair certain equity
investments in their portfolios in prior periods."
This led to the institution correcting the omissions retro-
spectively for 2011 ($86 million) and for 2012 ($20.3 million),
which has had an impact on the corporation's profit and loss
accounts for those years.
In addition, the accounts disclose that for the first nine
months of this year, the UTC's redemptions exceeded its sub-
scriptions by $393 million.
On the issue of the $18.2 billion reclassification, the UTC's
vice president of finance, Nigel Edwards, said IFRS 10 requires
financial institutions to consolidate entities it controls and
provides guidelines for the presentation of consolidated financial
Edwards, who was part of the interview, said: "The $18.2
billion is only a reflection of our adoption of the IFRS. It
simply reflects the ownership of the unitholders---their invest-
ment in the funds.
"Prior to the adoption of IFRS 10, we were not consolidating.
So this is simply their consolidated ownership in the funds."
Chinapoo said the reclassification means that what was
previously defined as unit capital will now be classified as
Chinapoo said: "Our unitholder is the owner of the funds.
That's the net asset value that we publish daily."
He said banks and insurance companies that provide their
depositors and policyholders with certificates or policies, but
those investors do not have a direct interest "in what those
companies use their money for."
At the UTC, and in first-world mutual funds, the unitholders
actually have a stake in the portfolio itself, which is reflected
as the Net Asset Value NAV, Chinapoo said.
In adopting IFRS 10, the UTC is recognising the unitholders'
ownership of the funds and the definition in the international
standard is non-controlling interest, he said.
He said that the reclassification is something that mutual
funds around the world will have to adopt.
$106 million impairment
On the issue of the impairment, Chinapoo said this was
part of the UTC's attempt to elevate its governance practices
by specifically defining what impairment means by quantum
The UTC in response to emailed questions on Monday
night, said: "It has been the Corporation's policy to recognize
impairments against our income, if they were "significant or
"This standard was based on management judgment about
the potential for the security to recover.
"In 2013, in order to strengthen the quality of our financial
reporting we enhanced our policy to define exactly what the
words "significant" or "prolonged" meant.
"In keeping with our prudent and conservative standards,
we defined "significant" as a 30 per cent reduction below cost
price and we defined "prolonged" as a value that remained
below cost price for greater than 12 months.
"We then applied these new standards to our statements
retroactively for the reporting periods 2011 and 2012 consistent
with International Accounting Standards (specifically IAS 39)."
The UTC said that the book entry would have "absolutely
no effect on unitholders' funds since the funds are marked
to market daily," and that the restatement is merely to recognise
Prudence led to $18.2 bn
Continued on page 5
UTC's executive director Ian Chinapoo
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