REPUBLIC BANK LIMITED
64
Notes to theConsolidatedFinancial Statements
For the year ended September 30, 2014. Expressed in thousands of Trinidad and Tobago dollars ($’000), except where otherwise stated
2 Significant accounting policies
(continued)
2.6 Summary of significant accounting policies
(continued)
c) Financial instruments
(continued)
i) Advances
Advances are financial assets with fixed or determinable payments and fixed maturities that are not quoted in an active market. They
are not entered into with the intention of immediate or short-term resale and are not classified as ‘Financial assets held for trading’,
designated as ‘Financial investments - available-for-sale’ or ‘Financial assets designated at fair value through profit or loss’. After initial
measurement, advances are subsequently measured at amortised cost using the effective interest rate method, less allowance for
impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees and costs that are
an integral part of the effective interest rate. The amortisation is included in ‘Interest income’in the consolidated statement of income.
The losses arising from impairment are recognised in the consolidated statement of income in ‘Loan impairment expense’.
ii) Investment securities
At fair value through profit or loss
Financial assets are classified in this category if they are either acquired for the purpose of selling in the short term or if so-designated
by management. Securities held as financial assets at fair value through profit or loss are initially recognised at fair value and are
continuously measured at fair value based on quoted market prices where available, or discounted cash flow models.
All gains realised and unrealised from trading securities and those designated at fair value through profit or loss are reported in
other income whilst losses are reported in operating expenses. Interest and dividends earned whilst holding trading securities and
those designated at fair value through profit or loss are reported in interest income.
Available-for-sale
Available-for-sale investments are securities intended to be held for an indefinite period of time, but may be sold in response to needs
for liquidity or changes in interest rates, exchange rates or equity prices. Securities held as available-for-sale are initially recognised
at fair value plus transaction costs and are continuously remeasured at fair value based on quoted market prices where available or
discounted cash flow models. Unquoted equity instruments are recognised at cost, being the fair value of the consideration paid for
the acquisition of the investment.
Unrealised gains and losses arising from changes in the fair value of securities classified as available-for-sale are recognised
in other comprehensive income net of applicable deferred tax. When the securities are disposed of, the related accumulated fair
value adjustments are included in other income. When securities become impaired, the related accumulated fair value adjustments
previously recognised in equity are included in the consolidated statement of income as an impairment expense on investment
securities.
iii) Debt securities and other fund raising instruments
Debt securities and other fund raising instruments are recognised initially at fair value net of transaction costs, and subsequently
measured at amortised cost using the effective interest rate method.
d) Impairment of financial assets
The Group assesses, at each consolidated statement of financial position date, whether there is any objective evidence that a financial
asset or group of financial assets is impaired. A financial asset or group of financial assets is impaired when the carrying value is greater
than the recoverable amount and there is objective evidence of impairment. The recoverable amount is the present value of the future
cash flows.
