2006 - Eastern Caribbean Securities Exchange

Notes to the Consolidated Financial Statementsfor the year ended 31st December, 2006Expressed in Thousands of Trinidad and Tobago dollars2. Significant accounting policies (continued)k) Derivative financial instruments and hedging (continued)arising from changes in fair value on derivatives that do not qualify for hedge accounting aretaken directly to the earnings statement.The Group has entered into a cashflow hedge relationship to hedge its exposure to variability incashflows arising from a portion of floating rate debt. Gains or losses on derivatives that meetthe strict criteria for hedge accounting are taken to equity from where amounts are transferred tothe earnings statement to offset fluctuations in revenue or expense from the underlying hedgeditem as it is recognised.l) LeasesOperating leasesLeases of assets under which all the risks and benefits of ownership are effectively retained bythe lessor are classified as operating leases. Payments made under operating leases are chargedto the statement of earnings on a straight-line basis over the period of the lease.Finance leasesFinance leases, which transfer to the Group substantially all the risks and benefits incidental toownership of the leased item, are capitalised at the inception of the lease at the fair value of theleased assets or, if lower, at the present value of the minimum lease payments. Lease paymentsare apportioned between the finance charges and reduction of the lease liability so as to achievea constant rate of interest on the remaining balance of the liability. Finance charges are chargeddirectly against income.Capitalised leased assets are depreciated over the shorter of the estimated useful life of the assetor the lease term.m) TaxationThe taxation charge for the current year is based on the results for the year as adjusted for items,which are non-assessable or disallowed. The taxation charge is calculated using the tax rate ineffect at the balance sheet date.A deferred tax charge is provided, using the liability method, on all temporary differencesbetween the tax bases of assets and liabilities and their carrying amounts for financial reportingpurposes.Annual Report 200611