Credit Union Annual Report 2021 V2 - Flipbook - Page 46
THE CAYMAN ISLANDS CIVIL SERVICE ASSOCIATION (CICSA)
CO-OPERATIVE CREDIT UNION LIMITED
NOTES TO FINANCIAL STATEMENTS (continued)
July 31, 2021
2.3 Changes in accounting policies and disclosures (continued)
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors - Amendments to IAS 8 (effective
January 1, 2023)
The amendments clarify the distinction between changes in accounting estimates and changes in accounting policies and
the correction of errors. Also, they clarify how entities use measurement techniques and inputs to develop accounting
estimates.
The amended standard clarifies that the effects on an accounting estimate of a change in an input or a change in a
measurement technique are changes in accounting estimates if they do not result from the correction of prior period errors.
The previous definition of a change in accounting estimate specified that changes in accounting estimates may result from
new information or new developments. Therefore, such changes are not corrections of errors. This aspect of the
definition was retained by the IASB.
The amendments are intended to provide preparers of financial statements with greater clarity as to the definition of
accounting estimates, particularly in terms of the difference between accounting estimates and accounting policies.
Although the amendments are not expected to have a material impact on entities’ financial statements, they shou ld
provide helpful guidance for entities in determining whether changes are to be treated as changes in estimates,
changes in policies, or errors.
2.4 Summary of accounting policies
Recognition of income and expenses
Interest income and expense
Interest income and expense are recorded using the effective interest rate (EIR) method for all financial instruments
measured at amortised cost, financial instruments designated at FVPL.
The EIR is the rate that exactly discounts estimated future cash receipts through the expected life of the financial
instrument or, when appropriate, a shorter period, to the net carrying amount of the financial asset. When calculating the
EIR, we estimate future cash flows considering all contractual terms of the financial instrument, but not future credit
losses.
The EIR (and therefore, the amortised cost of the asset) is calculated by taking into account any discount or premium on
acquisition, fees and costs that are an integral part of the EIR. Credit Union recognises interest income using a rate of
return that represents the best estimate of a constant rate of return over the expected life of the loan. Interest on loans is
recognised over the term of the loan and is calculated using the effective yield method, interest ceases to be recognised
on loans that are over 90 days in arrears.
Service fees
Service fees arising on cash advances are recognised on a time proportion basis over the period (of up to one month) of
the cash advance.
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