Credit Union Annual Report 2022 - Flipbook - Page 45
THE CAYMAN ISLANDS CIVIL SERVICE ASSOCIATION (CICSA)
CO-OPERATIVE CREDIT UNION LIMITED
NOTES TO FINANCIAL STATEMENTS (continued)
July 31, 2022
2.2 Significant accounting judgments and estimates (continued)
The estimates and judgments that have a significant risk of causing material adjustments to the carrying amounts of assets
and liabilities within the next financial year are discussed below:
i) Going concern
The Credit Union’s management has made an assessment of the Credit Union’s ability to continue as a going concern and
is satisfied that the Credit Union has the resources to continue in business for the foreseeable future. Furthermore,
management is not aware of any material uncertainties that may cast significant doubt upon the Credit Union ’s ability to
continue as a going concern. Therefore, the financial statements continue to be prepared on the going concern basis.
ii) Impairment losses on loans and advances
The Credit Union reviews its loan portfolio to assess impairment at least on a quarterly basis or when an indicator of
impairment is present. In determining whether an impairment loss should be recorded in the statement of comprehensive
income on these loans, the Credit Union makes judgments as to whether there is any observable data indicating that there
is a measurable decrease in the discounted collateral and estimated future cash flows from a portfolio of loans before the
decrease can be identified with an individual loan in that portfolio. This evidence may include observable data indicating
that there has been an adverse change in the payment status of borrowers in a group or local economic conditions that
correlate with defaults on assets in the Credit Union.
The methodology and assumptions used for estimating both the amount and timing of future cash flows are reviewed
regularly to reduce any differences between loss estimates and actual loss experience. If the fair value of collateral held
in respect of loans classified as past due by 90 days (2021: 90 days) and not specifically provided for were to decrease by
5% an additional impairment provision of approximately $53,154 (2021: $49,563) would have been recorded at July 31,
2022.
Additionally, the Credit Union periodically reviews its provisions for losses incurred in the performing loan portfolio but
not specifically identifiable at year end. In determining the provision for loan losses management makes certain judgments
regarding the extent to which historical loss trends and current economic circumstances impact their best estimate of
losses that exist in the performing loan portfolio at the statement of financial position date.
The measurement of impairment losses across all categories of financial assets in scope requires judgement, in particular,
the estimation of the amount and timing of future cash flows and collateral values when determining impairment losses
and the assessment of a significant increase in credit risk. These estimates are driven by a number of factors, changes in
which can result in different levels of allowances. The Credit Union’s expected credit loss (ECL) calculations are outputs
of complex models with a number of underlying assumptions regarding the choice of variable inputs and their
interdependencies. Elements of the ECL models that are considered accounting judgements and estimates include:
•
The Credit Union’s internal credit grading model, which assigns a probability of default (PD) to the individual
grades
•
The Credit Union’s criteria for assessing if there has been a significant increase in credit risk and so allowances
for financial assets should be measured on a lifetime expected credit losses (LTECL) basis and the qualitative
assessment
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