Page 111 - NIB Annual Report 12-13 | 13-14

TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD
Notes to Financial Statements, continued Year ended March 31, 2014
3. Significant accounting policies, continued
(a)
Non-derivative financial instruments, continued
(ii)
(iii)
(iv)
Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale and that are not classified in any of the previous categories.
NIB’s investments in equity and debt securities are classified as available-for- sale financial assets. Subsequent to initial recognition, they are measured at fair value and changes therein are recognised as other comprehensive income in the statement of income, expenses and reserves.
Investment in TCI Bank Limited
NIB’s investment in TCI Bank Limited (TCI Bank) has been accounted for using the fair value model so as to comply with IAS 26. Changes in fair value are recognised in the statement of income, expenses and reserves.
Accounts payable and accrued expenses
Trade and other payables are recognised initially at fair value less any directly attributable transaction costs. Subsequent to initial recognition trade and other payables are measured at amortised cost using the effective interest rate method.
The effective interest rate method is a method of calculating the amortised cost of a financial liability and allocating the interest expense over the relevant period. The effective interest rate is the rate that discounts the estimated future cash payments through the expected life of the financial instrument. When calculating the effective interest rate, NIB estimates cash flows considering all contractual terms of the financial instrument. The calculation includes all fees paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts.
(b) Provisions
A provision is recognised if, as a result of a past event, NIB has a present legal or constructive obligation that can be reliably estimated, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a rate that reflects current market assessments of the time value of money and the risks specific to the liability.
2013 & 2014 ANNUAL REPORT |107 15