Home' Trinidad and Tobago Guardian : December 31st 2013 Contents Tuesday, December 31, 2013 www.guardian.co.tt Guardian
Consolidated Financial Statements for the year ended September 2013
First Citizens Holdings Limited and its Subsidiaries
2 Summary of Significant Accounting Policies (continued)
2.14 Employee benefits (continued)
(b) Profit sharing and bonus plans
The Group recognises a liability and an expense for bonuses and profit-sharing, based on a
formula that takes into consideration the profit attributable to the Group's shareholders after
certain adjustments. The Group recognises a provision where contractually obliged or where there
is a past practice that has created a constructive obligation.
2.15 Cash and cash equivalents
For purposes of the cash flow statement, 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.
2.16 Interest income and expense
Interest income and interest expense are recognised in the consolidated income statement for all
interest bearing instruments on an accrual basis using the effective interest 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.
The effective interest method is a method of calculating the amortised cost of a financial asset or a
financial liability and of allocating the interest income or interest expense over the relevant period.
The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts
through the expected life of the financial instrument, or when appropriate, a shorter period to the
net carrying amount of the financial asset or financial liability. When calculating the effective interest
rate, the Group estimates cashflows considering all contractual terms of the financial instrument (for
example, prepayment options), but does not consider future credit losses. The calculation includes all
fees paid or received between parties to the contract that are an integral part of the effective interest
rate, transaction costs and all other premiums or discounts.
Once a financial asset or a group of similar financial assets has been written down as a result of an
impairment loss, interest income is recognised using the rate of interest used to discount the future
cashflows for the purpose of measuring the impairment loss.
2.17 Fee and commission income
Fees and commissions are recognised on an accrual basis, when the service has been provided. Loan
commitment fees for loans that are likely to be drawn down are deferred (together with related direct
cost) and recognised as an adjustment to the effective interest rate on the loan. Loan syndication fees
are recognised as revenue when the syndication has been completed and the Group has retained no
part of the loan package for itself or has retained part at the same effective interest rate as the other
participants. Commissions and fees arising from negotiating or participating in the negotiation of a
transaction for a third party, such as the arrangement of the acquisition of shares or other securities
or the purchase or sale of businesses are recognised on completion of the underlying transaction.
Portfolio and other management advisory and service fees are recognised based on the applicable
service contracts usually on a time apportionate basis.
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. The same principle is applied
for wealth management, financial planning and custody services that are continuously provided over
an extended period of time. Performance linked fees or fee components are recognised when the
performance criteria are fulfilled.
2.18 Dividend income
Dividends are recognised in the consolidated income statement when the entity's right to receive
payment is established.
2.19 Computer software
Costs associated with maintaining computer software programmes are recognised as an expense when
incurred. However, expenditure that enhances or extends the benefits of computer software programmes
beyond their original specifications and lives is recognised as a capital improvement and added to the
original cost of the software. Computer software development costs recognised as assets are amortised
using the straight-line method over their useful lives but not exceeding a period of three years.
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 proceeds
net of transactions costs and the redemption value is recognised in the consolidated income statement
over the period of the borrowings using the effective interest method.
Acceptances comprise undertakings by the Group to pay bills of exchange drawn on customers.
The Group expects most acceptances to be settled simultaneously with the reimbursement from the
customers. Acceptances are accounted for as off-balance sheet transactions and are disclosed as
contingent liabilities and commitments.
2.22 Dividend distribution
Dividends on ordinary shares are recognised in equity in the period in which they are approved by the
Company's shareholders. Dividends for the year, which are declared after the year end, are disclosed in
the subsequent events note when applicable.
2.23 Preference shares
Preference shares on which dividends are declared at the discretion of the directors are classified as
Provisions are recognised when the Group has a present legal or constructive obligation as a result
of past events, it is more likely than not 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 the obligation 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.
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.
2.25 Intangible assets
Intangible assets comprise separately identifiable items arising from business combinations, computer
software licenses and other intangible assets. Intangible assets are recognised at cost. The cost of an
intangible asset acquired in a business combination is its fair value at the date of acquisition. Intangible
assets with a definite useful life are amortised using the straight line method over their estimated
useful economic life, generally not exceeding 20 years. Intangible assets with an indefinite useful life
are not amortised. At each date of the consolidated statement of financial position, intangible assets
are reviewed for indications of impairment or changes in estimated future economic benefits. If such
indications exist, the intangible assets are analysed to assess whether their carrying amount is fully
recoverable. An impairment loss is recognised if the carrying amount exceeds the recoverable amount.
The Group chooses to use the cost model for the measurement after recognition.
Intangible assets with indefinite useful life are tested annually for impairment and whenever there is an
indication that the asset may be impaired.
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's
share of the net identifiable assets of the acquired subsidiary/associate at the date of acquisition.
Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill on acquisition of
associates is included in investment in associates.
Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses.
Gains and losses on disposal of an entity include the carrying amount of goodwill relating to the
(b) Other intangible assets
Other intangible assets are initially recognised when they are separable or arise from contractual
or other legal rights, the cost can be measured reliably and in the case of intangible assets not
acquired in a business combination, where it is probable that future economic benefits attributes
to the assets with flow from their use. The value of intangible assets which are acquired in a
business combination is generally determined using income approach methodologies such as the
discounted cash flow method.
Other intangible assets are stated at cost less amortisation and provisions for impairment, if any,
plus reversals of impairment, if any. They are amortised over their useful lives in a manner that
reflects the pattern to which they contribute to future cash flow.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(expressed in Trinidad and Tobago dollars)
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