Home' Trinidad and Tobago Guardian : December 17th 2013 Contents A42
Guardian www.guardian.co.tt Tuesday, December 17, 2013
First Citizens Asset Management Limited
30 September 2013
Notes to the Financial Statements (continued)
(Expressed in Trinidad and Tobago dollars)
2 Summary Of Significant Accounting Policies (continued)
2.7 Property, plant and equipment (continued)
Revaluation surpluses are credited directly to equity under the heading revaluation reserve. To the
extent the surplus reverses a previous deficit charged to income in respect of the same asset, it is
recognised in the income statement. Revaluation deficits not covered by a previous surplus of the
same asset are charged to the income statement.
Depreciation and amortisation are computed on all assets except land.
The provision for depreciation and amortisation is computed at varying rates to fully depreciate the
assets over their estimated useful lives:-
The following rates are used:
2% straight line
Equipment and furniture
20% to 25% straight line
33 1/3% straight line
25% straight line
Amortised over the life of the lease
The assets' useful lives are reviewed and adjusted if appropriate at each statement of financial position
date. Assets that are subject to amortisation are reviewed for impairment whenever events or changes
in circumstance indicate 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. Gains and losses on disposal of premises and equipment
are determined by reference to their carrying amount and are taken into account in determining
operating profit. When revalued assets are sold, the amounts included in revaluation reserve are
transferred to retained earnings.
2.8 Deferred income taxes
Deferred income tax is provided, using the liability method, for all temporary differences arising
between the tax bases of the assets and liabilities and their carrying values for financial reporting
purposes. Tax rates enacted or substantially enacted at the statement of financial position date are
used to determine deferred income tax.
The principal temporary difference arises from the difference between the accounting and tax
treatment of depreciation on property, plant and equipment and the revaluation of financial assets
available for sale and freehold land and building.
Deferred income tax related to fair value re-measurement of available-for-sale investments, which are
charged or credited directly to equity, is also credited or charged directly to equity and is subsequently
recognised in the income statement together with the deferred gain or loss.
Provisions are recognised when the Company has a present legal or constructive obligation as a
result of past events, 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.
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 obligations 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.
2.10 Employee benefits
(a) Pension plans
The Company's employees are members of the Group defined benefit plan. A defined benefit
plan defines 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 and compensation. This
pension plan is funded by the payments from employees and the Company, taking account
of the recommendations of independent qualified actuaries. The Group defined benefit plan
operates as a plan that shares risks among subsidiaries of the Group that are under common
control. The Group's current policy is to recognise the net defined benefit cost of the plan
in the separate financial statements of First Citizens Bank Limited, the entity which is legally
considered the sponsoring employer for the plan. The Company recognises a cost equal to its
contribution payable for its employees in its separate financial statements.
(b) Bonus plans
The Company recognises a liability and an expense for bonuses based on a formula that takes
into consideration the profit attributable to the Group's shareholders after certain adjustments.
The Company recognises a provision where contractually obliged or where there is a past
practice that has created a constructive obligation.
Dividends that are proposed and declared during the period are accounted for as an appropriation of
retained earnings in the statement of changes in equity.
2.12 Interest income and expense
Interest income and interest expense are recognised in the income statement 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, accrued discount and other
2.13 Fee and commission income
Fees and commissions are recognised on an accrual basis, when the service has been provided, and
fees arising from negotiation, or participating in the negotiation of a transaction for a third party, such
as the acquisition of loans, shares or other securities are recognised on completion of the underlying
transaction. 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.
2.14 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 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.
3 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
minimize potential adverse effects on the Company's financial performance.
The Board of Directors regularly reviews the operations of the Company and its financial performance to
identify areas of financial risk and to develop appropriate strategies to mitigate such risk. In discharging
this responsibility, the Board of Directors is assisted by Group Internal Audit which 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.
Market risk includes currency risk, interest rate and other price risk.
3.1 Credit risk
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other
party by failing to discharge an obligation. The Company does not engage in the extension of
credit and credit risk is largely restricted to cash equivalents, financial assets- available for sale and
deposits held with banks. Exposure to credit risk is managed through appropriate investment policies,
procedures, practices and the Group internal audit function, together with approved limits.
Maximum exposure to credit risk before collateral held or other credit enhancement
Gross Maximum Exposure
Credit risk exposures relating to statement of
financial position on financial assets
Cash and due from banks
Statutory deposit with Central Bank
Due from related parties
All receivable balances are neither past due nor impaired.
The above table represents a worst case scenario of credit risk exposure to the Company without
taking account of any collateral held or other credit enhancements attached.
3.2 Market risk
The Company takes on exposure to market risk, which is the risk that the fair value or future cash
flows of a financial instrument will fluctuate because of changes in market prices. Market risk arises
from open positions in interest rate, currency and equity products, all of which are exposed to general
and specific market movements and changes in the level of volatility of market rates or prices such as
interest rates, credit spreads, foreign exchange rates and equity prices.
3.2.1 Currency risk
The Company takes on exposure to effects of fluctuations in the prevailing foreign currency
exchange rates on its financial position and cash flows.
The market risk associated with maintaining foreign currency exposures is monitored
monthly by the Group's Asset-Liability Committee (ALCO). The Company does not currently
engage in any hedging activities.
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