(Jamaica) Limited - FirstCaribbean International Bank

notes to the Financial Statements
Year Ended 31 October 2009
(Expressed in Jamaican dollars unless otherwise indicated)
2. Summary of Significant Accounting Policies (Continued)
(g) Financial assets (continued)
All purchases and sales of financial assets that require delivery within the time frame established by regulation or
market convention (“regular way” purchases and sales) are recognised at trade date, which is the date that the
Group commits to purchase or sell the asset. Otherwise such transactions are treated as derivatives until settlement
occurs. Loans and receivables are recognised when cash is advanced to borrowers.
Financial assets are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value
through profit or loss.
Available-for-sale financial assets are subsequently re-measured at fair value based on quoted bid prices or amounts
derived from cash flow models. Unrealised gains and losses arising from changes in the fair value of securities
classified as available-for-sale are recognised in equity. When the securities are disposed of or impaired, the related
accumulated fair value adjustments are included in the statement of income as gains and losses from investment
securities.
Loans and receivables investments are carried at amortised cost using the effective interest yield method, less any
provision for impairment. Third party expenses associated with loans and receivables, such as legal fees incurred in
securing a loan are expensed as incurred.
Unquoted equity instruments for which fair values cannot be measured reliably are recognised at cost less
impairment.
(h) Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally
enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the
asset and settle the liability simultaneously
(i) Impairment of financial assets
The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or group
of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are
incurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred
after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the future
cash flows of the financial asset or group of financial assets that can be reliably estimated. Objective evidence that
a financial asset or group of financial assets is impaired includes observable data that comes to the attention of the
Group about the following loss events:
(i) significant financial difficulty of the issuer or obligor;
(ii) a breach of contract, such as a default or delinquency in interest or principal payments;
(iii) the Group granting to a borrower, for economic or legal reasons relating to the borrower’s financial difficulty,
a concession that the lender would not otherwise consider;
(iv) it becoming probable that the borrower will enter bankruptcy or other financial reorganisation;
(v) the disappearance of an active market for that financial asset because of financial difficulties; or
(vi) observable data indicating that there is a measurable decrease in the estimated future cash flows from a group
of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified
with the individual financial assets in the group, including:
- adverse changes in the payment status of borrowers in the group; or
- national or local economic conditions that correlate with default on the assets in the group.
If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has
been incurred, the amount of the loss is measured as the difference between the carrying amount and the
recoverable amount, being the estimated present value of expected cash flows, including amounts recoverable
from guarantees and collateral, discounted based on the current effective interest rate.
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