95 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) 69 25. Financial Risk Management, continued 25.2 Credit risk, continued Assessment of corporate investments (term deposits), continued Corporate term deposits and investments were staged based on the probability of default assigned to each entity. These investments are categorized as follows: Stage 1: The entity shows no decline in its ability to repay either based on past performance or future events for which a 12-month PD was assigned. Stage 2: There has been a significant event which has caused or is highly probable to have significant impact on the investee’s ability to repay for which the PD assigned was the Cumulative Probability of Default (CPD) rate less the survival period. Stage 3: There has been a default or significant event which has caused or is highly probable to have a significant impact on the investee’s ability to repay for which the assigned PD was the CPD rate. IFRS 9 provides that cost can be used as a basis for estimating fair value where, there are limitations on supportable information to do otherwise. There is currently insufficient trading information from published sources to measure the fair market value of the corporate investments. The Group’s definition of Significant Increase in Credit Risk (SICR) A significant increase in credit risk (SICR) was defined as a significant change in the estimated default risk over the remaining expected life of the investment. A comparison is made between the default risk as estimated at the reporting date and the default risk at initial recognition of each investment individually or by investment Group. Where an investment is initially deemed to be low credit risk at origination (the purchase date) and continues to be assessed as low credit risk at the reporting date, it is deemed that there has been no significant increase in credit risk. The indicators used to establish whether there has been a significant increase in credit risk is dependent on the nature of the investee; the product type, internal management methods and external market resources.
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