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)
(iii) Impairment (continued)
•
.
•
.
Credit-impaired Financial Assets
At each reporting date, the Group assesses whether financial assets carried at amortised cost
and debt financial assets carried at FVOCI 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:
Significant financial difficulty of the borrower or issuer;
A breach of contract such as a default or past due event;
The restructuring of a loan or advance by the Group on terms that the Group would not consider
otherwise;
It is becoming probable that the borrower will enter bankruptcy or other financial reorganisation;
or
The disappearance of an active market for a security because of financial difficulties.
Purchased or Originated Credit-impaired Assets (POCI)
POCI assets are financial assets that are credit-impaired on initial recognition. POCI assets are
recorded at fair value at original recognition and interest income is subsequently recognised based
on a credit adjusted EIR. Lifetime ECLS are only recognised or released to the extent that there is a
subsequent change in the credit risk.
Revolving Facilities
The Group's product offering includes a variety of corporate and retail overdraft and credit cards
facilities, in which the Group has the right to cancel and/or reduce the facilities at a short notice.
The Group does not limit its exposure to credit losses to the contractual notice period, but, instead
calculates ECL over a period that reflects the Group's expectations of the customer behaviour, its
likelihood of default and the Group's future risk mitigation procedures, which could include reducing
or cancelling the facilities.
Based on past experience and the Group's expectations, the period over which the Group calculates
ECLS for these products, is estimated based on the period over which the Group is exposed to
credit risk and where the credit losses would not be mitigated by management actions.
Write-off
Loans and debt securities are written off (either partially or in full) when there is no realistic prospect
of recovery. This is generally the case when the Group has exhausted all legal and remedial efforts
to recover from the customers. However, financial assets that are written off could still be subject to
enforcement activities in order to comply with the Group's procedures for recovery of amounts due.
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)
(iv) Financial Guarantees and Loan Commitments
Financial guarantees are contracts that require the Group to make specified payments to reimburse
the holders for a loss they incur because a specified debtor fails to make payment when due,
in accordance with the terms of a debt instrument. The financial guarantee liability is carried at
amortised cost when payment under the contract has become probable.
'Loans commitments' are firm irrevocable commitments to provide credit under pre-specified terms
and conditions.
Financial guarantees issued or irrevocable commitments to provide credit are initially measured at
fair value and their initial fair value is amortised over the life of the guarantee or the commitment.
Subsequently, they are measured at the higher of this amortised amount and the amount of loss
allowance.
(v) Foreign Currencies
Foreign currency differences arising on translation are generally recognized in profit or loss. However,
foreign currency differences arising from the translation of equity investments in respect of which
an election has been made to present subsequent changes in fair value in OCI are recognised
through OCI.
(vi) Loans and Receivable
'Loans and receivables' caption in the consolidated statement of financial position include:
•
Loans and receivables measured at amortised cost: they are initially measured at fair value
plus incremental direct transaction costs, and subsequently at their amortised cost using the
effective interest method and are presented net of expected credit losses; and
Loans and receivables measured at FVTPL or designated as at FVTPL: these are measured at fair
value with changes recognised immediately in profit or loss, if applicable.
When the Group purchases a financial asset and simultaneously enters into an agreement to resell
the asset (or a substantially similar asset) at a fixed price on a future date (reverse repo or stock
borrowing), the arrangement is accounted for as a loan or advance or due from banks, and the
underlying asset is not recognised in the Group's financial statements.
(vii) Investment Securities
The 'investment securities' caption in the consolidated statement of financial position includes:
•
•
Debt investment securities measured at amortised cost: these are initially measured at fair value
plus incremental direct transaction costs, and subsequently at their amortised cost using the
effective interest method;
Debt and equity investment securities measured at FVTPL or designated as at FVTPL: these are
at fair value with changes recognised immediately in profit or loss;
35
EMIRATES NBD BANK PJSC - GROUP CONSOLIDATED FINANCIAL STATEMENTS - FOR THE YEAR ENDED 31 DECEMBER 2021
36
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Debt securities measured at FVOCI; and
.
Equity investment securities designated as FVOCI.
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