Home' Trinidad and Tobago Guardian : December 31st 2013 Contents Tuesday, December 31, 2013 www.guardian.co.tt Guardian
Unconsolidated Financial Statements for the year ended September 2013
First Citizens Holdings Limited
2 Summary of Significant Accounting Policies (continued)
2.7 Cash and cash equivalents
Cash and cash equivalents comprise of cash balances on hand, deposits with other banks and
short-term highly liquid investments with maturities of three months or less when purchased.
2.8 Interest income and expense
Interest income and interest expense are recognised in the statement of income 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, loans and
accrued discount and premium on treasury bills and other discounted instruments. When loans
become doubtful of collection, they are written down to their recoverable amounts and interest
income is thereafter recognised based on the rate of interest that was used to discount the future
cash flows for the purpose of measuring the recoverable amount.
2.9 Dividend income
Dividends are recognised in the statement of income when the entity's right to receive payment is
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 net
proceeds and the redemption value is recognised in the statement of income over the period of
the borrowings using the effective interest method.
2.11 Share capital
a) Dividends on ordinary shares
Dividends on ordinary shares are recognised in equity in the period in which they are declared.
Dividends for the year, which are declared after the balance sheet date, are disclosed as
b) Capital contributions
Payments made by the Government of the Republic of Trinidad and Tobago (GORTT) on behalf
of the Company towards its loan obligations are treated as capital contributions since the
GORTT has indicated that the Company will not be required to repay these amounts.
Provisions are recognised when the Company has a present legal or constructive obligation as a
result of past events, it is probable that an overflow of resources embodying economic benefits will
be required to settle the obligation, and a reliable estimate of the amount of the obligation can be
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.
2.13 Income tax
Current income tax is calculated on the basis of the applicable tax law 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 tax losses carried forward.
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 utilised.
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
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
minimise potential adverse effects on the Company's financial performance.
The Company's risk management policies are designed to identify and analyse these risks, to set
appropriate risk limits and controls, and to monitor the risks and adherence to limits by means of reliable
and up-to-date information systems.
The Board provides written principles for overall risk management, as well as written policies covering
specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial
instruments and non-derivative financial instruments. In addition, internal audit 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.
3.1 Credit risk
This risk relates to the possibility that a counter party will cause a financial loss to the Company by
failing to discharge an obligation.
(a) Maximum exposure to credit risk before collateral held or other credit enhancement
Below shows a table of the various portfolios and their balances:
Credit risk exposures relating to on balance sheet financial
assets are as follows:
Cash and cash equivalents
Due from subsidiaries
None of these assets are past due or impaired.
3.2 Market risk
The Company takes on exposure to market risks, 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
comprises three types of risk, currency risk, interest rate risk and other price risk.
3.2.1 Interest rate risk
The Company takes on exposure to the effects of fluctuations in the prevailing levels of
market interest rates on its financial position and future cash flows. Fair value interest rate
risk is the risk that the value of a financial instrument will fluctuate because of the changes
in market interest rates. Cash flow interest rate risk is the risk that the future cash flows
of a financial instrument will fluctuate because of the changes in market interest rate. The
Company takes on exposure to the effects of fluctuations in the prevailing level of market
interest rates on both its fair value and cash flow risks.
The Company's interest rate risk arises mainly from its long term borrowings from its
subsidiary (First Citizens Bank Limited). The Company's borrowings are linked to the prime
rate with a floor rate of 11.5%, which expose it to minimal fair value interest rate risk. As
such, changes in market interest rates are unlikely to impact equity.
3.2.2 Currency risk
Currency risk is the risk that the fair value of future cash flows of a financial instrument will
fluctuate because of changes in foreign exchange rates. The Company has no exposure to
foreign currency risk.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS (continued)
(expressed in Trinidad and Tobago dollars)
Links Archive December 30th 2013 January 1st 2014 Navigation Previous Page Next Page