CORPBANCA/FI | CIK:0001276671 |

ifrs-full:DisclosureOfProvisionsExplanatory

NOTE 19 PROVISIONS

As of December 31, 2017 and 2016 the Bank has recorded the following provisions and changes in its provisions:

a)        Other Provisions.

The provisions as of December 31, 2017 and 2016 were as follows:

(i)   Employee benefits and staff salaries

This item includes the following provisions related to: i) provisions for staff benefits and payroll, ii) provisions for compensation for years of service indemnities, iii) provisions for other employee benefits and iv) provisions for vacations.

(ii)  Mandatory Dividends

This item corresponds to the minimum dividends to be paid

(iii) Contingencies

This item includes estimates for probable losses.

b)        The provision balance changes during 2017 and 2016 were as follows:

Accounting effects:

(i)   Employee benefits and staff salaries are recorded in “Personnel salaries expenses.”

(ii)  Mandatory dividends are recorded in the Equity Statement, against “Accrual for mandatory dividends.”

(iii) The contingency provisions/(releases) are included in Other Operating (Expenses)/Income, depending on whether they are debit or a credit. The provision balance changes from 2017 and 2016 are shown below:

c)         Provisions employee benefits and staff salaries

(1)         Short-term personnel benefits.

(i)        Long-term employee benefits.

Certain employees in Colombia are entitled to receive years-of-service awards starting with the 5th year employment anniversary and each five years thereafter. This award is paid in the month when the employee celebrates his/her corresponding employment anniversary.

1.- Assumptions used

The main assumptions used in the valuation are presented in the following tables:

Summary of key demographic hypotheses

2.- Methodology

Cost Method

To determine the cost of benefits, the method of the Projected Unit Credit (PUC) was used, according to the provisions of IAS 19 (revised 2011). Under the PUC method, the “projected accrued benefit” is calculated for each benefit. For all active members of the award program, the “projected accrued benefit” determined by using a formula based on the years of service to the date of calculation. The formula takes into account items such as salary average, social security benefits and other items, projected to the age at which it is assumed that the employee will no longer provide services. The defined benefit obligation is the present value of the “projected benefits accrued.”

Method applied to assets

The award program  does not have its own assets.

Others

The movements in the present value of the defined benefit obligation and the amounts recognized in the Consolidated Statements of Income in respect of this award are determined using the projected unit credit method and consisted of the following:

Changes in provision:

Cost of net profit

(ii)   Pension Plan

The retirement pension liability is recorded based on the present value of the pension obligation for employees who meet certain statutory requirements as to age, length of service and other items, determined in accordance with actuarial adjustments under the existing Colombian law.

The present value of the defined benefit obligation was measured using the Projected Unit Credit method and other long-term employee benefits.

1.-Assumptions used:

The principal assumptions used in the valuation are presented in the following tables:

2.-Methodology

Cost Method

To determine the cost of benefits, the method of the PUC was used, according to the provisions of IAS 19 (revised 2011). Under the PUC method, the “projected accrued benefit” is calculated for each benefit. For all active members of the plan, the “projected accrued benefit” is determinate by using a formula based on the years of service to the date of calculation. The formula takes into account items such as salary average, social security benefits and other items, projected to the age at which it is assumed that the employee will no longer provide services. The defined benefit obligation is the present value of the “projected benefits accrued.”

The service cost is the amount of benefits earned in the year by the active members as a result of a year of credited service value.

The interest cost for the year is the interest on the defined benefit obligation.

Method applied to assets

The plan does not have its own assets

Others

Amounts recorded with respect to the defined pension benefit plan was as follows:

Changes in provision:

(iii)                  Severance

The severance benefit in Colombia is equivalent to one month’s salary, adjusted for the application of a  severance factor (defined as the sum of 12 basic salaries plus additional payments included in salary per year of service and corresponding fraction.

1.- Assumptions used

The main assumptions used in the valuation are presented in the following tables:

2.- Methodology

Cost Method

To determine the cost of benefits, The PUC method was used.

Method applied to assets

The severance benefict plan does not have its own assets.

Others

Amounts recognized with respect to the severance benefit plan were as follows:

Changes in provision

(iv)                   Retirement benefit plan

This plan corresponds to the payment of a fixed amount in Colombian pesos at the time of retirement of the employee.

1.- Assumptions used

The main assumptions used in the valuation are presented in the following tables:

2.- Methodology

Cost Method

To determine the cost of benefits, the method of the PUC was used.

Method applied to assets

The plan does not have its own assets.

Others

Amounts recognized respect of these defined benefit plans were as follows:

Changes in provision

(v)                       Summary effects in Other Comprehensive Income (OCI)

(vi)                   Actuarial Valuation Nature

Future actuarial calculations may differ with respect to the calculations presented, due to the following factors:

·        The experience of the plans differs from those anticipated by economic and demographic hypotheses selected.

·        Changes in economic and demographic assumptions.

·        Increases or decreases expected as a natural part of the operation of the methodology for these calculations (for example, the end of the amortization period or additional costs based on the funding status of the plan).

·        Changes in the characteristics of the plan or applicable law, and with respect thereto, significant events affecting the results presented since the last valuation.

(vii)               Expected future payments

2017

2016

The average duration of the obligation for these plans is: 13.2 years (long-term benefit award program); 14.9 years (pension plan); 6.2 years (severance plan) and 12.9 years (retirement benefit plan).