ECCB 2014-2015 Annual Report and Statement of Accounts

EASTERN CARIBBEAN CENTRAL BANK

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (expressed in Eastern Caribbean dollars) March 31, 2015

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 consolidated financial statements. 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 Bank makes estimates and assumptions concerning the future. 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 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.

Available-for-sale securities

As at March 31, 2015, the Bank held available-for-sale: investment securities of $2,540,364,393 (2014: $2,288,364,080). Quoted debt securities accounted for $2,527,900,901 (2014: $2,276,178,387). The value of available-for-sale securities which were trading below cost at March 31, 2015 was $443,664,508 (2014: $1,080,853,730) with total unrealised losses of $2,885,618 (2014: $10,714,238). Management considers these losses temporary.

Valuation of land and buildings

The Bank utilises professional valuers to determine the fair value of its properties. Valuations are determined through the application of different valuation methods which are all sensitive to the underlying assumptions chosen.

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ECCB ANNUAL REPORT 2014/2015