41 SEPARATE FINANCIAL STATEMENTS 2023 Barbados Public Workers’ Co-operative Credit Union Limited Notes to the Separate Financial Statements March 31, 2023 (expressed in Barbados dollars) 13 2 Accounting policies …continued d) Financial instruments …continued Non-derivative financial assets - Classification and subsequent measurement …continued Business model assessment The Credit Union makes an assessment of the objective of a business model in which an asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes: • the stated policies and objectives for the portfolio and the operation of those policies in practice. In particular, whether management’s strategy focuses on earning contractual interest revenue, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of the liabilities that are funding those assets or realising cash flows through the sale of the assets; • how the performance of the portfolio is evaluated and reported to the Credit Union’s management; • the risks that affect the performance of the business model (and the financial assets held within that business model) and its strategy for how those risks are managed; • how managers of the business are compensated (e.g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected); • Financial assets that are held for trading or managed and whose performance is evaluated on a fair value basis are measured at FVTPL because they are neither held to collect contractual cash flows nor held both to collect contractual cash flows and to sell financial assets. Assessment of whether contractual cash flows are solely payments of principal and interest (SPPI) In assessing whether the contractual cash flows are SPPI, the Credit Union considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making the assessment, the Credit Union considers: • contingent events that would change the amount and timing of cash flows; • leverage features; • prepayment and extension terms; • terms that limit the Credit Union’s claim to cash flows from specified assets; and • features that modify consideration of the time value of money (e.g. periodical reset of interest rates). Applicability to the Credit Union The Credit Union classifies its financial assets into one of the following categories: • Amortised cost • Fair value through profit or loss (FVTPL) • Fair value through other comprehensive income (FVOCI)
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