94 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | SEPARATE FINANCIAL STATEMENTS 2022 BARBADOS PUBLIC WORKERS' CO-OPERATIVE CREDIT UNION LIMITED Notes to the Separate Financial Statements For the year ended March 31, 2022 (Expressed in Barbados dollars) 67 23. Financial Risk Management, continued Credit risk, continued Financial investments, 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 were 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. The Investment Credit Rating was unchanged as at the financial yearend. 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. The Investment credit rating has declined below a company rating. This is where the company or investment classification family is considered speculative and subject to substantial default risk. 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. The investment credit rating has significantly declined. The company or investment classification family is considered speculative or in poor standing and subject to very high default risk or may be in default on some part of the its investment obligation. 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 Credit Union’s definition of Significant Increase in Credit Risk (SICR) A significant increase in credit risk (SICR) is 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 the initial recognition of each investment individually or by investment group. Where an investment is initially deemed to have low credit risk at origination (the purchase date) and continues to be assessed as having low credit risk at the reporting date, it is deemed that there has been no significant increase in credit risk.
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