134 / 174
120
ECCB ANNUAL REPORT 2016/2017
EASTERN CARIBBEAN CENTRAL BANK
NOTES TO THE FINANCIAL STATEMENTS
(expressed in Eastern Caribbean dollars)
March 31, 2017
Eastern Caribbean Central Bank
Notes to the Financial Statements
March 31, 2017
(expressed in Eastern Caribbean dollars)
56
3. Financial risk management
…
continued
i) Strategic Risk
The Bank is in the process of finalizing a strategic plan to guide its operation over the period 2017-
2021. This plan is hinged on four (4) basic pillars which reflect the purpose of the Bank, namely:
a.
Financial sector stability and development;
b.
Fiscal and debt sustainability;
c.
Growth, competitiveness and employment;
d.
Organizational effectiveness.
It is recognized that effective delivery of the strategic initiatives as contained in the plan is heavily
dependent on the supporting policies and operations which have attendant risks. These risks may
be influenced by a wide range of internal and external factors, including an inappropriate use of
resources or a fundamental change in the circumstances on which the assumptions were predicated.
The Bank has therefore identified specific monitoring frameworks and reporting lines to minimize
any negative impact of a perceived or actual failure to deliver on its strategic objectives.
j) Critical accounting estimates and judgements
The Bank’s financial statements and its financial result
s are influenced by accounting policies,
assumptions, estimates and management judgement, which 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.
Estimated pension obligation
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.
Other key assumptions for pension obligations are based on current market conditions.