45 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2021 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED Notes to the Consolidated Financial Statements For the year ended March 31, 2021 (Expressed in Barbados dollars) 18 2. Accounting Policies, continued (d) Financial instruments, continued Expected credit losses and impairment, continued Significant increase in credit risk When determining whether the risk of default on a financial instrument has increased significantly since initial recognition, the Group considers both quantitative and qualitative information and analysis based on the Group’s historical experience and credit risk assessment. The determination of whether there has been a significant increase in credit risk is critical to the staging process. Factors to consider include: • Changes in market or general economic conditions; • Expectation of potential breaches; • Expected delays in payment; • Deterioration in credit ratings; or • Significant changes in operating results or financial position of the borrower. The Group uses three criteria for determining whether there has been a significant increase in credit risk: • a quantitative test based on movement in PD; • qualitative indicators; and • a backstop of 30 days past due The Group considers that significant increase in credit risk occurs for debt investments when investments with investment grade rating at acquisition moves to a non-investment grade but above a default grade. For debt investments with a non-investment grade at acquisition, a significant increase in credit risk occurs when there is an unfavorable movement in the ratings relative to the rating at initial recognition, including movement to a lower end of non-investment grade. An exposure will migrate through the ECL stages as asset quality deteriorates. If, in a subsequent period, asset quality improves and also reverses any previously assessed significant increase in credit risk since origination, then the provision for doubtful debts reverts from lifetime ECL to 12-months.