Home' Trinidad and Tobago Guardian : December 27th 2013 Contents B36
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Consolidated Financial Statements
30 September 2013
2 Summary of Significant Accounting Policies (continued)
2.7 Impairment of financial assets (continued)
(c) Renegotiated loans
Loans that are either subject to collective impairment assessment or individually significant and whose
terms have been negotiated are no longer considered to be past due but are treated as new loans. In
subsequent years the asset is considered to be past due and disclosed only if renegotiated again.
2.8 Impairment of non-financial assets
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for
impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be recoverable. An impairment
loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately
identifiable cash flows (cash-generating units). Non financial assets other than goodwill that suffered an
impairment are reviewed for possible reversal of the impairment at each reporting date.
2.9 Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the consolidated 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.
2.10 Sale and repurchase agreements and lending of securities
Securities sold subject to sale and repurchase agreements (repos) are retained on the consolidated
statement of financial position as investment securities and the counterparty liability is included in other
Securities purchased under agreements to resell (reverse repos) are recorded as loans to other banks or
customers as appropriate.
The difference between sale and repurchase price is treated as interest and accrued over the life of the
repo agreement using the effective interest method.
2.11 Lease transactions
Leases are accounted for in accordance with IAS 17 and IFRIC 4. They are divided into finance leases
and operating leases.
Leases in which a significant portion of the risks and methods of ownership are retained by another
party, the lessor, are classified as operating leases. Leases of assets where the Group has substantially all
the risk and rewards of ownership are classified as finance leases.
(a) The Group as the lessee
The Group has entered into operating leases where the total payments made under operating
leases are charged to the consolidated income statement on a straight-line basis over the period
of the lease. When an operating lease is terminated before the period has expired, any penalty
payment made to the lessor is recognised as an expense in the period in which termination takes
When assets are held subject to a finance lease, an asset and liability is recognised in the
consolidated statement of financial position at amounts equal at inception to the fair value of the
leased asset or, if lower, the present value of the minimum lease payments. Lease payments are
apportioned between the finance charge and the outstanding liability so as to achieve a constant
rate on the finance balance outstanding.
The interest element of the finance cost is charged to the consolidated income statement over
the lease period so as to produce a constant periodic rate of interest on the remaining balance of
the liability for each period. The plant and equipment acquired under finance leases is depreciated
over the shorter of the useful life of the asset and the lease term.
(b) The Group as the lessor
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 net investment method (before tax), which reflects a constant periodic rate
Notes to the Consolidated Financial Statements (continued)
(expressed in Trinidad and Tobago dollars)
2.12 Property, plant and equipment
Freehold premises are shown at fair value based on assessments performed by management or by
independent valuators every three years, less subsequent depreciation for buildings. All other property,
plant and equipment are stated at historical cost less depreciation. The valuation of freehold premises is
reviewed annually to ensure it approximately equates to fair value. The valuations of freehold premises
are re-assessed when circumstances indicate there may be a material change in value.
Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow
to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are
charged to the consolidated income statement during the financial period in which they are incurred.
Increases in the carrying amount arising on revaluation of freehold premises are credited to fair value
reserves in shareholders' equity. Decreases that affect previous increases of the same assets are charged
against fair value reserves directly in equity; all other decreases are charged to the consolidated income
statement. Any accumulated depreciation at the date of revaluation is eliminated against the gross
carrying amount of the asset, and the net amount is restated to the revalued amount of the asset.
Leasehold improvements and equipment are recorded at cost less accumulated depreciation.
Depreciation and amortisation are computed on all assets except land.
The provision for depreciation and amortisation is computed at varying rates to allocate the cost of the
assets to their residual value.
The following rates are used:
2% straight line
Equipment and furniture
20% to 25% straight line
Computer equipment and motor vehicles
20% to 33.3% straight line
Amortised over the life of the lease
The assets' useful lives are reviewed and adjusted if appropriate at each reporting date. Assets that
are subject to amortisation are reviewed for impairment whenever events or changes in circumstances
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. The recoverable amount is the higher of the assets fair
value less cost to sell and value in use. Gains and losses on disposal of property, plant 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 fair value reserves are transferred to
2.13 Income tax
Current income tax is calculated on the basis of the applicable tax law in the respective jurisdiction
and is recognised in the consolidated 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 consolidated financial
statements. Deferred income tax is determined using tax rates that have been enacted or substantially
enacted by at the date of the consolidated 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 settled.
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 depreciation on property, plant and equipment, the
defined benefit asset, tax losses carried forward, revaluation gains/losses on available-for-sale financial
assets and the amortisation of zero coupon instruments.
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
Deferred income tax is provided on temporary differences arising from investments in subsidiaries
except where the timing of the reversal of the temporary difference is controlled by the Group and it is
probable that the difference will not reverse in the foreseeable future.
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 consolidated income statement together with the deferred gain or loss.
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