Page 37 - GTBank Annual Report 2020 eBook

asset are deemed to have expired. In this case,
the original financial asset is derecognized and In addition to the above, the bank shall also
a new financial asset is recognised at fair consider qualitative factors as detailed below.
value. Any difference between the amortized
cost and the present value of the estimated Qualitative criteria
future cash flows of the modified asset or
consideration received on derecognition is Scenarios where modifications will lead to
recorded as a separate line item in profit or loss derecognition of existing loan and recognition
as ‘gains and losses arising from the of a new loan, i.e., substantial modification,
derecognition of financial assets measured at are:
amortized cost’.
The exchange of a loan for another
If the cash flows of the modified asset carried financial asset with substantially
at amortized cost are not substantially different, different contractual terms and
then the modification does not result in conditions such as the restructuring of
derecognition of the financial asset. In this a loan to a bond; conversion of a loan
case, the Bank recalculates the gross carrying to an equity instrument of the borrower
amount of the financial asset and recognizes Roll up of interest into a single bullet
the amount arising from adjusting the gross payment of interest and principal at the
carrying amount as a modification gain or loss end of the loan term
in profit or loss. If the contractual cash flows on Conversion of a loan from one
a financial asset have been renegotiated or currency to another currency
modified and the financial asset was not
derecognised, the Bank shall assess whether Other factor to be considered:
there has been a significant increase in the
credit risk of the financial instrument by Extension of maturity dates
comparing:
If the terms of a financial asset are
the risk of a default occurring at the renegotiated or modified or an existing financial
reporting date (based on the modified asset is replaced with a new one due to
contractual terms); and
financial difficulties of the borrower, then an
assessment is made of whether the financial
the risk of a default occurring at initial
recognition (based on the original, asset should be derecognized (see above) and
ECL are measured as follows:
unmodified contractual terms)
If the expected restructuring will not
In determining when a modification to terms of result in derecognition of the existing
a financial asset is substantial or not to the asset, then the expected cash flows
existing terms, the Bank will consider the arising from the modified financial
following non-exhaustive criteria: asset are included in calculating the
Quantitative criteria cash shortfalls from the existing asset
If the expected restructuring will result
A modification would lead to derecognition of in derecognition of the existing asset,
existing financial asset and recognition of a then the expected fair value of the new
new financial asset, i.e., substantial asset is treated as the final cash flow
modification, if: from the existing financial asset at the
time of its derecognition.
The discounted present value of the
cash flows under the new terms,
including any fees received net of any Financial Liabilities
fees paid and discounted using the
original effective interest rate, is at least A financial liability is derecognised when the
10 per cent different from the obligation under the liability is discharged,
discounted present value of the cancelled or expires. The Bank derecognises a
remaining cash flows of the original financial liability when its terms are modified
financial asset. and the cash flows of the modified liability are Annual Report 2020

Guaranty Trust Bank Gambia Limited www.gtbankgambia.com 35