Page 80 - Ecobank Gambia Annual Report 2020
P. 80
Financial Statements & Annual Report
Notes to the Financial Statements
for the year ended 31 December 2020 (in Thousands of Gambian Dalasis)
characteristics: When ECLs are measured on a collective policies and that have the most significant effect on the
basis, the financial instruments are grouped on the amounts recognised in financial statements:
basis of shared risk characteristics. The Bank monitors Establishing the number and relative weightings of
the appropriateness of the credit risk characteristics on forward-looking scenarios for each type of product/
an ongoing basis to assess whether they continue to be market and determining the forward looking information
similar. This is required in order to ensure that should relevant to each scenario: When measuring ECL the
credit risk characteristics change there is appropriate Bank uses reasonable and supportable forward looking
re-segmentation of the assets. This may result in new information, which is based on assumptions for the
portfolios being created or assets moving to an existing future movement of different economic drivers and how
portfolio that better reflects the similar credit risk these drivers will affect each other. Refer to note 11.10
characteristics of that group of assets. Re-segmentation for more details, including analysis of the sensitivity of
of portfolios and movement between portfolios is more the reported ECL to changes in estimated forward looking
common when there is a significant increase in credit risk information.
(or when that significant increase reverses) and so assets Probability of default: PD constitutes a key input in
move from 12-month to lifetime ECLs, or vice versa, but measuring ECL. PD is an estimate of the likelihood of
it can also occur within portfolios that continue to be default over a given time horizon, the calculation of which
measured on the same basis of 12-month or lifetime ECLs includes historical data, assumptions and expectations
but the amount of ECL changes because the credit risk of of future conditions. See note 11.10 for more details,
the portfolios differ. including analysis of the sensitivity of the reported ECL
Models and assumptions used: The Bank uses various to changes in PD resulting from changes in economic
models and assumptions in measuring fair value of drivers.
financial assets as well as in estimating ECL. Judgement is Loss Given Default: LGD is an estimate of the loss arising
applied in identifying the most appropriate model for each on default. It is based on the difference between the
type of asset, as well as for determining the assumptions contractual cash flows due and those that the lender
used in these models, including assumptions that relate would expect to receive, taking into account cash flows
to key drivers of credit risk. from collateral and integral credit enhancements. See
For Off-Balance exposures including Guarantees; Letters note 11.10 for more details, including analysis of the
of Credit (LCs); etc., are assessed for impairment in line sensitivity of the reported ECL to changes in LGD resulting
with the provisions of IFRS 9. A three year historical data from changes in economic drivers.
was used to derive the credit conversion factor (CCF) for Fair value measurement and valuation process: In
Ecobank Gambia Ltd which was pegged at 5%. estimating the fair value of a financial asset or a liability,
IFRS 16 the Bank uses market-observable data to the extent it is
In line with the implementation guideline of IFRS 16, available. Where such Level 1 inputs are not available the
some assumptions were formulated an incorporated into Bank uses valuation models to determine the fair value
the model. The main assumption is the of its financial instruments.
minimum threshold which would qualify lease contracts Income taxes
to be subjected to IFRS 16 measurement. The following Significant estimates are required in determining
key assumptions are formulated: provisions for income taxes. There are many transactions
¦ The threshold is pegged at US$5,000 by the Affiliate. and calculations for which the ultimate tax determination
¦ Rental contract lasting for beyond 12 months are is uncertain during the ordinary course of business. The
Bank recognises liabilities for anticipated tax liabilities
considered. based on estimates of whether additional taxes will be
¦ The incremental borrowing rate is pegged to the due. Where the final tax outcomes of these matters are
different from the amounts that were initially recorded,
Central bank policy rate such differences are adjusted in the period in which such
Key sources of estimation uncertainty determination is made.
The following are key estimations that the Directors have 11.12 Operating segments
used in the process of applying the Bank’s accounting
78 Ecobank Gambia Annual Report 2020 www.ecobank.com
