ECCB 2015/2016 Annual Report

EASTERN CARIBBEAN CENTRAL BANK

NOTES TO FINANCIAL STATEMENTS

(expressed in Eastern Caribbean dollars)

March 31, 2016

3.

Financial risk management … continued

i)

Critical accounting estimates and judgements

The Bank’s financial statements and its financial results are influenced by accounting policies, assumptions, estimates and management judgement, which necessarily have to be made in the course of preparation of the financial statements. All estimates and assumptions required in conformity with IFRS are best estimates undertaken in accordance with the applicable standard. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing material adjustments to the carrying amounts of assets and liabilities within the next financial year are discussed below. The present value of the retirement benefit obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. Any changes in these assumptions will impact the carrying amount of the pension asset. The assumptions used in determining the net cost (income) for pensions include the discount rate. The Bank determines the appropriate discount rate at the end of each year. This is the interest rate that should be used to determine the present value of estimated future cash flows expected to be required to settle the pension obligations. The Bank considers the interest rates of high-quality instruments, normally long-term government bonds that are denominated in Eastern Caribbean currency which is the currency in which the benefits will be paid and that have terms of maturity approximating the terms of the related pension liability. Estimated pension obligation

Other key assumptions for pension obligations are based on current market conditions.

Impairment of financial assets

In determining amounts recorded for impairment losses in the financial statements, management makes judgements regarding indicators of impairment, that is, whether there are indicators that there may be a measurable decrease in the estimated future cash receivables, for example, default and adverse economic conditions. Management also makes estimates of the likely estimated future cash flows of impaired receivables as well as the timing of such cash flows.

Available-for-sale securities

As at March 31, 2016, the Bank held available-for-sale investment securities of $2,863,200,523 (2015: $2,540,364,393). Quoted debt securities accounted for $2,849,762,722 (2015: $2,527,900,901). The value of available-for-sale securities which were trading below cost at March 31, 2016 was $575,239,552 (2015: $443,664,508) with total unrealised losses of $652,582 (2015: $2,885,618). Management considers these losses temporary.

90

ECCB A nnual R eport 2015/2016