UNITY BANK LIMITED 2022 Financial Report UNITY BANK LIMITED 2022 Financial Report
ABN 11 087 650 315
ABN 11 087 650 315
• financial assets that are not credit-impaired at the reporting date: as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the Bank in accordance with the contract and the cash flows that the Bank expects to receive); • financial assets that are credit-impaired at the reporting date: as the difference between the gross carrying amount and the present value of estimated future cash flows; • undrawn loan commitments: as the present value of the difference between the contractual cash flows that are due to the Bank if the commitment is drawn down and the cash flows that the Bank expects to receive; and • financial guarantee contracts: the expected payments to reimburse the holder less any amounts that the Bank expects to recover. The critical assumptions used in the calculation are as set out in Note 12. Note 30 details the credit risk management approach for loans. Restructured financial assets Financial assets which are renegotiated or modified, or an existing financial asset is replaced with a new one due to financial difficulties of the borrower, then an assessment is made of whether the financial asset should be derecognized and ECL are measured as follows. • If the expected restructuring will not result in derecognition of the existing asset, then the expected cash flows arising from the modified financial asset are included in calculating the cash shortfalls from the existing asset. • If the expected restructuring will result in derecognition of the existing asset, then the expected fair value of the new asset is treated as the final cash flow from the existing financial asset at the time of its derecognition. This amount is included in calculating the cash shortfalls from the existing financial asset that are discounted from the expected date of derecognition to the reporting date using the original effective interest rate of the existing financial asset. Credit-impaired financial assets At each reporting date, the Bank assesses whether financial assets carried at amortised cost are credit impaired . 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: • the restructuring of a loan or advance by the Bank on terms that the Bank would not consider otherwise; • it is becoming probable that the borrower will enter bankruptcy or other financial reorganization; or • the disappearance of an active market for a security because of financial difficulties. A loan that has been renegotiated due to a 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 retail loan that is overdue for 90 days or more is considered impaired. Presentation of allowance for ECL in the statement of financial position Loss allowances for ECL are presented in the statement of financial position as follows: • financial assets measured at amortised cost: as a deduction from the gross carrying amount of the assets; • loan commitments and financial guarantee contracts: generally, as a provision; and • significant financial difficulty of the borrower or issuer; • a breach of contract such as a default or past due event;
32
25
Made with FlippingBook Annual report maker