selah wrote:Can some one explain to me something very simple but I have yet to understand it.
IF you look at total share holders fund it is KSh.4,377,675 then when you look at total capital it is KSh.6,546,896
The total capital is made up of the core capital and supplementary capital.So my questions is when reading the balance sheet what makes the total capital is it the shareholder fund or additional capital from a debt instrument in this case the bond.
@Selar, total capital=core capital + supplementary capital. (as you have pointed above)
However, note that shareholders fund is not the same as core capital. This is because some items comprising shareholders funds are not included in core capital e.g. statutory loan loss reserve, 50% of un-audited PAT. Also, a number of deductions are made in arriving at core capital e.g. investments in subsidiaries, good will.
Also note that the 7 billion Medium Term Note (MTN) sold by HFCK in Sept 2010 does not qualify as supplementary capital and is therefore not a part of the total capital. The MTN is classified as borrowed funds (check on the BS).
The following could also assist
Quote:“Core Capital” (Tier 1) - Is as defined in Section 2(1) of the Banking Act namely permanent shareholders equity (issued and fully paid-up ordinary shares and perpetual non-cumulative preference shares), disclosed reserves such as share premium, retained earnings and 50% un-audited after tax profits less investments in subsidiaries conducting banking business, investment in equity instruments of other institutions, intangible assets (excluding computer software) and goodwill.
Quote:“Supplementary Capital” (Tier 2) – Is as defined in Section 2(1) of the Banking Act and includes 25% of asset revaluation reserves which have received prior Central Bank’s approval, subordinated debt, hybrid (debt equity) capital instruments or any other capital instrument approved by Central Bank. Supplementary capital must not exceed core capital.