CAPITA FINANCIAL SERVICES INC. (ST. LUCIA BRANCH) Notes to the Financial Statements March 31, 2024 (expressed in Eastern Caribbean dollars) 13 2 Material accounting policy information …continued b) Financial assets and financial liabilities …continued v) Impairment The Branch recognises loss allowance for expected credit losses (ECL) on the following financial instruments that are not measured at FVTPL: - financial assets that are debt instruments; - loan commitments issued. No impairment loss is recognised on equity investments. The Branch measures loss allowances at an amount equal to lifetime ECL, except for the following, for which they are measured as 12-month ECL: - debt investment securities that are determined to have low credit risk at the reporting date; and - other financial instruments on which credit risk has not increased significantly since their initial recognition. The Branch considers a debt investment security to have low credit risk when its credit risk rating is equivalent to the globally understood definition of ‘investment grade’. The Branch does not apply the low credit risk exemption to any other financial instruments. 12-month ECL are the portion of lifetime ECL that result from default events on a financial instrument that are possible within the 12 months after the reporting date. Financial instruments for which a 12-month ECL is recognised are referred to as ‘Stage 1 financial instruments’. Financial instruments allocated to Stage 1 have not undergone a significant increase in credit risk since initial recognition and are not credit-impaired. Lifetime ECL are the ECL that result from all possible default events over the expected life of the financial instrument or the maximum contractual period of exposure. Financial instruments for which lifetime ECL are recognised but that are not credit-impaired are referred to as ‘Stage 2 financial instruments’. Financial instruments allocated to Stage 2 are those that have experienced a significant increase in credit risk since initial recognition but are not credit-impaired. Financial instruments for which lifetime ECL are recognised and that are credit-impaired are referred to as ‘Stage 3 financial instruments’.
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