Separate Annual Report 2021

89 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) 67 23. Financial Risk Management, continued Credit risk, continued Financial investments, continued Assessment of Amoritized Cost Fixed Income Securities Sovereign debt securities - Government of Barbados On June 19, 2018, the Barbados government formally entered into default when the grace period for payment of interest and principal on its foreign 2035 bonds expired. The Barbados Government entered into the Barbados Economic Recovery and Transformation (BERT) program, with its local currency debtors. Under this program holders of treasury bills, treasury notes, debentures, loans and bonds owed by the Government of Barbados received an offer of exchange on September 7, 2018. The Credit Union’s acceptance of this offer resulted in the restructuring of principal and interest payments of $19,002,841 on its debt securities measured at amortized cost. The new securities are designated as Series B bonds in the amount of $17,994,321 together with Series D bonds in the amount of $1,008,847. In keeping with the requirements of the IFRS 9 standard, the previous investments which were carried at amortized cost were derecognized and replaced by that of the new securities at their fair market value. This resulted in a derecognition loss of $3,634,651 below their 2018 year end stated value. As a consequence, a derecognition assessment was carried out as at October 1, 2018 on the principal and capitalized interest of the underlying investments. The Central Bank of Barbados yield curve for these securities was compared with that of the Institute of Chartered Accountants of Barbados (ICAB) to arrive at the risk free rate used in the performance of this calculation. The Net Present Value (NPV) was calculated on each strip and was deducted from the carrying value to arrive at the loss on derecognition. Subsequent to the initial local currency sovereign credit rating on November 16 th , 2018 of “Selective Default” (SD), this improved to B- with a Stable outlook on January 13 th , 2020. There were no further credit rating updates during the current financial year.