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)
2.14 Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair
value of the net identifiable assets of the acquired subsidiary undertaking at
the date of acquisition and is reported in the balance sheet as an intangible
asset. Goodwill is tested annually for impairment and carried at cost less
accumulated impairment losses. Goodwill is allocated to lowest levels for
which there are separately identifiable cash flows (cash-generating units) for
the purpose of impairment testing. An impairment loss is recognised for the
amount by which the asset’s carrying value exceeds its recoverable amount.
The recoverable amount is the higher of an asset’s fair value less costs to sell
and value in use.
2.15 Property and equipment
Land and buildings comprise mainly branches and offices. All property and
equipment are stated at historical cost less accumulated depreciation. Historical
cost includes expenditure that is directly attributable to the acquisition of the
items. Changes in the expected useful life are accounted for by changing
the amortisation period or method, as appropriate, and treated as changes in
accounting estimates.
Subsequent costs are included in the asset’s carrying amount or are recognised
as a separate asset, as appropriate, only when it is probable that future
economic benefits associated with the item will flow to the Bank and the cost
of the item can be measured reliably. All other repairs and maintenance are
charged to the consolidated statement of income during the financial period
in which they are incurred.
Land is not depreciated. Depreciation on other assets is computed using the
straight-line method at rates considered adequate to write-off the cost of
depreciable assets, less salvage, over their useful lives.
The annual rates used are:
Buildings 2½%
Leasehold improvements
10% or shorter life of the lease
Equipment, furniture and vehicles 20 – 50%
See Auditors’ Report Page 56.
Assets that are subject to depreciation are reviewed for impairment whenever
events or changes in circumstances indicate that 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 asset’s recoverable amount is the higher of the
asset’s fair value less costs to sell and the value in use.
Gains and losses on disposals are determined by comparing proceeds with
carrying amounts and are recognised in ‘other operating income’ or ‘other
operating expenses’ within the consolidated statement of income.
2.16 Leases
Operating lease payments are recognised as an expense on a straight-line
basis over the lease term and included in ‘other operating expenses’.
2.17 Provisions
Provisions are recognised when the Bank has a present legal or constructive
obligation as a result of past events, it is more than likely 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.
2.18 Retirement benefit obligations
i) Pension obligations
The Bank operates a pension plan, the assets of which are held in a separate
trustee-administered fund. The pension plan is funded by payments from
employees and the Bank, taking account of the recommendations of
independent qualified actuaries. The plan has defined benefit sections
and a defined contribution section.
A defined benefit plan is a pension plan that defines an amount of pension
benefit to be provided, usually as a function of one or more factors such
as age, years of service or compensation. A defined contribution plan
is a pension plan under which the Bank pays fixed contributions into a
separate entity (a fund) and will have no legal or constructive obligations
to pay further contributions if the fund does not hold sufficient assets to
pay all employee benefits relating to employee service in the current and
prior periods.
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