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significant effect on the amounts recognized in the financial statements with substantial management
judgement and/or estimates are collated below with respect to judgements/estimates involved.

2.4.1. Impairment losses on financial assets

The measurement of impairment losses both under IFRS 9 across all categories of financial assets in scope
requires judgement, in particular, the estimation of the amount and timing of future cash flows and collateral
values when determining impairment losses and the assessment of a significant increase in credit risk.
These estimates are driven by a number of factors, changes in which can result in different levels of
allowances. The Bank’s ECL calculations are outputs of complex models with a number of underlying
assumptions regarding the choice of variable inputs and their interdependencies. Elements of the ECL
models that are considered accounting judgements and estimates include:

• The Bank’s internal credit grading model, which assigns PDs to the individual grades
• The Bank’s criteria for assessing if there has been a significant increase in credit risk and so
allowances for financial assets should be measured on a LTECL basis and the qualitative
assessment
• Development of ECL models, including the various formulas and the choice of inputs
• Determination of associations between macroeconomic scenarios and, economic inputs, such as
unemployment levels and collateral values, and the effect on PDs, EADs and LGDs
• Selection of forward-looking macroeconomic scenarios and their probability weightings, to derive
the economic inputs into the ECL models
• It has been the Bank’s policy to regularly review its models in the context of actual loss experience
and adjust when necessary.

2.4.2 Going concern

The Bank’s management has made an assessment of its ability to continue as a going concern and is
satisfied that it has the resources to continue in business for the foreseeable future. Furthermore,
management is not aware of any material uncertainties that may cast significant doubt on the Bank’s ability
to continue as a going concern. Therefore, the financial statements continue to be prepared on the going
concern basis

2.4.3 Fair value of financial instruments

The fair value of financial instruments is the price that would be received to sell an asset or paid to transfer
a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date
under current market conditions (i.e., an exit price) regardless of whether that price is directly observable
or estimated using another valuation technique. When the fair values of financial assets and financial
liabilities recorded in the statement of financial position cannot be derived from active markets, they are
determined using a variety of valuation techniques that include the use of valuation models. The inputs to
these models are taken from observable markets where possible, but where this is not feasible, estimation
is required in establishing fair values. Judgements and estimates include considerations of liquidity and
model inputs related to items such as credit risk (both own and counterparty), funding value adjustments,
correlation and volatility.

2.4.4. Effective Interest Rate (EIR) method

The Bank’s EIR method, recognizes interest income using a rate of return that represents the best estimate
of a constant rate of return over the expected behavioral life of loans and deposits and recognizes the effect
of potentially different interest rates charged at various stages and other characteristics of the product life
cycle (including prepayments and penalty interest and charges). This estimation, by nature, requires an

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Guaranty Trust Bank (Gambia) Limited Financial Statements December 2021