Page 52 - Ecobank Gambia Annual Report 2020
P. 52
Financial Statements & Annual Report
Notes to the Financial Statements
for the year ended 31 December 2020 (in Thousands of Gambian Dalasis)
result of past service provided by the employee and the functions of the Bank’s risk management are to identify
obligation can be estimated reliably. all key risks for the Bank, measure these risks, manage
Termination benefits the risk positions and determine capital allocations. The
Termination benefits are recognised as an expense when Bank regularly reviews its risk management policies
the Bank is demonstrably committed, without realistic and systems to reflect changes in markets, products
possibility of withdrawal, to a formal detailed plan to and best market practices. The Bank’s aim is to achieve
terminate employment before the normal retirement an appropriate balance between risk and return and
date. Termination benefits for voluntary redundancies are minimise potential adverse effects on the Bank’s financial
recognised if the Bank has made an offer encouraging performance. The Bank defines risk as the possibility
voluntary redundancy, it is probable that the offer will of losses or profits foregone, which may be caused by
be accepted and the number of acceptances can be internal or external factors.
estimated reliably. Risk management is carried out by the risk department
vi. Impairment of Non-Financial Assets under policies approved by the Board of Directors. The
Intangible assets that have an indefinite useful life are department identifies, evaluates financial risks in close
not subject to amortisation and are tested annually co-operation with the Bank’s operating units. The Board
for impairment. Assets are reviewed for impairment provides guiding principles for overall risk management,
whenever events or changes in circumstances indicate as well as written policies covering specific areas,
that the carrying amount may not be recoverable. An such as foreign exchange risk, interest rate risk, credit
impairment loss is recognised for the amount by which the risk, use of derivative financial instruments and non-
asset’s carrying amount exceeds its recoverable amount. derivative financial instruments. In addition, internal
The recoverable amount is the higher of an asset’s fair audit is responsible for the independent review of risk
value less costs to sell and value in use. For the purposes management and the control environment.
of assessing impairment, assets are banked at the lowest The risks arising from financial instruments to which the
levels for which there are separately identifiable cash Bank is exposed are a financial risk, which includes credit
flows (cash generating units). The impairment test also risk, liquidity risk, market risk and operational risk.
can be performed on a single asset when the fair value i) Credit-impaired financial assets
less cost to sell or the value in use can be determined
reliably. Non-financial assets that suffer impairment are A financial asset is credit-impaired when one or more
reviewed for possible reversal of the impairment at each events that have a detrimental impact on the estimated
reporting date. future cash flows of that financial asset have occurred.
vii. Share Capital Evidence that a financial asset is credit-impaired include
Ordinary share capital observable data about the following events:
Ordinary shares are classified as equity. Significant financial difficulty of the issuer or the borrower;
viii. Earnings per Share a breach of contract, such as a default or past due event;
The Bank presents basic earnings per share (EPS) data the lender(s) of the borrower, for economic or contractual
for its ordinary shares. Basic EPS is calculated by dividing reasons relating to the borrower’s financial difficulty,
the profit or loss attributable to ordinary shareholders of having granted to the borrower a concession(s) that the
the Bank by the weighted average number of ordinary lender(s) would not otherwise consider; it becoming
shares outstanding during the period. The Bank has probable that the borrower will enter bankruptcy or
no convertible notes and share options, which could other financial reorganization; the disappearance of an
potentially dilute its EPS and therefore the Bank’s Basic active market for that financial asset because of financial
and diluted EPS are essentially the same. difficulties; or the purchase or origination of a financial
11.10 Financial risk management asset at a deep discount that reflects the incurred credit
a) Introduction and overview losses.
The Bank’s business involves taking on risks in a targeted It may not be possible to identify a single discrete event—
manner and managing them professionally. The core instead, the combined effect of several events may have
caused financial assets to become credit-impaired.
50 Ecobank Gambia Annual Report 2020 ii) Purchased or originated credit-impaired (POCI) financial
assets
For POCI an entity shall only recognise the cumulative
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