Page 105 - RB GRENADA ANNUAL REPORT 2025_ONLINE

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Notes to the Financial Statements

For the year ended September 30, 2025. Expressed in Thousands of Eastern Caribbean dollars ($’000), except where otherwise stated.

2 Material accounting policies (continued)
2.5 Summary of material accounting policies (continued)
v Fair value (continued)
Level 3 (continued)

Where the Bank’s investments are not actively traded in organised financial markets, the fair value is determined using
discounted cash flow analysis, which requires considerable judgement in interpreting market data and developing
estimates. Accordingly, estimates contained herein are not necessarily indicative of the amounts that the Bank could
realise in a current market exchange. The use of different assumptions and/or estimation methodologies may have a
material effect on the estimated fair values. The fair value information for available-for-sale investments is based on
information available to management as at the dates presented. Management is not aware of any factors that would
significantly affect the estimated fair value amounts.

Investments classified as ‘at Fair value through profit or loss’ are actively traded in organised markets and fair value is
determined by reference to the market price at year end or on the last trade date prior to year end.

Financial instruments where carrying value is equal to fair value:- Due to their short-term maturity, the carrying value
of certain financial instruments is assumed to approximate their fair values. These include cash and cash equivalents,
balances due from banks and related banks, investment interest receivable, customers’ deposit accounts, other
assets and other liabilities.

Advances are net of specific and other provisions for impairment. The fair values of advances is based on a current
yield curve appropriate for the remaining term to maturity.

For balances due to banks, where the maturity period is less than one year, the fair value is assumed to equal carrying
value. Where the maturity period is in excess of one year, these are primarily floating rate instruments, the interest
rates of which reset with market rates, therefore the carrying values are assumed to equal fair values.

The fair value of fixed rate debt securities carried at amortised cost is estimated by comparing market interest rates
when they were first recognised with current market rates offered for similar financial instruments. The estimated
fair value of fixed interest-bearing deposits is based on discounted cash flows using prevailing money market interest
rates for facilities with similar credit risk and maturity.

w Customers’ liabilities under acceptances, guarantees, indemnities and letters of credit
These represent the Bank’s potential liability, for which there are equal and offsetting claims against its customers
in the event of a call on these commitments. These amounts are not recorded on the Bank’s Statement of financial
position but are detailed in Note 24 (b) of these Financial statements.

x Equity reserves
The reserves recorded in equity on the Bank’s Statement of financial position include:
Stated capital – Ordinary stated capital is classified within equity and is recognised at the fair value of the consideration
received by the Bank.
Statutory reserve that qualify for treatment as equity are discussed in Note 2.5 (q).
General contingency reserve – This represents the difference between regulatory provision requirements and specific
provisions under IFRS Accounting Standards and is an appropriation of retained earnings.