Investor Presentaiton
NOTES TO THE GROUP CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
7
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(j) Financial Assets and Financial Liabilities (continued)
(ii) Recognition and Initial Measurement (continued)
Assessment whether contractual cash flows are solely payments of principal and interest:
For the purposes of this assessment, 'principal' is defined as the fair value of the financial asset on
initial recognition. 'Interest' is defined as consideration for the time value of money and for the credit
risk associated with the principal amount outstanding during a particular period of time and for other
basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as profit margin.
In assessing whether the contractual cash flows are solely payments of principal and interest, the
Group 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 Group considers:
.
Contingent events that would change the amount and timing of cash flows;
Leverage features;
Prepayment and extension terms;
Terms that limit the Group's claim to cash flows from specified assets (e.g. non-recourse asset
arrangements); and
Features that modify consideration of the time value of money - e.g. periodical reset of interest
rate.
See note on investment securities, loans and receivable and cash and cash equivalents for further
details.
The Group classifies its financial liabilities, other than financial guarantees and loan commitments,
as measured at amortised cost or FVTPL.
The Group classifies financial liabilities as held for trading when they have issued primarily for short
term profit making through trading activities or form part of a portfolio of financial instruments
that are managed together for which there is evidence of a recent pattern of short-term profit
taking. Gains and losses arising from changes in fair values are included in the consolidated income
statement in the year in which they arise.
Reclassifications:
Financial assets are not reclassified subsequent to their initial recognition, except in the period after
the Group changes its business model for managing financial assets.
NOTES TO THE GROUP CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
7
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(j) Financial Assets and Financial Liabilities (continued)
(iii) Impairment
•
•
•
•
The Group recognises loss allowances for ECL on the following financial instruments that are not
measured at FVTPL:
•
Financial assets that are debt instruments;
Financial guarantee contracts issued; and
Loan commitments issued.
No impairment loss is recognised on equity investments.
The Group measures loss allowances at an amount equal to lifetime ECL, except for the financial
instruments on which credit risk has not increased significantly since their initial recognition.
12-month ECL are the portion of life time ECL that result from default events on a financial instrument
that are possible within the 12 months after reporting date.
Measurement of ECL
ECL are probability-weighted estimate of credit losses. They are measured as follows:
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 entity in accordance with
the contract and the cash flows that the Group 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 Group if the commitment is drawn down and the cash flows that
the Group expects to receive; and
Financial guarantee contracts: the expected payments to reimburse the holder less any amounts
that the Group expects to recover.
Restructured Financial Assets
If the terms of a financial asset 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. The cash shortfalls are discounted from the expected date
of derecognition to the reporting date using the original effective interest rate of the existing
financial asset.
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EMIRATES NBD BANK PJSC - GROUP CONSOLIDATED FINANCIAL STATEMENTS - FOR THE YEAR ENDED 31 DECEMBER 2021
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