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Diahuebs 30 di Juni 2022

Notes to the Abbreviated Financial Statements (continued)

has undoubtedly been positive, with the development and distri- (d) Impairment losses on financial assets accounts for acute negative economic fallout. For the year ended
bution of vaccines and the gradual reopening of economies world- The measurement of expected credit loss allowance for financial 31 December 2021, the overlay for the acute negative scenario
wide. Further positive developments include increased tourism for assets measured at amortised cost and fair value through other remains; however, the likelihood attributed to this and other pess-
the Dutch Caribbean and the strong growth of the international comprehensive income requires judgement, in particular, the esti- mistic scenarios have been reduced given the improvements in
equity markets in 2021. The Company has made forward-looking mation of the amount and timing of future cash flows and collat- the current and expected economic environment. The resulting
projections using the macroeconomic indicators, such as real GDP, eral values when determining impairment losses and the assess- probability of default and losses given default were applied to all
unemployment, and inflation, which were available as at the end ment of a significant increase in credit risk. These estimates are financial assets.
of the reporting period. The ongoing uncertainty means an in- driven by a number of factors, changes in which can result in
creased likelihood that actual economic outcomes will vary from different levels of allowances. Management also maintains the position that the lifetime default
estimates used, resulting in differences between the current ac- risk of assets with several years remaining to maturity has not
counting estimates and the actual future results of the Company. The Company’s expected credit loss calculations are outputs of significantly changed since the onset of the Covid-19 pandemic,
These uncertainties predominantly affected the measurement of models with a number of underlying assumptions regarding the an important factor given that IFRS 9 requires that entities assess
expected credit losses on financial assets. choice of variable inputs and their interdependencies. Elements of the risk of default over the life of expected assets. Such assets
the expected credit loss models that are considered accounting account for a significant portion of the Company’s investment
(a) The ultimate liability arising from claims made under judgements and estimates include: portfolio.
insurance contracts
The estimation of the ultimate liability arising from claims made • The Company’s criteria for assessing if there has been a sig- (e) Taxation
under insurance contracts is an important accounting estimate. nificant increase in credit risk and so allowances for financial The Company is subject to income taxes according to Aruban
There are several sources of uncertainty that need to be consid- assets should be measured on a lifetime expected credit loss laws. Some estimates are required in determining the provision
ered in the estimate of the liability that the Company will ultimately basis and the qualitative assessment for income taxes. There are some transactions and calculations for
pay for such claims in particular, the claims arising from motor, • The segmentation of financial assets when their ECL is which the ultimate tax determination is uncertain during the ordi-
casualty and health insurance contracts. At 31 December 2021, assessed on a collective basis nary course of business. The Company recognizes liabilities for
the carrying amount of short-term insurance contracts (claims) • Development of ECL models, including the various formulas anticipated tax audit issues based on estimates of whether addi-
was AWG 5,217 (2020: AWG 9,157). and the choice of inputs tional taxes will be due. Where the final tax outcome of these
• Determination of associations between macroeconomic matters is different from the amounts that were initially recorded,
(b) Business model assessment scenarios and, economic inputs and the effect on probabilities such differences will impact the income tax and deferred tax pro-
Classification and measurement of financial assets depends on the of default, exposure at default and loss given default visions in the period in which such determination is made.
results of the SPPI and the business model test. The Company
determines the business model at a level that reflects how groups The Company regularly review its internal models in the context of (f) Impairment of non-financial assets
of financial assets are managed together to achieve a particular actual loss experience and adjust when necessary. An impairment exists when the carrying value of an asset or cash
business objective. This assessment includes judgment reflecting generating unit exceeds its recoverable amount, which is the
all relevant evidence including how the performance of the assets Forward-looking macroeconomic variables higher of its fair value less costs to sell and its value in use. The fair
is evaluated and their performance measured, the risks that affect The estimation and application of forward-looking information value less costs to sell calculation is based on available data from
the performance of the assets and how these are managed and requires significant judgment. PD, LGD and EAD inputs used to binding sales transactions in an arm’s length transaction of similar
how the managers of the assets are compensated. The Company estimate Stage 1 and Stage 2 credit loss allowances are modelled assets or observable market prices less incremental costs for dis-
monitors financial assets measured at amortised cost or fair value based on the macroeconomic variables (or changes in macro- posing of the asset. The value in use calculation is based on a
through other comprehensive income that are derecognised prior economic variables) that are most closely correlated with credit discounted cash flow model. The cash flows are derived from ap-
to their maturity to understand the reason for their disposal and losses in the relevant portfolio. The estimation of ECL on 12-month proved budgets and do not include restructuring activities that the
whether the reasons are consistent with the objective of the busi- ECLs and Lifetime ECLs is a discounted probability-weighted esti- Company is not yet committed to or significant future investments
ness for which the asset was held. Monitoring is part of the Com- mate that considers three future macroeconomic scenarios, with that will enhance the asset’s performance of the cash generating
pany’s continuous assessment of whether the business model for macroeconomic projections varying by territory. The base case unit being tested. The recoverable amount is most sensitive to the
which the remaining financial assets are held continues to be ap- scenario assumes that a stable economic enviroment where cur- discount rate used for the discounted cash flow model as well as
propriate and if it is not appropriate whether there has been a rent conditions, based on available macroeconomic data, will the expected future cash-inflows and the growth rate used for
change in business model and so a prospective change to the largely continue. Upside and downside scenarios are set relative to extrapolation purposes. The carrying amount of impairment provi-
classification of those assets. the base case scenario based on reasonably possible alternative sions on non-financial assets as at 31 December 2021 was nil
macroeconomic conditions, considering macroeconomic forecasts (2020: nil).
(c) Fair valuation of financial assets and trends.
The Company issues a few investments that are designated at fair (g) Post employment benefits
value through profit and loss. These financial instruments are not Scenarios are reassessed on at least an annual basis and more In conducting valuation exercises to measure the effect of all post
quoted in active markets, and their values are determined by using frequently if conditions warrant. Scenarios are probability-weighted employment benefit plans throughout the Company, the Company’s
valuation techniques. Since 2014 the Company has developed an separately for each territory modeled according to the best esti- external qualified actuaries use judgment and assumptions in
internal investment valuation methodology based on the yield mate of their relative likelihood based on historical frequency and determining discount rates, salary increases, pension increases
curves published by the Central Bank of Curaçao and St. Maarten current trends and conditions. Probability weights are updated on and health care costs.
(CBCS) to estimate the fair value of local fixed rate securities that an annual basis or more frequently as warranted.
do not have regular prices in an active market. The yield curve
used to value Curaçao investments is the average of the CBCS’s Covid-19 Pandemic
yield curve before issuance of the debt to the Netherlands and In the prior year, to incorporate the economic impact of the
after issuance of the debt to the Netherlands. For Aruba invest- Covid-19 pandemic, the Company made adjustments to its ECL
ments the CBCS curve before issuance of debt to the Netherlands models such as increasing the likelihood of pessimistic scenarios
is used for the valuation process. and overlaying a further pessimistic scenario that explicitly

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