Home' Trinidad and Tobago Guardian : December 31st 2013 Contents B34
Guardian www.guardian.co.tt Tuesday, December 31, 2013
Consolidated Financial Statements for the year ended September 2013
First Citizens Holdings Limited and its Subsidiaries
2 Summary of Significant Accounting Policies (continued)
2.3 Foreign currency translation (continued)
(c) Group companies
The results and financial position of all the Group entities (none of which has the currency of
a hyperinflationary economy) that have a functional currency different from the presentation
currency are translated into the presentation currency as follows:
(i) assets and liabilities for each statement of financial position presented are translated at the
closing rate at the date of that statement of financial position;
(ii) income and expenses for each income statement are translated at average exchange rates
(unless this average is not a reasonable approximation of the cumulative effect of the rates
prevailing on the transaction dates, in which case income and expenses are translated at the
dates of the transactions); and
(iii) all resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the translation of the net investment in
foreign operations and of borrowings are recognised in other comprehensive income. When a
foreign operation is disposed of or partially disposed of, such exchange differences are recognised
in the consolidated income statement as part of the gain or loss on sale. Goodwill and fair value
adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the
foreign entity and translated at the closing rate.
2.4 Derivative financial instruments
Derivative financial instruments including swaps are initially recognised in the consolidated statement
of financial position at fair value and are subsequently re-measured at their fair values. Fair values
are obtained from quoted market prices, discounted cash flow models and options pricing models as
appropriate. All derivatives are carried as assets when their fair value is positive and as liabilities when
The carrying values of the interest rate swap, which will vary in response to changes in market
conditions, are recorded as assets or liabilities with the corresponding resultant charge or credit in the
consolidated income statement.
2.5 Financial assets and financial liabilities
2.5.1 Financial assets
The Group classifies its financial assets in the following categories: financial assets designated as at
fair value through profit or loss, loans and receivables, held to maturity and available-for-sale. The
classification depends on the purpose for which the financial assets were acquired. Management
determines the classification of its financial assets at initial recognition and re-evaluates this designation
at every reporting date.
(a) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that
are not quoted in an active market, other than:
(i) Those that the Group intends to sell immediately or in the short term, which are classified
as held for trading, and those that the entity upon initial recognition designates at fair value
through profit or loss;
(ii) Those that the entity upon initial recognition designates as at fair value through profit or loss
or as available-for-sale;
(iii) Those for which the holder may not recover substantially all its initial investment, other than
because of credit deterioration.
Loans and receivables are initially recognised at fair value - which is the cash consideration to
amortised cost using the effective interest method. Loans and receivables are reported in the
consolidated statement of financial position as loans and advances to banks or customers or as
loan notes. Interest on loans is included in the consolidated income statement under interest
income. In the case of impairment, the impairment loss is reported as a deduction from the
carrying value of the loan and recognised in the consolidated income statement under impaired
loss on loan and receivables net of recoveries.
(b) Available-for-sale financial assets
Available-for-sale financial assets are those intended to be held for an indefinite period of time,
which may be sold in response to needs for liquidity or changes in interest rates, exchange rates
or equity prices or that are not classified as loans and receivables, held to maturity investments or
financial assets at fair value through profit or loss.
Available-for-sale financial assets are initially recognised at fair value and subsequently carried at
fair value with gains and losses being recognised in the consolidated statement of comprehensive
income except for impairment losses and foreign exchange gains and losses, until the financial
asset is derecognised.
When securities classified as available-for-sale are sold or impaired, the accumulated fair value
adjustments recognised in other comprehensive income are included in the consolidated income
calculated using the effective interest method is recognised in the consolidated income statement.
Dividends on available-for-sale equity instruments are recognised in the consolidated income
statement when the Group's right to receive payments are established.
(c) Financial assets at fair value through profit or loss
This category comprises two sub-categories: financial assets held for trading and financial assets
designated by the Group as fair value through profit or loss upon initial recognition.
A financial asset is classified as held for trading if it is acquired or incurred principally for the
purpose of selling or repurchasing it in the near term or if it is part of a portfolio of identified
financial instruments that are managed together and for which there is evidence of a recent actual
pattern of short-term profit taking. Derivatives are also categorized as held for trading.
The Group also designates certain financial assets upon initial recognition as at fair value through
profit or loss (fair value option). This designation cannot be subsequently changed. According to
IAS 39, the fair value option is only applied when the following conditions are met:
(i) The application of the fair value option reduces or eliminates an accounting mismatch that
would otherwise arise; or
(ii) The financial assets are part of a portfolio of financial instruments which is risk managed and
reported to senior management on a fair value basis.
(d) Held to maturity
Held to maturity investments are financial assets with fixed or determinable payments and fixed
maturity dates where management has the positive intention and the ability to hold to maturity,
(i) those that the Group upon recognition designates at fair value through profit or loss
(ii) those that the Group designates as available-for-sale
(iii) those that meet the definition of loans and receivables
Held to maturity investments are initially recognised at fair value including direct and incremental
transaction costs and are measured subsequently at amortised cost, using the effective interest
2.5.2 Financial liabilities
The Group measures financial liabilities at amortised cost. Financial liabilities measured at amortised
cost include deposits from banks or customers, bonds payables, other funding instruments and notes
due to related parties.
2.5.3 Recognition and de-recognition of financial instruments
The Group uses trade date accounting for regular way contracts when recording financial assets
transactions. Financial assets that are transferred to third parties but do not qualify for derecognition
are presented as assets pledged as collateral if the transferee has the right to sell or re-pledge them.
Financial assets are derecognised when the contractual right to receive the cashflows from these assets
have ceased to exist or the assets have been transferred and substantially all the risks and rewards of
ownership of the assets are also transferred.
Financial liabilities are derecognised when they have been redeemed or otherwise extinguished.
2.5.4 Determination of fair value
For financial instruments traded in an active market, the determination of fair values of financial assets
and liabilities is based on quoted market prices or dealer price quotations.
A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly
available from an exchange, dealer, broker, industry group, pricing service or regulatory agency, and
these prices represent actual and regular occurring market transactions on an arm's length basis. If the
above criteria are not met, the market is regarded as being inactive. Indicators that a market is inactive
are when there is a wide bid-offer spread or significant increase in the bid-offer spread or there are few
recent transactions. When a market becomes inactive, the valuation technique utilised makes use of the
quoted price even though the market is not active.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(expressed in Trinidad and Tobago dollars)
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