CAPITA FINANCIAL SERVICES INC. (ST. LUCIA BRANCH) Notes to the Financial Statements March 31, 2024 (expressed in Eastern Caribbean dollars) 19 2 Material accounting policy information …continued i) Interest income and expense Interest income and expense are recognised on an accrual basis using the effective interest method. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. In calculating this rate, cash flows are estimated considering all contractual terms of the financial instrument but not considering future credit losses. The calculation includes all fees paid or received between parties to the contract that are an integral part of the effective interest rate as well as transaction costs. Once a financial asset has been written down as a result of an impairment loss, interest income is recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. j) Dividend income Dividend income is recognised when the Branch’s right to receive the dividend is established. k) Taxation Deferred income taxes are accounted for under tax effect accounting using the liability method. Deferred tax is provided for all temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes using the rates that have been enacted or substantially enacted by the reporting date and are expected to apply when the asset is realised or liability settled. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the asset can be utilised. l) Defined contribution plan A defined contribution plan is a pension plan under which the Branch pays fixed contributions into a separate entity. The Branch has no legal or constructive obligation to pay further contributions if the plan does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. The Branch’s contributions to its defined contribution plan are charged to profit or loss in the year to which they relate.
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