Bahamas - FirstCaribbean International Bank

Notes to the Consolidated Financial Statements
October 31, 2007
(expressed in thousands of Bahamian dollars)
2. Summary of significant accounting policies (continued)
2.7 Derecognition of financial assets and financial liabilities
2.6 Financial instruments (continued)
(iv) Available-for-sale financial investments
Available-for-sale financial investments are those which are designated as
such or do not qualify to be classified as designated as fair value through
profit or loss, held-to-maturity or loans and advances. They include equity
instruments, investments in mutual funds and money market and other
debt instruments.
After initial measurement, available-for-sale investments are subsequently
measured at fair value. Unrealised gains and losses are recognised
directly in equity in the ‘available-for-sale reserve’. When the security is
disposed of, the cumulative gain or loss previously recognised in equity is
recognised in the consolidated statement of income in ‘Other operating
income’ or ‘Other operating expenses’. Where the Bank holds more than
one investment in the same security they are deemed to be disposed of
on a first-in first-out basis. Interest earned whilst holding available-forsale
investments are recognised in the consolidated statement of income
as ‘Other operating income’ when the right of the payment has been
established. The losses arising from impairment of such investments are
recognised in the consolidated statement of income.
Financial assets are initially recognised at fair value plus transaction
costs for all financial assets not carried at fair value through profit or
loss. Financial assets are derecognised when the rights to receive the
cash flows from the financial assets have expired or where the Bank has
transferred substantially all risks and rewards of ownership. When the
Bank has transferred its rights to receive cash flows from an asset or has
entered into a pass-through arrangement, and has neither transferred nor
retained substantially all the risks and rewards of the asset nor transferred
control of the asset, the asset is recognised to the extent of the Bank’s
continuing involvement in the asset. Continuing involvement that takes
the form of a guarantee of the transferred asset is measured at the lower
of the original carrying amount of the asset and the maximum amount of
consideration the Bank could be required to repay.
(i)
Financial assets
A financial asset (or where applicable a part of a financial asset or part of
a group of similar financial assets) is derecognised where:
• The rights to receive cash flows from the asset have expired; or
• The Bank has transferred its rights to receive cash flows from the asset
or has
• Assumed an obligation to pay the received cash flows in full without
material delay to a third party under a ‘pass-through arrangement’;
and
• Either (a) the Bank has transferred substantially all the risks and rewards
of the asset, or (b) the Bank has neither transferred nor retained
substantially all the risks and rewards of the asset, but has transferred
control of the asset.
When the Bank has transferred its right to receive cash flows from an
asset or has entered into a pass-through arrangement, and has neither
transferred nor retained substantially all the risks and rewards of the
asset, nor transferred control of the asset, the asset is recognised to the
extent of the Bank’s continuing involvement in the asset. Continuing
involvement that takes the form of a guarantee over the transferred asset
is measured at the lower of the original carrying amount of the asset and
the maximum amount of consideration that the Bank could be required
to pay.
When continuing involvement takes the form of a written and/or
purchased option (including a cash-settled option or similar provision) on
the transferred asset, the extent of the Bank’s continuing involvement is
the amount of the transferred asset that the Bank may repurchase, except
that in the case of a written put option (including a cash-settled option
or similar provision) on an asset measured at fair value, the extent of the
Bank’s continuing involvement is limited to the lower of the fair value of
the transferred asset and the option exercise price.
See Auditors’ Report Page 56.
Unquoted equity instruments for which fair values cannot be measured
reliably are recognised at cost less impairment. Dividend income is
recognised when the right to receive payment is established.
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