ECCB 2015/2016 Annual Report

EASTERN CARIBBEAN CENTRAL BANK

NOTES TO FINANCIAL STATEMENTS

(expressed in Eastern Caribbean dollars)

March 31, 2016

2. Summary of significant accounting policies … continued

f)

Financial assets and liabilities

Financial assets

In accordance with IAS 39, all financial assets and liabilities – which include derivative financial instruments – are recognised in the statement of financial position and measured in accordance with their assigned category. The Bank allocates financial assets to the following three categories: financial assets at fair value through profit or loss; loans and receivables; and available-for-sale financial assets. Management determines the classification of its financial assets at initial recognition. Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired or incurred principally for the purpose of selling in the short-term. Derivatives are also categorised as held for trading unless they are designated as hedging instruments. Assets in this category are classified as current assets as they are expected to be settled within 12 months. They are recognized in the statement of financial position as “Financial assets held for trading”. Financial instruments included in this category are recognized initially at fair value; transaction costs are taken directly to the statement of income or loss. Gains and losses arising from changes in fair value are included directly in the statement of income or loss. The instruments are derecognized when the rights to receive cash flows have expired or the Bank has transferred substantially all the risks and rewards of ownership and the transfer qualifies for derecognition. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, other than: (a) those that the Bank upon initial recognition designates as available-for-sale; or (b) those for which the Bank may not recover substantially all its initial investment, other than because of credit deterioration. Loans and receivables are initially recognised at fair value - which is the cash consideration to originate or purchase the loan including any transaction costs - and measured subsequently at amortised cost using the effective interest method. Interest on loans and receivables are included in the statement of income or loss and is reported as “interest income”. In the case of impairment, the impairment loss is reported as a deduction from the carrying value of the loan and receivables and recognised in the statement of income or loss. Loans and receivables are measured at amortised cost. (i) (ii)

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ECCB A nnual R eport 2015/2016