Home' Trinidad and Tobago Guardian : December 31st 2013 Contents B36
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
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(expressed in Trinidad and Tobago dollars)
2 Summary of Significant Accounting Policies (continued)
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 Bank 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 place.
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
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.
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 net basis.
2.14 Employee benefits
(a) Pension plans
The Group operates a defined benefit plan, which is a pension plan that defines an amount of
pension benefits 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 payments
from employees and by the Group, taking account of the recommendations of independent
For defined benefit plans, the pension accounting costs are assessed using the projected unit
credit method. Under this method, the cost of providing pensions is charged to the consolidated
income statement so as to spread the regular cost over the service lives of employees in accordance
with the advice of qualified actuaries who value the plans annually. The liability recognised in the
consolidated statement of financial position in respect of defined benefit plans is the present value
of the defined benefit obligation at the date of the consolidated financial position less the fair value
of the plan assets together with adjustments for unrecognised actuarial gains and losses and past
service costs. The pension obligation is measured at the present value of the estimated future cash
outflows using interest rates of government securities, which have terms to maturity approximating
the terms of the related liability.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions
in excess of the greater of 10% of the value of the plan assets or 10% of the defined benefit
obligations are charged or credited to income over the employees' expected average remaining
working life. Past service costs are recognised immediately, unless the changes to the pension plan
are conditional on the employees remaining in service for a specified period of time (the vesting
period). In this case, the past service costs are amortised on a straight line basis over the vesting
Links Archive December 30th 2013 January 1st 2014 Navigation Previous Page Next Page