Page 28 - awe30062_compressed

Diahuebs 30 di Juni 2022

Notes to the Abbreviated Financial Statements (continued)

(c) Derecognition of financial assets • Debt securities that are determined to have low credit risk at Irrespective of the outcome of the above assessment, the Group
A financial asset (or when applicable, a part of a financial asset the reporting date; and presumes that the credit risk on a financial asset has increased
or part of a group of similar financial assets) is derecognised • Other financial instruments for which credit risk has not in- significantly since initial recognition when contractual payments
when: creased significantly since initial recognition. are more than 30 days past due, unless the Group has reasonable
• The rights to receive cash flows from the asset have expired. and supportable information that demonstrated otherwise. In the
• The Company retains the right to receive cash flows from the Lifetime ECL are the ECL that result from all possible default prior year, several of the Group’s insurance subsidiaries offered a
asset, but has assumed an obligation to pay them in full events over the expected life of a financial asset, whereas deferral in premium payments to support customers during the
without material delay to a third party under a ‘pass-through’ 12-month ECL are the portion of ECL that results from default Covid-19 pandemic. Many of these deferrals have since expired,
arrangement. events that are possible within the 12 months after the reporting and customers have been required to either resume monthly pay-
• The Company has transferred its rights to receive cash flows date. ments or fully bring their accounts back up to date.
from the asset and either:
- has transferred substantially all the risk and rewards of the For receivables, the Company applies the simplified approach per- Despite the aforementioned, the Company assumes that the
asset, or mitted by IFRS 9, which requires expected lifetime losses to be credit risk on a financial instrument has not increased significantly
- has neither transferred nor retained substantially all the recognised from initial recognition of the receivables. since initial recognition if the financial instrument is determined to
risks and rewards of the asset, but has transferred control have low credit risk at the reporting date. A financial instrument is
of the asset. Loss allowances for ECL are presented in the financial statements determined to have low credit risk if the financial instrument has a
as follow: low risk of default, the debtor has a strong capacity to meet its
When the Company has transferred its right to receive cash contractual cash flow obligations in the near term and adverse
flows from an asset and has neither transferred nor retained • Financial assets measured at amortised cost: the loss allow- changes in economic and business conditions in the longer term
substantially all the risks and rewards of the asset nor trans- ance is deducted from the gross carrying amount of the assets may, but will not necessarily, reduce the ability of the debtor to
ferred control of the asset, the asset is recognised to the extent in the statement of financial position. Movement in ECL is fulfil its contractual cash flow obligations. The Company considers
of the Company’s continuing involvement in the asset. Con- recognised in the statement of income. a debt instrument to have low credit risk when its credit risk rating
tinuing involvement that takes the form of a guarantee over • Debt instruments measured at fair value through other com- is equivalent to the globally understood definition of ‘investment
the transferred asset is measured at the lower of the original prehensive income: the loss allowance is recognised in other grade’.
carrying amount of the asset and the maximum amount of comprehensive income with the corresponding entry rec-
consideration that the Company could be required to repay. ognised in the statement of income. The loss allowance does Credit-impaired financial assets
not reduce the carrying amount of the financial asset in the At each reporting date, the Company assesses whether financial
On derecognition of a financial asset measured at amortised statement of financial position. assets carried at amortised cost and debt instruments carried at
cost, the difference between the asset’s carrying amount and fair value through comprehensive income are credit-impaired.
the sum of the consideration received is recognised in the Significant increase in credit risk A financial asset is credit-impaired when one or more events that
statement of income. In addition, on derecognition of an invest- In assessing whether the credit risk on a financial instrument has have a detrimental impact on the estimated future cash flows of
ment in a debt instrument classified as at fair value through increased significantly since initial recognition, the Company com- the financial asset have occurred.
other comprehensive income, the cumulative gain or loss pre- pares the risk of a default occurring as at the reporting date with
viously accumulated in the fair value reserve is reclassified to the risk of default occurring as at the date of initial recognition. Evidence that a financial asset is credit-impaired includes the
the statement of income. In making this assessment, the Company considers both quantita- following observable data:
tive and qualitative information that is reasonable and supportable,
A financial liability is derecognised when it is extinguished, including historical experience and forward-looking information • Significant financial difficulty of the debtor or issuer;
discharged, cancelled or expires. that is available without undue cost or effort. Forward-looking • A breach of contract, such as a default or past due event;
information considered includes the future prospects of the indus- • The disappearance of an active market for a financial asset
(d) Modifications of financial assets tries in which the Company’s debtors operate, obtained from because of financial difficulties;
If the terms of a financial asset are modified, the Company economic expert reports, financial analysts, governmental bodies • It is becoming probable that the debtor will enter bankruptcy
evaluates whether the cash flows of the modified asset are and other similar organisations, as well as consideration of various or other financial reorganisation; or
substantially different from that of the original asset. If the external sources of actual and forecast economic information that • Rating agencies’ assessments of creditworthiness.
terms are substantially different, the Company derecognises relate to the Company’s core operations.
the original financial asset and recognises a new financial asset Definition of default
at fair value. The date of modification is consequently consid- The quantitative assessment to identify whether credit risk has The Company considers a financial asset to be in default when:
ered to be the date of initial recognition for impairment calcu- increased significantly since initial recognition takes into account
lation purposes, including for the purpose of determining the following: • the debtor is unlikely to pay its credit obligations to the Company
whether a significant increase in credit risk has occurred. in full, without recourse by the Company to actions such as
The Company also assesses whether the new financial asset • the remaining lifetime probability of default as at the reporting realising security (if any is held); or
recognised is deemed to be credit-impaired at initial recogni- date; with • the debtor is past due more than 90 days unless the Company
tion, especially in circumstances where the modification was • the remaining lifetime probability of default for this point in has reasonable and supportable information to demonstrate
driven by the debtor being unable to make the originally time that was estimated at the time of initial recognition of that a more lagging default criterion is more appropriate.
agreed payments. the exposure.
In assessing whether a debtor is in default, the Company considers
If the cash flows of the modified asset are not substantially The qualitative assessment to identify whether credit risk has indicators that are qualitative, quantitative and based on data
different, the modification does not result in derecognition of increased significantly since initial recognition takes into account developed internally and obtained from external sources.
the financial asset. The Company recalculates the gross carry- the following:
ing amount of the financial asset based on revised cash flows, Write-off
discounted at the original effective interest rate (or credit- • Actual or expected significant deterioration in the financial The Company writes off financial assets, either partially or in full,
adjusted effective interest rate for purchased or originated instrument’s external (if available) or internal credit rating; when it has exhausted all practical recovery efforts and has con-
credit-impaired financial assets), and recognises the amount • Actual or expected significant adverse changes in business, cluded there is no reasonable expectation of recovery. Indicators
arising from adjusting the gross carrying amount as a modifica- financial or economic conditions that are expected to cause a that there is no reasonable expectation of recovery include ceas-
tion gain or loss in the statement of income. significant change to the debtor’s ability to meet its obligations; ing enforcement activity and where the Company’s recovery
• Actual or expected significant changes in the operating results method is foreclosing on collateral and the value of the collateral is
Impairment of assets of the debtor; such that there is no reasonable expectation of recovering in full.
• Significant increases in credit risk on other financial instruments If the amount to be written off is greater than the accumulated
Impairment of financial assets of the debtor; loss allowance, the difference is first treated as an addition to the
At each reporting date, the Company assesses, on a forward-look- • Significant changes in the expected performance and behaviour allowance that is then applied against the gross carrying amount.
ing basis, the expected credit losses (ECL) associated with its fi- of the debtor, including changes in the payment status of
nancial assets measured at amortised cost and fair value through debtor; Measurement of expected credit losses
other comprehensive income (excluding equity instruments). • Actual or expected significant adverse change in the regulatory, The measurement of expected credit losses is a function of:
economic, or technological environment of the debtor that (i)Probability of default - an estimate of the likelihood of default
The Company measures loss allowances on its debt instruments results in a significant change in the debtor’s ability to meet over a given time horizon;
at an amount equal to lifetime ECL, except in the following cases, its debt obligation.
for which the amount recognised is 12-month ECL:
28