Separate Annual Report 2021

42 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | SEPARATE FINANCIAL STATEMENTS 2021 BARBADOS PUBLIC WORKERS' CO-OPERATIVE CREDIT UNION LIMITED Notes to the Separate 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 Restructured financial assets If the terms of a financial asset are renegotiated or modified or an existing financial asset is replaced with a new one due to financial difficulties of the borrower, then an assessment is made of whether the financial asset should be derecognized and ECL are measured as follows: - If the expected restructuring will not result in derecognition of the existing asset, then the expected cash flows arising from the modified financial asset are included in calculating the cash shortfalls from the existing asset. - If the expected restructuring will result in derecognition of the existing asset, then the expected fair value of the new asset is treated as the final cash flow from the existing financial asset at the time of its derecognition. This amount is included in calculating the cash shortfalls from the existing financial asset that are discounted from the expected date of derecognition to the reporting date using the original effective interest rate of the existing financial asset. In assessing whether the modified terms are “substantially” different from the original terms, the following factors are considered: • Introduction of significant new terms • Significant change in loan’s interest rate • Significant extension in loan’s term • Significant change in credit risk from inclusion of collateral or other credit enhancements. Expected life For instruments in Stage 2 or Stage 3, loss allowances reflect expected credit losses over the expected remaining lifetime of the instrument. For most instruments, the expected life is limited to the remaining contractual life. For certain revolving facilities such as lines of credit, the expected credit life is estimated based on the period over which the Credit Union’s exposure to credit losses is not mitigated by normal credit risk management actions. Write-off Loans and debt securities are written off when there is no reasonable expectation of recovering a financial asset in its entirety or a portion thereof. This is generally the case when the Credit Union determines that the borrower does not have the assets or source of income that could generate sufficient cash flows to repay the amounts subject to the write off. This assessment is carried out at the individual asset level. Recoveries of amounts previously written off are included in impairment losses on financial instruments in profit or loss. Financial assets that are written off are still subject to enforcement activities in order to comply with the Credit Union’s procedures for recovery of amounts due.