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...continuedFor defined benefit plans, accounting costs are assessed using the projected unit credit method. Underthis method, the cost of providing pensions is charged to the income statement so as to spread theregular cost over the lives of the employees in accordance with the advice of qualified actuaries whovalue the plans once every three years. The pension obligation is measured at the present value of theestimated future cash outflows using interest rates of government securities which have terms tomaturity approximating the terms of the related liability. All actuarial gains and losses are spreadforward over the average remaining service lives of the employees.Other post-retirement obligationsThe Bank provides post-retirement healthcare benefits to their retirees. The entitlement to thesebenefits is usually based on the employee remaining in service up to retirement age and thecompletion of a minimum service period. The expected costs of these benefits are accrued over theperiod of employment, using a methodology similar to that for defined benefit pension plans.Valuations of these obligations are carried out by independent qualified actuaries.Share capitalShare issue costsExternal costs directly attributable to the issue of new shares, other than on a business combination,are deducted from equity net of any related taxes.Dividends on ordinary sharesDividends on ordinary shares are recognized in equity in the period in which they are declared.Dividends for the year which are declared after the balance sheet date are dealt with in the subsequentevents note.Preferred sharesPreferred shares that are non-redeemable and upon which dividends are declared at the discretion ofthe directors are classified as equity.Interest income and expenseInterest income and expense are recognised in the income statement for all interest bearinginstruments on an accrual basis using the effective yield method based on the actual purchase price.Interest income includes coupons earned on fixed income investment and trading securities andaccrued discount and premium on treasury bills and other discounted instruments. Interest income issuspended when loans become doubtful of collection, such as when overdue by more than 90 days, orwhen the borrower or securities’ issuer defaults, if earlier than 90 days. Such income is excluded frominterest income until received. Interest income on loans in arrears greater than 90 days is taken intoincome to the extent that it is deemed recoverable.59