Financial Statements 2011 - Investing In Africa

Notes To The Financial Statements (Continued)
As at 31 december 2011
3) Summary of significant accounting policies (continued)
h) Financial instruments (continued)
VI. Impairment of non financial assets
At the end of each reporting period, the Group reviews the carrying amount of its tangible and intangible assets to
determine whether there is any indication that these assets have suffered an impairment loss.
If objective evidence on impairment losses exists, the recoverable amount of the asset is estimated in order to determine
the extent of the impairment loss. The carrying amount of the asset is reduced through the use of an allowance account
and the amount of the loss is recognised in the profit or loss. In cases where the asset is carried at revalued amount, the
impairment loss is treated as a revaluation decrease.
In determining the recoverable amount, the Group considers the higher of the fair value of the asset less costs to sell,
and value in use. In estimating value in use, the Group is cognisant of the estimated future cash flows discounted to the
present value using a pre-tax discount rate that is reflective of the current market assessment of time value of money
and the risks specific to the asset itself.
Intangible assets with indefinite useful life are tested for impairment annually, and when there is indication that the
asset may be impaired.
Where impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased
to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the
carrying amount that would have been determined had no impairment loss been recognised, unless such asset is
carried at revalued amount, in which case the reversal of the impairment loss is treated as revaluation income.
i) Offsetting
Financial instruments are offset and the net amount reported in the statement of financial position when, and only when,
there is a legal right to set off the amounts and there is an intention to settle on a net basis or to realise the asset and settle
the liability simultaneously.
j) Employee expenses
I. Retirement benefit obligations
The Group operates a defined contribution plan under which the Group pays fixed contributions into a separate entity.
The Group has no obligation, legal or constructive, to pay further contributions if the scheme does not have sufficient
assets to pay all employees the benefits relating to employee service in the current and prior periods. The assets of the
scheme are held in a separate trustee administered fund, which is funded by contributions from both the Group and the
employees.
In addition, the Group also contributes to the National Social Security Fund in Kenya and Parastatal Pension Fund
in Tanzania, which are defined contribution scheme registered under respective Acts of Parliament in the respective
countries.
The Group’s contributions to the defined contribution schemes are charged to the profit or loss in the year in which they
relate.
Contract staff are entitled to gratuity payment at the completion of the contract. Provision is made for gratuity in line
with the contracts.
II. Short-term benefits
Short-term employee benefit obligations (e.g medical reimbursements and insurance) are measured on an undiscounted
basis and are expensed as the as the employee renders service.
The monetary benefits for employee accrued leave entitlement at the reporting date are recognised as an expense
accrual.
k) Leasehold land
Payments to acquire leasehold interest in land are treated as prepaid operating lease rentals and amortised on straight
line basis over the period of the lease.
50 • NIC Bank Limited • Annual Report & Financial Statements 2011