FirstCaribbean International Bank (Bahamas) Limited

Notes to Consolidated Financial StatementsFor the year ended October 31, 2009(Expressed in thousands of Bahamian dollars)2. Accounting Policies (Continued)2.4 Summary of Significant Accounting Policies (continued)(15) Retirement benefit obligationsi) Pension obligationsThe Bank operates a pension plan, the assets of which are held in a separate trustee-administered fund. Thepension plan is funded by payments from employees and the Bank, taking account of the recommendations ofindependent 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 afunction of one or more factors such as age, years of service or compensation. A defined contribution plan isa pension plan under which the Bank pays fixed contributions into a separate entity (a fund) and will have nolegal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay allemployee benefits relating to employee service in the current and prior periods.The asset/liability recognized in the consolidated balance sheet in respect of defined benefit sections of the planis the present value of the defined benefit obligation at the balance sheet date minus the fair value of plan assets,together with adjustments for unrecognized actuarial gains/losses and past service costs. The defined benefitobligation is calculated periodically by independent actuaries using the projected unit credit method. The presentvalue of the defined benefit obligation is determined by the estimated future cash outflows using interest rates ofgovernment securities that have terms to maturity approximating the terms of the related liability. The pensionplan is a final salary plan and the charge for such pension plan, representing the net periodic pension cost lessemployee contributions is included in staff costs.Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are chargedor credited to income over the expected average service lives of the related employees. Past service costs arerecognized immediately in income, unless the changes to the pension plan are conditional on the employeesremaining in service for a specified period of time (the vesting period). In this case, past service costs are amortizedon a straight-line basis over the vesting period.For the defined contribution section of the plan, the Bank makes contributions to a private trustee-administeredfund. Once the contributions have been paid, the Bank has no further payment obligations. The regularcontributions constitute net periodic costs for the year in which they are due and as such are included in staffcosts. The Bank’s contributions in respect of the defined contribution section of the plan are charged to theconsolidated statement of income in the year to which they relate.(ii) Other post retirement obligationsThe Bank provides post-retirement healthcare benefits to its retirees. The entitlement to these benefits is usuallybased on the employee remaining in service up to retirement age and the completion of a minimum serviceperiod. The expected costs of these benefits are accrued over the period of employment, using a methodologysimilar to that for defined benefit pension plans. Actuarial gains and losses arising from experience adjustmentsand changes in actuarial assumptions are charged or credited to income over the expected average service livesof the related employees. These obligations are valued periodically by independent qualified actuaries.31