51 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) 23 2 Accounting policies …continued e) Significant accounting judgements, estimates and assumptions …continued Impairment of non-derivative financial assets …continued Incorporation of forward-looking information The Credit Union formulated three economic scenarios: a base case, which is the central scenario, developed internally based on consensus forecasts, and two less likely scenarios, one upside and one downside scenario. The central scenario is aligned with information used by the Credit Union for other purposes such as strategic planning and budgeting. External information considered includes economic data and forecasts published by governmental bodies and monetary authorities in the region where the Credit Union operates, international organisations such as the International Monetary Fund and selected private-sector forecasts. The scenario probability weightings applied in measuring ECL are as follows: 2023 March 31 Upside Central Downside Scenario probability weighting 20% 50% 30% 2022 March 31 Upside Central Downside Scenario probability weighting 20% 50% 30% Macro-economic variables used in these scenarios include (but are not limited to), unemployment rates, GDP growth rates, inflation rates and price indices. Forward looking macro-economic information and assumptions have been considered in these scenarios, including potential impacts of anticipated government policies and regulatory actions. Periodically, the Credit Union carries out stress testing of more extreme shocks to calibrate its determination of the upside and downside representative scenarios. Impairment of non-financial assets Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal is based on available data from binding sales transactions, conducted at arm’s length for similar assets or observable market prices less incremental costs of disposing of the asset. The value in use calculation is based on a DCF model. The recoverable amount is sensitive to the discount rate used for the DCF model as well as the future cash inflows.
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