Page 106 - RB GRENADA ANNUAL REPORT 2025_ONLINE

106 • Republic Bank (Grenada) Limited 2025 Annual Report • FINANCIALS

Notes to the Financial Statements

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

3 Significant accounting judgements, estimates and assumptions
The preparation of the Bank’s Financial statements requires management to make judgements, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures and the
disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require
a material adjustment to the carrying amount of assets or liabilities affected in future periods.

Other disclosures relating to the Bank’s exposure to risks and uncertainties include:
a Risk management (Note 18)
b Capital management (Note 20)

Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a
significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year
are described below. The Bank based its assumptions and estimates on parameters available when the Financial statements
were prepared. Existing circumstances and assumptions about future developments, however, may change due to market
changes or circumstances arising that are beyond the control of the Bank. Such changes are reflected in the assumptions
when they occur.

Impairment losses on financial assets (Notes 4 and 5)
The measurement of impairment losses under IFRS 9 across all categories of financial assets requires judgement. 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 estimation of the amount and timing of future cash flows and collateral values when determining impairment losses
• The Bank’s internal credit grading model, assigns PDs for corporate facilities, and this was the basis for grouping PDs
• 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 formulae and the choice of inputs
• Determination of the existence of associations between macroeconomic scenarios and, economic inputs, such as
unemployment levels and collateral values, and the effect on PDs, EADs and LGDs
• The inclusion of overlay adjustments based on judgement and future expectations

Other assumptions
Net pension asset/liability (Note 9)
In conducting valuation exercises to measure the effect of all employee benefit plans throughout the Bank, the Bank’s
independent actuaries use judgement and assumptions in determining discount rates, salary increases, National Insurance
Scheme (NIS) ceiling increases, pension increases and the rate of return on the assets of the Plan.

Goodwill (Note 8)
The Bank’s Financial statements include goodwill arising from acquisitions. In accordance with IFRS 3, goodwill was reviewed
for impairment, as at September 30, 2025, using the ‘value in use’ method. This requires the use of estimates for determination
of future cash flows expected to arise from each CGU and an appropriate perpetuity discount rate to calculate present value.