44 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED Barbados Public Workers’ Co-operative Credit Union Limited Notes to the Separate Financial Statements March 31, 2023 (expressed in Barbados dollars) 16 2 Accounting policies …continued d) Financial instruments …continued Expected credit losses and impairment …continued The Credit Union considers that significant increase in credit risk occurs for debt investments when investments with investment grade rating at acquisition moves to a non-investment grade but above a default grade. For debt investments with a non-investment grade at acquisition, a significant increase in credit risk occurs when there is an unfavorable movement in the ratings relative to the rating at initial recognition, including movement to a lower end of non-investment grade. An exposure will migrate through the ECL stages as asset quality deteriorates. If, in a subsequent period, asset quality improves and also reverses any previously assessed significant increase in credit risk since origination, then the provision for doubtful debts reverts from lifetime ECL to 12-months. Credit impaired financial assets A financial asset is credit impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial asset is credit impaired includes the following observable data: • Significant financial difficulty of the borrower or issuer • A breach of contract such as default or past due event • The restructuring of a loan or advance by the Credit Union on terms that the Credit Union would not otherwise consider • The disappearance of an active market for a security because of financial difficulties A loan that has been renegotiated due to the deterioration in the borrower’s condition is usually considered to be credit-impaired unless there is evidence that the risk of not receiving contractual cash flows has reduced significantly and there are no other indicators of impairment. In addition, a loan that is overdue for 90 days or more is considered credit-impaired. Credit impaired financial assets The Credit Union considers the following when assessing whether sovereign debt is credit-impaired: • The market’s assessment of credit worthiness as reflected in the bond yields • The rating agencies’ assessment of creditworthiness • The country’s ability to access the capital markets for new debt issuance • The probability of debt being restructured, resulting in holders suffering losses through voluntary or mandatory debt forgiveness.
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