Bahamas - FirstCaribbean International Bank

FIRSTCARIBBEAN INTERNATIONAL BANK (BAHAMAS) LIMITEDNotes to Consolidated Financial StatementsOctober 31, 2002(expressed in thousands of Bahamian dollars)2 Significant accounting policies...continuedInterest rate swaps and hedgingInterest rate swaps are initially recognised in the balance sheet at cost and subsequently are measuredat their fair value. Fair values are obtained from discounted cash flow models, using quoted marketinterest rates. All interest rate swaps are carried as assets when fair value is positive and as liabilitieswhen fair value is negative.Interest rate swaps have been designated as highly effective hedges of the fair value of certain loans,and hedge accounting has been used for these derivative instruments. Changes in the fair value of theswaps are recorded in the income statement and are matched with the corresponding change in the fairvalues of the hedged loans that are attributable to market interest rate movements.ProvisionsProvisions are recognised when the Bank has a present legal or constructive obligation as a result ofpast events, it is probable that an outflow of resources embodying economic benefits will be required tosettle the obligation, and a reliable estimate of the amount of the obligation can be made.Foreign currenciesMonetary assets and liabilities denominated in foreign currencies are translated into Bahamian dollarsat rates prevailing at the date of the financial statements and non-monetary assets and liabilities aretranslated at historic rates. Revenue and expenses denominated in foreign currencies are translatedinto Bahamian dollars using prevailing average monthly exchange rates. Realized and unrealized gainsand losses on foreign currency positions are reported in income of the current period. Translationadjustments of investment positions in foreign entities are reported in shareholders’ equity.LeasesThe total payments made under the operating leases are charged to the income statement on a straightlinebasis over the period the lease.Pension ObligationsThe Bank operates defined benefit plans, the assets of which are generally held in separate trusteeadministeredfunds. The pension plans are generally funded by payments from the Bank, takingaccount of the recommendations of independent qualified actuaries.58