CAPITA FINANCIAL SERVICES INC. (ST. LUCIA BRANCH) Notes to the Financial Statements March 31, 2024 (expressed in Eastern Caribbean dollars) 15 2 Material accounting policy information …continued b) Financial assets and financial liabilities …continued v) Impairment …continued Credit-impaired financial assets …continued A loan that has been renegotiated due to a deterioration in the borrower’s condition is usually considered to be credit-impaired unless there is evidence that the risk of not receiving contractual cash flows has reduced significantly and there are no other indicators of impairment. In addition, a retail loan that is overdue for 90 days or more is considered credit-impaired even when the regulatory definition of default is different. In making an assessment of whether an investment in sovereign debt is credit-impaired, the Branch considers the following factors: - The market’s assessment of creditworthiness as reflected in bond yields. - The rating agencies’ assessments of creditworthiness. - The country’s ability to access the capital markets for new debt issuance. - The probability of debt being restructured, resulting in holders suffering losses through voluntary or mandatory debt forgiveness. - The international support mechanisms in place to provide the necessary support as ‘lender of last resort’ to that country, as well as the intention, reflected in public statements, of governments and agencies to use those mechanisms. This includes as assessment of the depth of those mechanisms and, irrespective of the political intent, whether there is the capacity to fulfil the required criteria. Presentation of allowance for ECL in the statement of financial position Loss allowances for ECL are presented in the statement of financial position as follows: - Financial assets measured at amortised cost: as a deduction from the gross carrying amount of the assets; - Loan commitments and financial guarantee contracts: generally, as a provision. - Debt instruments measured at FVOCI: no loss allowance is recognised in the statement of financial position because the carrying amount of these assets is their fair value. However, the loss allowance is disclosed and is recognised in the fair value reserve. Write-off Loans and debt securities are written off (either partially or in full) when there is no reasonable expectation of recovering a financial asset in its entirety or a portion thereof. This is generally the case when the Branch determines that the borrower does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. This assessment is carried out at the individual asset level. Recoveries of amounts previously written off are recognised when cash is received and are included in ‘impairment losses on financial instruments’ in profit or loss. Financial assets that are written off could still be subject to enforcement activities in order to comply with the Branch’s procedures for recovery of amounts due.
RkJQdWJsaXNoZXIy MTA2MDM=