FirstCaribbean International Bank Limited

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Notes To The Consolidated Financial Statements Impairment of available-for-sale investments Management makes judgements at each reporting date to determine whether available-for-sale investments are impaired. These investments are impaired when the carrying value is greater than the recoverable amount and there is objective evidence of impairment. Intangible assets The Group’s financial statements include goodwill and customer-related intangible assets arising from acquisitions. In accordance with IAS 36, goodwill is reviewed for impairment annually using the “value in use” method. This requires the use of estimates for determination of future cash flows expected to arise from each cash-generating unit and an appropriate discount rate to calculate present value. Management also makes judgements at each reporting date to determine whether intangible assets are impaired or not. 2.3 Adoption of new accounting policies The accounting policies adopted are consistent with those used in the previous financial year except for the adoption of the following standards, amendments and interpretations which are relevant to the Group: • IFRS 3 Business Combinations (Revised) • IFRS 7 Financial Instruments: Disclosures (Amendments) • IFRS 8 Operating Segments • IAS 1 Presentation of Financial Statements (Revised) • IAS 27 Consolidated and Separate Financial Statements (Amendment) • IAS 39 Financial Instruments: Recognition and Measurement — Eligible Hedged Items (Amendment) • Improvements to International Financial Reporting Standards (issued 2008) In addition, the Bank has adopted the elements of Improvements to International Financial Reporting Standards (issued 2008 and 2009) which were either required as a result of the Group’s adoption of IFRS 3 (Revised) Business Combinations, or were required for annual periods beginning after July 1, 2009. Adoption of these revised standards and interpretations did not have any effect on the financial performance or position of the Group. They did, however, give rise to revised or additional disclosures in the statement of total comprehensive income (IAS1 Presentation of Financial Statements (Revised)), Note 33 (IFRS 8 Operating Segments) and Note 34H (IFRS 7 Financial Instruments: Disclosures (Amendment)). 2.4 Summary of significant accounting policies The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. Foreign currency translation Each entity in the Group determines its own functional currency, and items included in the financial statements of each entity are measured using that currency. The functional currency of the Bank is Barbados dollars, however, these consolidated financial statements are presented in United States dollars as this is the single largest currency of use throughout the Group and is universally accepted and recognised in all the territories in which the Group operates. Transactions and balances Transactions in foreign currencies are initially recorded by the Group entities at their respective functional currency rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at rates prevailing at the reporting date and nonmonetary assets and liabilities are translated at historic rates. Revenue and expenses denominated in foreign currencies are translated into the Bank’s functional currency and then converted to the Group’s presentation currency using prevailing average monthly exchange rates. Realised and unrealised gains and losses on foreign currency positions are reported in income of the current year. Translation differences on non-monetary items, such as equities classified as available-for-sale financial assets, are included in the available-for-sale revaluation reserve in equity. Group companies The results and financial position of all the Group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows: • Assets and liabilities for each statement of financial position presented are translated at the closing rate at the reporting date. • Income and expenses for each statement of 34
Notes To The Consolidated Financial Statements comprehensive income or statement of income presented 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 • 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 and other currency instruments designated as hedges of such investments, are taken to other comprehensive income. When a foreign operation is sold, the component of other comprehensive income relating to that particular foreign operation is recognised in the statement of income as part of the gain or loss on sale. Derivative financial instruments and hedge accounting The Group uses derivative financial instruments such as forward currency contracts and interest rate swaps to manage its foreign currency risks and interest rate risks, respectively. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. Any gains or losses arising from changes in fair value on derivatives are taken directly to the statement of income, except for the effective portion of cash flow hedges, which is recognised in other comprehensive income. For the purpose of hedge accounting, hedges are classified as: • Fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability or an unrecognised firm commitment (except for foreign currency risk) • Cash flow hedges when hedging exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognised firm commitment • Hedges of a net investment in a foreign operation. At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which the Group wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the effectiveness of changes in the hedging instrument’s fair value in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed at inception and on a monthly basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated. Hedges which meet the Group’s strict criteria for hedge accounting are accounted for as follows: • Fair value hedge For hedging relationships which are designated and qualify as fair value hedges and that prove to be highly effective in relation to hedged risk, changes in the fair value of the derivatives are recorded in the statement of income, along with the corresponding change in fair value of the hedged asset or liability that is attributable to that specific hedged risk. If the hedge no longer meets the criteria for hedge accounting, an adjustment to the carrying amount of a hedged interest-bearing financial instrument is amortised to net profit or loss over the remaining period to maturity. • Cash flow hedge The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in the statement of income. Amounts accumulated in other comprehensive income are recycled to the statement of income in the periods in which the hedged item will affect profit or loss (for example, when the forecast sale that is hedged takes place). When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge 35
Page 1: Group Annual Report 2010 FirstCarib
Page 4 and 5: Corporate Profile FirstCaribbean In
Page 6 and 7: Financial Highlights * 2007 exclude
Page 8 and 9: Chief Executive Officer’s Letter
Page 10 and 11: Senior Management and Advisors Exec
Page 12 and 13: Retail Banking The Retail Banking s
Page 14 and 15: Fostering the spirit of true partne
Page 16 and 17: Belize City teams decided to combin
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Page 28 and 29: CONSOLIDATED STATEMENT OF INCOME Fo
Page 30 and 31: CONSOLIDATED STATEMENT OF CHANGES I
Page 32 and 33: NOTES TO the CONSOLIDATED FINANCIAL
Page 36 and 37: Notes To The Consolidated Financial
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Proxy Form I/We, the undersigned sh
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Main Branches and Centres Head Offi
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FirstCaribbean International Bank Limited

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