BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2021 46 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) 19 2. Accounting Policies, continued (d) Financial instruments, continued Expected credit losses and impairment, continued Credit impaired financial assets A financial asset is credit impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial asset is credit impaired includes the following observable data: • Significant financial difficulty of the borrower or issuer • A breach of contract such as default or past due event • The restructuring of a loan or advance by the Group on terms that the Group would not otherwise consider • The disappearance of an active market for a security because of financial difficulties A loan that has been renegotiated due to the 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 loan that is overdue for 90 days or more is considered credit-impaired. Credit impaired financial assets The Group considers the following when assessing whether sovereign debt is credit-impaired: • The market’s assessment of credit worthiness as reflected in the bond yields • The rating agencies’ assessment 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. • Measurement of ECL ECL are a probability-weighted estimate of credit losses. They are measured as follows: - Financial assets that are not credit-impaired at the reporting date: as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive); - Financial assets that are credit-impaired at the reporting date: as the difference between the gross carrying amount and the present value of estimated future cash flows; and - Undrawn loan commitments: as the present value of the difference between the contractual cash flows that are due to the Group if the commitment is drawn down and the cash flows that the Group expects to receive.