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Notes to the Financial Statements (Continued)For the year ended 31 December 20136. USE OF ESTIMATES AND JUDGMENTS (continued)(c) Retirement benefitsThe cost of the defined benefit pension planis determined using actuarial valuation. Theactuarial valuation involves making assumptionsabout discount rates, expected rates of returnon assets, future salary increases, mortalityrates and future pension increases. Due to thelong term nature of these plans, such estimatesare subject to significant uncertainty and achange in any of the assumptions will alter thecarrying amount of pension obligations.The assumptions used in determining the netcost (income) for pensions include the discountrate. The Bank determines the appropriatediscount rate at the end of each year. This is theinterest rate that should be used to determinethe present value of estimated future cashoutflows expected to be required to settle thepension obligations.In determining the appropriate discount rate, theBank considers the interest rates of high-qualitycorporate bonds that are denominated in thecurrency in which the benefits will be paid andthat have terms to maturity approximating theterms of the related pension liability. Other keyassumptions for pension obligations are basedin part on current market conditions.(d) Property and equipmentProperty and equipment is depreciated over itsuseful life taking into account residual values,where appropriate. The actual lives of the assetsand residual values are assessed annually andmay vary depending on a number of factors.In reassessing asset lives, factors such astechnological innovation, product life cycles andmaintenance programs are taken into accountwhich involves extensive subjective judgment.Residual value assessments consider issuessuch as future market conditions, the remaininglife of the asset and projected disposal values.The rates used are set out on accounting policy3(g) (ii).(e) Income taxesSignificant estimates are required in determiningthe provision for income taxes. There are manytransactions and calculations for which theultimate tax determination is uncertain duringthe ordinary course of business. Where thefinal tax outcome is different from the amountsthat were initially recorded, such differences willimpact the income tax balances and deferredtax provisions in the period in which suchdetermination is made.(f) Share based paymentsEquity based payments are recognized as anexpense based on the fair value of the optionsrights as at the reporting date. The fair value ofthe options is estimated through the use of optionvaluation models which require inputs suchas risk free interest rate, expected dividends,expected volatility and the expected option lifeand is expensed over the vesting period. Theseinputs to the model are driven by external marketforces and are judgmental in nature and use ofdifferent input estimates or models could producedifferent option values, which would result in therecognition of higher or lower expense.27 134K C B 2 0 1 3 A n n u a l R e p o r t a n d F i n a n c i a l S t a t e m e n t s
Notes to the Financial Statements (Continued)7. FINANCIAL ASSETS AND FINANCIAL LIABILITIES(a) Accounting classification and fair valuesThe tables below show the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does notinclude fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fairvalue.C carrying amount Fair valueO other TotalHeld for Held to Loans and Available amortized carrying2013 - Group trading maturity receivables for sale cost amount Level 1 Level 2 Level 3 Fair valueAssets KShs.‘000 KShs.‘000 KShs.‘000 KShs.‘000 KShs.‘000 KShs.‘000 KShs.‘000 KShs.‘000 KShs.‘000 KShs.‘000Financial assetsCash and balances with Central Banks - - 33,940,577 - - 33,940,577 - - - -Due from other banks - - 10,402,010 - - 10,402,010 - - - -Government securities 6,241,984 47,533,782 - 37,167,167 - 90,942,933 90,942,933 - 90,942,933Investment in other securities - - - 2,053,183 - 2,053,183 2,053,183 - - 2,053,183Loans and advances to customers - - 227,721,781 - - 227,721,781 - - 228,089,376 228,089,376Clearing house - - 789,203 - - 789,203 - - - -Total financial assets 6,241,984 47,533,782 272,853,571 39,220,350 - 365,849,687 92,996,116 228,089,376 321,085,492LiabilitiesDue to other banks - - - - 6,650,977 6,650,977 - - - -Deposits from customers - - - - 305,659,189 305,659,189 - - - -Bills payable - - - - 1,533,857 1,533,857 - - - -Long term debt - - - - 7,719,647 7,719,647 - - 6,724,978 6,724,978Total liabilities assets - - - - 321,563,670 321,563,670 - - 6,724,978 6,724,97827 135K C B 2 0 1 3 A n n u a l R e p o r t
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Annual Report2013INVESTING ININNOVA
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ContentPagesBusiness Review and Fin
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Business Review and Financial Highl
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Regulatory Environment (Continued)R
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Chairman’s Statement (Continued)W
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Chairman’s Statement (Continued)T
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Taarifa ya Mwenyekiti (Yaendelea)kw
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Taarifa ya Mwenyekiti (Yaendelea)ka
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Chief Executive Officer’s Stateme
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Chief Executive Officer’s Stateme
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Taarifa ya Mkurungenzi MkuuKushirik
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Taarifa ya Mkurungenzi Mkuukatika k
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Taarifa ya Mkurungenzi Mkuu (Yaende
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KCB 2013 PartnershipsKCB CEO, Joshu
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Sustainability StatementOur VisionI
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Sustainability Statement (Continued
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Sustainability Statement (Continued
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KCB Foundation ReportSince the Foun
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KCB Foundation Report (Continued)ne
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2013 KCB Foundation Report (Continu
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2013 KCB Foundation InitiativesStaf
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Corporate Governance Statement (Con
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Board of DirectorsNGENY BIWOTT GROU
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Board of Directors (Continued)ADIL
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Subsidiary Directors KCB Bank Tanza
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Subsidiary Directors KCB Bank Tanza
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Subsidiary Directors KCB Bank Ugand
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Subsidiary Directors KCB Bank South
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Subsidiary Directors KCB Bank South
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Subsidiary Directors KCB Bank Rwand
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Subsidiary Directors KCB Bank Burun
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KCB Foundation BoardCATHERINE KOLA
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Executive CommitteeFrom Top LeftCha
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Executive Committee (Continued)Samu
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Executive Committee (Continued)Char
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Report of the DirectorsThe Director
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Report of the Independent AuditorsT
Page 85: Innovation InitiativesFrom left, KC
Page 88 and 89: Consolidated Income Statement Notes
Page 90 and 91: Income Statement of the BankFor the
Page 92 and 93: Consolidated Statement of Financial
Page 94 and 95: Consolidated Statement of Changes i
Page 96 and 97: Statement of Changes in Equity of t
Page 98 and 99: Consolidated Statement of Cash Flow
Page 100 and 101: Notes to the Financial StatementsFo
Page 102 and 103: Notes to the Financial Statements (
Page 154 and 155: as follows:Notes to the Financial S
Page 176 and 177: Notice of the Annual General Meetin
Page 178 and 179: Arifa ya Mkutano Mkuu wa 43 wa Mwak
Page 180 and 181: Notes27 178K C B 2 0 1 3 A n n u a
Page 182 and 183: Fomu Ya UwakilishiKatibuBenki Ya Ke
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