Credit Union Annual Report 2022 - Flipbook - Page 51
THE CAYMAN ISLANDS CIVIL SERVICE ASSOCIATION (CICSA)
CO-OPERATIVE CREDIT UNION LIMITED
NOTES TO FINANCIAL STATEMENTS (continued)
July 31, 2022
2.4 Summary of accounting policies (continued)
v. Derecognition of financial assets and liabilities
Derecognition due to substantial modification of terms and conditions
Derecognition due to substantial modification of terms and conditions Credit Union der ecognises a financial asset, such
as a loan to a customer, when the terms and conditions have been renegotiated to the extent that, substantially, it becomes
a new loan, with the difference recognised as a derecognition gain or loss, to the extent that an impairment loss has not
already been recorded. The newly recognised loans are classified as Stage 1 for ECL measurement purposes, unless the
new loan is deemed to be purchased or originated credit impaired (POCI).
When assessing whether or not to derecognise a loan to a customer, amongst others, the Credit Union considers the
following factors:
•
Introduction of an equity feature
•
Change in counterparty
•
If the modification is such that the instrument would no longer meet the SPPI criterion
If the modification does not result in cash flows that are substantially different, the modification does not result in
derecognition. Based on the change in cash flows discounted at the original EIR, Credit Union records a modification
gain or loss, to the extent that an impairment loss has not already been recorded.
Derecognition other than for substantial modification
Financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is
derecognised when the rights to receive cash flows from the financial asset have expired. Credit Union also derecognises
the financial asset if it has both transferred the financial asset and the transfer qualifies for derecognition.
Credit Union has transferred the financial asset if, and only if, either:
•
Credit Union has transferred its contractual rights to receive cash flows from the financial asset
•
It retains the rights to the cash flows, but has assumed an obligation to pay the received cash flows in full without
material delay to a third party under a ‘pass–through’ arrangement
Or
Pass-through arrangements are transactions whereby Credit Union retains the contractual rights to receive the cash flows
of a financial asset (the ‘original asset’), but assumes a contractual obligation to pay those cash flows to one or more
entities (the ‘eventual recipients’), when all of the following three conditions are met:
•
Credit Union has no obligation to pay amounts to the eventual recipients unless it has collected equivalent
amounts from the original asset, excluding short-term advances with the right to full recovery of the amount lent
plus accrued interest at market rates.
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